State Pension Update October 5, 2011

October 11, 2011

Updates since our September 28 report: Rhode Island; Washington

Rhode Island: Governor and State Treasurer outline pension reform. September 30, 2011.

Ads urge public to support pension reform. October 1, 2011.

Washington: State retirees plan to sue for return of cost-of-living adjustments. News Tribune. September 28, 2011.

State Legislators Pump UP Pensions In Ways You Can't. USA Today. September 23, 2011.

State-by-state: Benefits available to state legisaltors.

States where pension reform action is expected shortly:

California: Governor and legislative leaders pledge action in 2013 session.

Illinois: Governor and legislative leaders say they will pursue pension reform this Fall.

Massachusetts: Senate passed pension reform on Sept. 15. Bill now is in the House. However, their proposals essentially kick the ball forward (delay the day of reckoning).

New Hampshire: Pension proposals expected to be finalized by December 1 and voted on in the 2012 session.

New York: Gov. Cuomo says "curbing public pensions will be" his top goal in 2012.

Rhode Island: Special session on pensions begins in October.

National Conference on Public Retirement Systems opened their new website ( and released their report on"The Secure Choice Pension: A Way Forward for Retirement Security in the Private Sector. September 2011.

NCSL update on State of Pensions

Twenty-six state legislatures have made significant changes to their retirement systems so far this year. Over the last two years, 39 states in all have enacted substantial revisions to at least one state retirement plan. With just two exceptions (Michigan and Utah), state lawmakers have revised rather than replaced traditional defined benefit pension plans.

Legislation on pension reform, as of the end of July, was pending in Massachusetts and Ohio, and the governors of California and New York had proposed changes that were likely to be considered later in the year or in 2012

The changes include:

INCREASING EMPLOYEE CONTRIBUTIONS. Sixteen legislatures increased employee contribution amounts this year, and nine did so last year. The increases apply to all current employees in 18 states and only to new employees in seven states. In nine of these states, contributions by employers were reduced, reflecting a trend toward equalizing employee and employer retirement contributions. (See map.)

CHANGING ELIGIBILITY RULES. Twenty-three legislatures have increased age and service requirements for retirement for state employees, teachers or both in the past two years. In most states, the new rules apply only to people hired after the effective date of the legislation. Most of the changes move the age of retirement closer to 65 and increase the amount of service credits required to retire early. Twelve states have also increased minimum eligibility requirements, called vesting, by three to four years.

MODIFYING HOW BENEFITS ARE CALCULATED. This year, five states-Florida, Hawaii, Maryland, Montana and Vermont-have lengthened the time period for figuring average salaries, upon which benefits are based. Eight states-California, Iowa, Illinois, Louisiana, Michigan, New Jersey, Utah and Virginia-made similar changes last year. In most cases, the change was from a person's highest 36 months to the highest 60 months. Florida changed its provision from the highest five years to the highest eight. All these changes apply only to people hired after the effective date of the legislation.

REVISING AUTOMATIC BENEFIT INCREASES. Seventeen states have reduced their automatic cost-of-living adjustments in the past two years. Six of the nine legislatures that made changes this year will apply the new rules to future retirees, while the other three decided to apply the changes to current employees as well. NCSL. State Legislatues. September 2011. page 7

  • National Conference of State Legislators (NCSL)- Summary of pension and retirement plan enactments in 2011 State Legislators -

Public pensions investments fall short, increase risk, impose taxes without consent. Frank Keegan. June 30, 2011.

NY Times analysis by state of the tax increases per household to fully fund pensions or the annual return on investment required. For example, New Jersey would need a tax hike of $2475 per household per year to fully fund pensions or a 17.8% annual return for the next thirty years to fully fund pensions. NYTimes. June 21, 2011.

Governmental Accounting Standards Board (GASB) is finally proposing to force states to report more of their unfunded pension liabilities. This is a small step in the direction of full disclosure. Under the GASB proposals, plans would be required to report their unfunded obligations as if they were paying them off over the remaining years of service for employees covered by the pension plans-an average of about 10 to 15 years for all public plans, Mr... Brainard said at the conference. GASB also is proposing to make the size of governments' pension shortfalls clearer to investors. Unfunded pension obligations normally aren't listed as a liability on balance sheets. Instead, they only list shortfalls to the annual required pension contribution, while the unfunded obligation shows up in a footnote. Under GASB's proposal, an estimate of the total shortfall would be required to be listed on the balance sheet. Unfortunately, these changes will not take effect for another year and a half to two years. June 22, 2011.

GASB's proposed new pension rules-

  • The Congressional Budget Office released a report on "The Underfunding of State and Local Pension Plans." By one method of analyzing unfunded pension liability they estimated the unfunded liabilities as of 2009 as being between $2 trillion and $3 trillion. I estimate it is over $3 trillion. CBO. May 2011.

Pew state pension, retirement crisis update shows $3 trillion sneak-a-tax. April 26, 2011.

The mainline media keeps claiming that there is "a coordinated move by Republican governors to cut state spending and undercut public employee unions, traditionally strong supporters of liberal and Democratic candidates." .Wisconsin State Journal. April 6, 2011. You will note that pension reform is occurring in 37 states and 15 of these states are headed by a Democrat Governor. (California; Colorado; Connecticut; Delaware: Hawaii; Illinois; Kentucky; Maryland; Massachusetts; Montona; New Hampshire; New York; Oregon; Vermont; and Washington). That would truly be an interesting "coordinated move".

WSJ article on some public pension funds are finding themselves caught in a squeeze between actuaries worried about future benefit costs and local governments worried about immediate budgets strains. WSJ. March 23, 2011

CALPERS ignores actuary and maintains unrealistic 7.7%% assumed annual rate of return.

Only question now is will California or Illinois pension system run out of funds first.

2011 Pension reform proposals


  • The House of Representatives has passed H. B. 414 which would increase employee contribution rates for members of Alabama public retirement systems, including general public employees of state and local governments, teachers, higher education members, justices and judges and law enforcement and protective professions. The bill would increase general employees' and teachers' contribution rates from the present rate of 5 percent by one percentage point on May 1, 2011, and by two additional steps to 7.5 percent on October 1, 2012. Increases for other classes are similar. The bill provides that the governing boards of the state retirement plans are to adjust employer contribution rates to reflect actuarial savings from the employee contribution increases and any other benefit obligation changes enacted in the 2011 regular session of the Legislature, probably a reference to the Legislature's previous closure of the state deferred retirement option plan. Source: Alabama Legislature, HB 414. April 30, 2011.
  • Prichard, Alabama's pension system is bankrupt. City stopped paying pensions. NYT December 23, 2010. Good quote from Mike Aguirre, too: "Prichard is the future," said Michael Aguirre, the former San Diego city attorney, who has called for San Diego to declare bankruptcy and restructure its own outsize pension obligations. "We're all on the same conveyor belt. Prichard is just a little further down the road."


  • Unions challenge state on retirement contributions. Arizona city Independent. July 20, 2011.
  • Governor Brewer signed Senate Bill 1609 which limits abuses such as "double-dipping" when retirees go back to their same jobs while receiving a pension. It also requires current employees to contribute more to their own retirements. However, the real risk is in the nature of pension systems themselves. Benefits guaranteed at future taxpayers' expense have to be funded even when economic times are bad. Benefits that are granted to retirees when economic times are good and pension funds' portfolios are flush cannot be rolled back when portfolios collapse with the pop of an economic bubble. One way to see how Arizona's pension systems stack up is to compare them to a private employer's 401(k) contributions to employees. The average private employer's contribution to an employee's 401(k) is 3 percent of salary. Taxpayers are currently contributing about 9.8 percent of state government employees' salaries to their pensions, amounting to $173.6 million per year. If the public contribution fell to 3 percent of government employees' salaries, the annual contribution would be $53.1 million, saving $120.5 million, or more than 10 percent of Arizona's projected $1.1 billion budget shortfall for 2012. But the current level of public funding of pension plans is likely to remain the same into the foreseeable future as pension fund portfolios are rebuilt to make the systems financially sound. Goldwater Institute. April 27, 2011. and Arizona Republic. May 11, 2011.
  • Goldwater Institute has issued a policy brief on "Defusing the Pension Bomb: Making Retirement Plans solvent for all public workers.Goldwater Institute. The papers recommends that new and promoted government employees be placed in a 401(k) plan so that taxpayer risk is limited; that current defined benefit plans should be more transparent regarding their financial condition; and that individuals' pension benefits should also be more strictly limited, eliminating loopholes that allow some to claim pensions higher than justified given their overall employment history. The report concludes that the key to pension reform is to eliminate pension systems over time by converting to a 401(k) retirement benefit. April 27, 2011.


  • Legislative leaders pledge California pension changes for 2012. September 10, 2011.
  • Pension reform top priority for returning lawmakers. August 14, 2011.
  • California could cut pension spending with hybrid system, report finds August 15, 2011. . Hybrid pension plans would save billions. The Sacramento Bee. August 12, 2011.
  • Pension funds grew more than 20% over the past year but still are below the pre-recession level. Pre-recession level was $265 billion; current level is $237.5 billion. Washington Post. July 18, 2011. Bob's comments: Assuming a 7.75 annual return on investments, the 2007 assets of $265 billion should now be at $353.9 billion and they are only $237.5 billion! The Washington Post AP article overlooks this key point.
  • Newly hired state employees in six unions would have to pay more into the system, work longer and will get less out of pensions than previous employees, under a series of new contracts that the state Senate ratified Monday. The legislation narrowly passed when two Republicans joined 25 Democrats in approving the memos of understanding, which required a two-thirds vote. The bill now moves to the Assembly, where Democrats will also need two Republicans to ratify the contracts. The so-called MOUs, negotiated between six public employee groups and Gov. Jerry Brown, permanently increase employee contributions to their pensions by an additional 2 percent to 5 percent, which will result in $350 million in savings, said Sen. Lou Correa, D-Santa Ana, the author of the legislation, SB151. Some salary increases would cost the state $152 million, so the total net gain to taxpayers over the next year is $200 million Correa said. The agreement fell $200 million shy of what Brown had projected in his budget, and that he's asking voters to cover the shortfall with new taxes or cuts in other areas of the budget. Mercury May 2, 2011.
  • Two polls found an increasing amount of support for pension reform. In the Public Policy Institute poll the most likely voters (57 percent) favor cutting pension plans for public sector workers. And 74 percent of want public employees to get a 401k-type benefit instead of a defined contribution system. A Field Poll we told you about last week found an increasing level of support for pension reform, too. March 24, 2011.
  • Gov. Brown released his pension proposals on March 31. They include; preventing current and future employees from buying additional pension credits, barring state and local governments from skipping pension payments or covering their employees' share, barring retroactive benefit increases that award benefits to employees who haven't paid for them, and limiting "pension spiking" for new hires. Other steps Brown cited but didn't detail include a cap limiting the maximum pension regardless of salary or years worked, barring "double-dippers" from collecting both government pensions and salaries and switching to a "hybrid" retirement system like that the federal government enacted in the 1980s. The system combines smaller pensions with Social Security and a 401(k)-style savings plan. March 31, 2011. Gov.Brown had called for pension reform in his campaign to: stop pension spiking and abuse; stop retroactive application of benefit enhancements; increase employee contributions for all employees; prohibit 'pension' holidays. Source: Jerry Brown Governor 2010 Proposals have been abbreviated and reformatted.
  • How California's public pension system broke (and how to fix it). Reason Foundation. June 2010.


  • Judge tosses lawsuit challenging 2010 Legislation that lowered cost of living increases. ""While plaintiffs unarguably have a contractual right to their PERA pension itself," Hyatt wrote, "they do not have a contractual right to the specific COLA formula in place at their respective retirement, for life without change.". June 29, 2011.
  • Governor Hickenlooper signed the budget compromise bill on May 6 to help cover a $1 billion state budget shortfall. May 6, 2011. Final compromise included diverting tobacco funds to any health care program (SJR 11-009) increasing employee contributions to pensions by 2.5 percent and decreasing employer contributions by 2.5%. May 9, 2011.
  • Senate Bill 76, as passed by the Senate on February 9, 2011, would change employer and contribution rates for the Public Employees Retirement Association (PERA). 2010 legislation shifted 2.5 percentage points of the contributions for the state and judicial divisions from the employer to the employee for FY 2011 only. This bill would extend the shift for those divisions to FY 2012. In addition, for FY 2012 only, it would allow individual school districts, local governments, and the Denver Public Schools (a separate division of PERA) to shift up to 2.5 percent of the total contribution from employers to employees beginning January 1, 2012. This would save the state General Fund approximately $35 million in FY 2012.
    Source: Colorado Legislative Council Fiscal Note 11-076 (April 7, 2011)
  • Following the loss of $10 billion in 2008, Colorado's largest public employee retirement system now can only meet 51.8 percent of its obligations to retirees. July 14, 2009



  • Gov. Jack Markell signed into law a bipartisan effort to reign in some of the state's fastest growing expenses - the state's share of employee and retiree pension and health care costs. The bill will save taxpayers over $130 million in the next five years and over $480 million in the next 15 years. By focusing on reducing the costs associated with future state employees, the savings will continue to grow over time. May 3, 2011. Under the plan, state employees hired after Jan. 1, 2012, will have to contribute 5 percent of their pay toward the pension fund, up from the current 3 percent contribution. Newly hired employees will be required to have 10 years of service in order to qualify into the plan, up from the current five-year requirement. Also, the retirement age will be increased from 62 with five years of service to 65 with 10 years of service under the proposal, and the monthly penalty used to determine early retirement pensions would double. March 30, 2011.


  • Florida educators union sue over 3 percent state pension requirement. June 20, 2011.
  • Firefighters, teachers and police officers will have to pay 3 percent of their salary to cover a share of their pension costs. New public employees will have to work longer to reach retirement, while older workers will get a much lower investment return on alternative pension plans also offered by the state. Lawmakers are relying on changes to the state pension plan, also known as the Florida Retirement System, in order to come up with $1.1 billion in savings to help fill a budget shortfall of nearly $4 billion. Employees will pay 3 percent of their salary for their pensions. Any public employee who enrolls in the pension plan on or after July 1 must work longer to receive benefits. The retirement age will rise from 62 to 65 for rank-and-file employees, and from 55 to 60 for special-risk employees such as sheriff's deputies. Cost-of-living increases for any service earned on or after July 1 are eliminated. But this provision expires in 2016 and the increases will then kick back in. This provision only applies to those working now and it would not impact employees who have already retired. Herald-Tribune. April 30, 2011.



  • House Bill 1038 (to Governor on May 17, 2011) makes numerous changes in the provisions of Hawaii retirement plans. The bill:
  • Increases the member's contribution rates for employees who become members of classes A, B, or H after June 30, 2012;
  • Increases the period of years for calculating the average final compensation for employees who become members of classes A, B, C, or H after June 30, 2012;
  • Increases the vesting period for employees who become members of class H after June 30, 2012;
  • Increases the employer contribution rates for public safety related employees and other employees in classes A and B beginning in fiscal year 2012-2013;
  • Reduces the percentage of regular interest credited to the retirement accounts of employees who becomes members of classes A, B, or H after June 30, 2011;
  • Increases the age and service requirements for employees who become members of classes A, B, or H after June 30, 2012; and
  • Authorizes the Board of Trustees of the Employees' Retirement System to establish the investment yield rate for the entire system after June 30, 2011. NCSL. April 30, 2011.
  • Act 29 of 2011 (House Bill 1035) prohibits any retirement benefit enhancements, including any reduction of retirement age, until the actuarial value of the system's assets is 100% of its actuarial accrued liability.


  • Public Law No. 22-2011 (Senate Bill 524) establishes a defined contribution (DC) plan as an option for new state employees. A state employee who does not elect to become a member of the DC plan becomes a member of the Public Employees' Retirement Fund (PERF). The bill requires the PERF Board of Trustees to establish the same investment options for the DC plan that are available for the investment of a PERF member's annuity savings account. It provides that a member's contribution to the Plan is 3% of the member's compensation and is paid by the state on behalf of the member. It also provides that the state's employer contribution rate for the Plan is equal to the state's employer contribution rate for PERF. It also provides that the amount credited from the employer's contribution rate to the member's account shall not be greater than the normal cost of PERF with any amount not credited to the member's account applied to PERF's unfunded accrued liability. The bill establishes a minimum state employer contribution of 3% of plan members' compensation. The bill establishes a five-year vesting schedule for employer contributions, and requires a member who terminates state employment before the member is fully vested to forfeit amounts that are not vested. It establishes provisions for the withdrawal of amounts in member accounts. The bill also authorizes rollover contributions to the plan. Source: Senate Bill 524. NCSL. April 30, 2011.


  • Likely site of next fight over public employee benefits. Leaders in both parties in Springfield appear ready to push a major pension reform bill this fall that would remove Illinois workers' current defined-benefit plan and replace it with less lucrative options, including a 401(k) plan. Meanwhile, Democratic Gov. Pat Quinn - who just last year was accused by Republicans of coddling labor for votes - is now being accused by labor of trying to renege on salary and benefit guarantees for union workers. August 22, 2011.
  • House leaders mum on pension reform negotiations. August 12, 2011.
  • Unions win as lawmakers put off pension reform until Fall. House Speaker Michael Madigan and House Minority Leader Tom Cross abruptly pulled the plug Monday on legislation forcing government workers to pay more for their pensions in a major win for the state's public-employee unions. Madigan (D-Chicago) and Cross (R-Oswego) faced an almost unheard-of legislative setback, succumbing to a dizzying letter-writing and phone-calling campaign to rank-and-file lawmakers by more than a half-dozen unions. After passing out of a House committee last week, Madigan's and Cross's legislative package drew support from no more than 45 House members when 60 votes were needed to pass a bill, union sources told the Chicago Sun-Times. Thanks to the most potent grassroots lobbying campaign ever waged, we have blocked passage of a measure backed by leaders of both political parties and the biggest corporations in the state of Illinois," Henry Bayer, executive director of AFSCME Council 31, said in a prepared statement. Chicago Sun Times. May 31, 2011. fall.html
  • Illinois has failed to set aside $85.6 billion that it owes to current and future retirees, meaning it has funded only 38 percent of its obligation to those people. The Pew Center on the States ranks Illinois dead last among the states in terms of its funding of future obligations. Illinois, unable to marshal the political will to set aside money for workers' pensions, keeps doing nothing, apparently hoping the pension mess will fix itself. But that never happens, of course. Instead, it just gets worse. In recent years the state has sold bonds to help it try to catch up with pension payments. But that and other bond sales have led the major credit agencies to downgrade Illinois' debt-raising the cost of any future bond issues. Not that continued borrowing for pension payments would be a good idea. Already, according to an analysis by the Civic Federation, debt dedicated to pension payments by the end of the current fiscal year will reach $16.3 billion, surpassing for the first time the $13.2 billion in debt that has been used for capital projects such as roads and schools, bridges and buildings. May 31, 2011.
  • House committee okays pension reform. Under the legislation, existing teachers and state employees would have a choice of three retirement plans in which to enroll - one that preserves existing pension benefits; one with reduced benefits, and a third that would amount to a 401(k)-style retirement plan. The highest-priced plan would enable existing state workers, teachers, judges and lawmakers to preserve their current retirement benefits that top out at between 75 percent and 85 percent of final salaries. But it would require higher employee contributions that could increase every three years. A state worker who has 4 percent of his paycheck withheld as a pension contribution would see that amount increase to 9.29 percent under the legislation. University workers, who contribute 8 percent of their income toward their pensions, would have to set aside more than 15 percent to retain that top benefit. For judges, their existing 11 percent pension withholding would rise to about 34 percent, and lawmakers would go from 11.5 percent to nearly 25 percent. May 27, 2011.
  • The State Auditor reported on March 3, 2011, that Illinois pension system is deeper in the red than previously thought --$76 billion -21% higher than last year's estimate. AEI estimates it is really $192 billion. State borrowed $3.7 billion this year to pay annual pension contribution. The amount owed in the next budget is $5.4 billion. Business March 4, 2011.
  • Last year Illinois borrowed $10 billion in bonds hoping to make 8.5% interest while paying only 5% interest on the bonds. BUT pension investments only earned about 3 percent making the bond issue a loser. Washington Post. February 22, 2011.


  • Gov. Brownback signed pension reform legislation. The new law raises the state's annual contribution by about $15 million in July 2013, according to KPERS and legislative researchers. The increase will continue to ramp until July 2017, and phasing into to $95 million, according to new estimates assuming a growing employee payroll. The law also directs the state to identify surplus real estate and sell it when possible, with 80 percent of the money raised going to close the KPERS funding gap. Teachers and government workers also face making concessions, starting in 2014. Most would be forced to choose between paying a higher percentage of their salaries into KPERS or seeing their future benefits cuts. Others, hired after June 2009, would be forced to choose between different cuts in future benefits. May 25, 2011.


  • Senate Bill 2, passed by the Senate on February 11, 2011, would close the current defined benefit pension plans to new county and state employees, legislators and judges on June 30, 2012. New employees would be offered the opportunity to join a defined-contributions plan. As reported from committee, the legislation would close the Legislators' Retirement Plan, Judicial Retirement Plan, State Police Retirement System, Kentucky Employees Retirement System, and County Employees Retirement System to new members on July 1, 2012. Source: Lexington Herald-Leader, "Kentucky's Cost Might Increase Under Proposed Pension Overhaul," January 27, 2011
  • Key Kentucky state worker pension fund in distress. Courier-Journal. August 29, 2010.


  • Rep. Kevin Pearson (R-Slidell) is calling for increased state employee pension contributions to cover rising liabilities, but his proposal goes beyond Jindal's plan and would include police officers, judges, and university professors. Jindal is asking for rank-and-file state workers to contribute 11 percent of their salaries to pensions, up from the current eight percent. The Pelican Post. March 24, 2011.


  • From August 1-8, Maine's government pension system lost $891 million in market value.
  • The proposed state budget to be considered by the House and Senate next week calls for tax cuts, major reforms to the state pension system and some of the welfare reforms that Gov. Paul LePage advocated. The $6.1 billion, two-year plan that earned unanimous approval from the Legislature's 13-member Appropriations Committee on June 9 represents a series of compromises designed to win the two-thirds support it needs in the House and Senate. The committee's House Chairman Patrick Flood, R-Winthrop, said Democrats and Republicans worked to find money to avoid some cuts to human services. On the final night of negotiations, Flood presented an amendment offering $20 million in future revenue from wholesale liquor sales to help prevent any budget gap.
  • On pension reform, the Governor wanted to require state workers and teachers to put an additional 2 percent of their pay into the system, while lowering the state's share of the cost. That and other changes were designed to free up money for tax cuts. However, the committee voted to eliminate that requirement, with revised figures showing that the change would require most workers to contribute 9.65 percent of their pay, while the state's share would be less than 1 percent. The committee made other changes, limiting annual cost-of-living-increases for retirees at 3 percent, rather than 2 percent as proposed by LePage. It also voted for a one-year freeze on increases, followed by state payments to replace the increases for two additional years. One controversial part of the committee's proposal is a $20,000 cap on the annual retirement income to which the increases are applied. Kennebec Journal.June 11, 2011.
  • The legislature's budget committee has reached a tentative compromise on pension reform. The pension compromise, which is subject to additional review, would eliminate the higher contribution levels for state employees that the Governor had proposed, but would freeze and then cap cost-of-living adjustments for public sector workers and retirees. The changes negotiated by Republican and Democratic lawmakers would create a new financial shortfall that will have to be plugged before the committee completes work on the budget that begins July 1. But the revised pension plan seeks to address concerns raised by state employees, retirees and union officials during the public hearing process. Gov. Paul LePage, a Republican, originally had proposed requiring state workers to contribute an additional 2 percent toward the state's pension system, up from the current 7.65 percent deducted from their paychecks. Under the tentative agreement reached by the Appropriations Committee, state workers would be able to keep that 2 percent in their paychecks. But the compromise would freeze salary levels for two years. The LePage administration had estimated that their pension proposals would have saved $400 million over the biennium and reduce the unfunded liability by roughly $2 billion over the long term. It was unclear Friday evening how the compromise plan compares financially to the LePage administration's original proposal, although it was clear the compromise would make a smaller dent in the shortfall. Additionally, initial reports suggested that the committee's proposal would reduce savings in the current budget, creating a roughly $55 million budget hole. June 4,2011.
  • o Governor Paul LePage's budget for the coming biennium proposes increases in employee contributions to Maine retirement plans by 2 percentage of salary; would increase the retirement age to 65 for state employee and teacher members of the Maine Public Employee Retirement System who have fewer than five years of service on July 1, 2011; and would reduce the cap on cost-of-living increases on the retirement benefit for members of the State Employee and Teacher Retirement Program, the Judicial Retirement Program and the Legislative Retirement Program from 4 percent to 2 percent effective January 1, 2014. It also requires that retirement benefits for members of these retirement programs may not be adjusted in September 2011, September 2012 or September 2013. The proposed budget legislation also:
  • Requires retired teachers who are eligible for Medicare to be enrolled in the program administered for state employees.
  • Requires teachers to have 10 years of service to qualify for a retiree health benefit.
  • Caps the State's cost for retired teachers health insurance for fiscal years 2011-12 and 2012-13 at fiscal year 2010-11 levels and caps increases in subsequent years to 4 percent each year Sources: Governor's Address and State of Maine, Governor's Recommended 2012-2013 Budget: Overview. -600-700 state employees and 1,000 teachers may retire before January 1 to avoid new proposed state law that would require them to pay for their health coverage after January 1, 2012. March 13, 2011.
  • Rep. Cebra introduced legislation to raise workers contributions by 1 percent for six years and eliminating cost-of-living increases for retires with pensions of more then $45,000 annually.
  • The Cost of Doing Nothing: Maine's Pension Payments are Crowding out other Spending. The Maine Heritage Policy Center. February 3, 2011.
  • Maine has over a $2 billion unfunded liability for public employee's retiree health care costs. Maine Watchdog. June 16, 2010.


  • Pension board votes to maintain 7.75% annual rate of return, April 29, 2011.
  • House budget would require state employees to pay 7 percent of their salaries instead of 5 percent into their pension plans. Baltimore citybiz.list. March 24, 2011.
  • House Bill 72, the Budget Reconciliation and Financing Act, included extensive changes to Maryland retirement plans. The bill became law without the governor's signature on April 8, 2011.
    Current Members --
  • All Plans Except Employees' Pension System (EPS) and Teachers' Pension System (TPS): For service credit earned after June 30, 2011, the COLA earned for retirement is contingent on achieving 7.75% investment return. For years in which investment return is not achieved, COLA is capped at 1%; for years in which the investment return achieves 7.75%, the cap increases to 2.5%.
  • Employees' Pension System (EPS) and Teachers' Pension System (TPS): Increase member contribution from 5% to 7%;Maintain 1.8% multiplier and all retirement eligibility and vesting criteria.
  • Law Enforcement Officers' Pension System (LEOPS): Increase member contribution from 4% to 6% in FY 2012 and to 7% in FY 2013 and thereafter; Maintain 2.0% multiplier
  • Judges: no change
  • Future Members (as of July 1, 2011)
  • All Plans (except Legislators and Judges): AFC is calculated based on high 5 instead of high 3; Vesting increases from 5 to 10 years; Contingent COLA based on achieving 7.75% investment return. For years in which investment return is not achieved, COLA is capped at 1%; for years in which the investment return achieves 7.75%, the cap increases to 2.5%.
  • Employees' Pension System (EPS) and Teachers' Pension System (TPS): Member contribution is 7%; Multiplier is 1.5%; Normal service retirement eligibility is age 65 with 10 years (up from 62 with 5 years) or Rule of 90; Early service retirement eligibility is age 60 with 15 years (up from age 55 with 15years), with 0.5% reduction for every month before age 65.
  • Law Enforcement Officers Pension System (LEOPS) and State Police: LEOPS member contribution is 6% in FY 2012 (up from 4%) and 7% in FY 2013 and thereafter; State Police normal service retirement eligibility is age 50 or 25 years of service (up from 22); Any new DROP account started after July 1, 2011 (including one started by current members) earns 4% annual compound interest (instead of 6% monthly compound interest).
  • Funding Provisions
  • In FY 2012 and 2013, reinvest all but $120 million of the savings generated by the reforms into the pension fund (the $120 million goes to budget relief); beginning in FY 2014, reinvest up to $300 million of the savings generated by the reforms, with the remainder going to budget relief.
    Source: Source: Maryland General Assembly, Department of Legislative Services, Fiscal and Policy Note for House Bill 72, April 6, 2011.
  • Maryland's pension system portfolio rose 14.3 percent over the six months ending Dec. 31. Investments are worth $36 billion, up from $28.5 billion at the end of fiscal year 2009. At that point the system was 65 percent funded.Now, the bad news: From 2007 to 2009, the fund lost $11 billion. Despite the recent uptick, the system is only 64 percent funded as of the end of 2010. Anything below 80 percent is in the danger zone.,0,1490171.column




  • Judge tosses lawsuit challengng 2010 legislation that lowered cost of living increases. Officials with the Minnesota retirement system said the decrease in the cost-of-living adjustments will reduce projected future benefit costs by $5.9 billion over the next several decades. "Coupled with the beneficial investment gains realized by the pension systems over the last two years, the funding picture for all three systems has improved," representatives for Minnesota's three pension funds said in a statement. July 1, 2011.


  • Senate Bill 2439 (signed by the governor March 30, 201), Section 2, changes COLA provisions for people who join the retirement system on or after July 1, 2011. For people who became members of the system before July 1, 2011, the COLA is equal to the sum of 3% for each full fiscal year in retirement before the member reaches age 55, plus 3% compounded for each full fiscal year in retirement after the member reaches age 55. For the new hires on or after July 1, 2011, the COLA will still be 3% but the age at which the compounding begins increases from age 55 to age 60. The effect of this change will be to reduce the cost to the retirement system since the compounding will not begin until the member reaches age 60.


  • House Bill 122 (to governor April 27) changes various provisions of the Montana Public Employee Retirement System for people hired on or after July 1, 2011. The employee contribution rate for such members will be 7.9% of compensation and will remain at 6.9% for those hired before that date. Also for people hired after that date:
  • Highest average compensation will be based on the highest average of 60 consecutive months of employment (36 months for members before that date);
  • Eligibility for normal retirement will be at age 65 with five years of service or age 70 (for members before that date, unchanged at 60/5, 65 or 30 years of service);
  • Eligibility for early retirement will be at age 55 with five years of service (for members before that date unchanged at , 50/5 or 25 years of service);
  • Calculation of retirement benefits will be as follows:
  • o If less than 10 years of membership service, 1.5% of highest average compensation multiplied by the years of total service credit.
  • o If 10 or more years but less than 30 years of membership service, 1.7857 or 1/56 of highest average compensation multiplied by the years of total service credit.
  • o If 30 or more years of membership service, 2.0% of highest average compensation multiplied by the years of total service credit.
  • o In each instance above, the minimum benefit will be the actuarial equivalent of double the member's accumulated contributions.
  • o The formula for prior members with less than 25 years of service is a multiplier of 1/56 and for those with more than 25 years of service a multiplier of 2%.
  • Source: Montana Legislature, H.B. 122 and Fiscal Note for H.B 122.


  • Is Nebraska's cash balance pension a model? Stateline. September 25, 2011.
  • Legislative Bill 382 (approved by the governor May 4, 2011) increases employee and employer contribution requirements for the School Employees Retirement System, the State Patrol Retirement System and the Omaha School Employees Retirement System.
  • Beginning September 1, 2011, the member contribution rate in the School Employees Retirement System increases from 8.28% to 8.88%. Beginning September 1, 2012 the member contribution rate increases .9% to 9.78%, and beginning on September 1, 2017 the member contribution rate returns to 7.28%. The employer match continues at 101% of the employee contribution.
  • The state contribution of 1% of total salary compensation for the Schools Employees Retirement System and Class V (Omaha) School Employees Retirement System is extended from July 1, 2014 to July 1, 2017 when it returns to .7%.
  • Beginning September 1, 2011, the contribution rate for Class V (Omaha) School increases 1% to 9.3%.
  • For the Nebraska State Patrol Retirement Act, beginning July 1, 2011, the patrol and state/employer contribution rates increase from 16% to 19%. The member and state/employer contribution rates return to 16% on July 1, 2013.


New Hampshire

  • Retirement Board drops pension lawsuit. September 21, 2011.
  • Legislative Study committee tackles pension reform and expects to have proposed legislation by December 1. September 13, 2011.
  • Judge hears arguments, will decide in September on pension change legality. July 19, 2011.
  • Judge won't block sections of state pension reform law. July 15, 2011.
  • Retirement system sues over pension reform. The public New Hampshire Retirement System asked a court on July 12 to block implementation of the part of a new pension reform law dealing with setting employer contribution rates. At issue is whether the Legislature or the board controls the rates employers pay. The public pension system covers more than 50,000 active and nearly 26,000 retired state and municipal workers, teachers, police and firefighters. Contributions from employers -- the state and local governments -- and employees plus money earned through investments make up the pension fund. A coalition of employee groups has a hearing scheduled on July 14 on the same rate-setting issue as well as on another section of the law that raises employee contribution rates. July 12, 2011.
  • Two lawsuits have been filed against pension reform legislation enacted as law at midnight Wednesday. One of the lawsuits was filed by public employee unions and asks a judge to halt a 2 percent increase of their pension contributions until a ruling can be made on its constitutionality. A second suit was filed by the New Hampshire Retirement System, which alleges the pension reform bill "usurps the board's authority." July 1, 2011.
  • Lame Duck retirement system challenges pension reform law. New Hampshire June 28, 2011.
  • Gov. John Lynch vetoed legislation on June 15 that would require public employees to pay more toward their pensions and some to work longer -- to spare New Hampshire taxpayers. Lynch said that even as the bill sat on his desk with a June 15 deadline, legislative negotiators have said they will consider "substantive changes" to it, including changes made on June 14 by the state Board of the Retirement System that he said "could impact the budgets of the state and local communities." Lynch said he was vetoing the current measure, "given the Legislature's stated intent to change this Legislation further, and my responsibility to review the legislation in its full and final form." Lawmakers are mitigating board actions to prevent immediate rate hikes. The current bill had shifted more costs onto workers to spare state and local property taxpayers from paying an increasing share of rising pension costs. Labor groups had lobbied hard for Lynch to veto it. Lawmakers believe that by raising employees' contribution rates, the state can stop a longstanding practice of subsidizing local public employee pension costs without causing municipal contribution rates to spike. The state had been paying 35 percent of local pension costs, a longstanding practice meant to encourage municipalities to participate in the system. The state reduced its share to 25 percent in the current budget. The budget for the upcoming two years passed by the Senate eliminates the state's share. At the 35 percent rate, the state's share would be about $87 million in each of the next two years. June 15, 2011.
  • The pension reform compromise that makes sweeping changes in retirement reform especially for new public employees is on its way to the desk of Gov. John Lynch after the state Legislature overwhelmingly approved it on June 8. Rep. Ken Hawkins, R-Bedford, said the bill (SB 3) will make a small dent in the $4.7 billion unfunded liability of the New Hampshire Retirement System. The liability includes more than $3.5 billion in the pension account and more than $1 billion in a medical subsidy that offers support for health insurance costs of public retirees who retired before 2003. The compromise tries to eliminate the practice of double dipping by not allowing someone collecting a pension to take a public employee job unless it is for no more than 32 hours a week. Starting July 1, all local government and school workers would contribute 7 percent of their salary to pensions, up from 5 percent. The payroll deduction for police officers would go up to 11.55 percent up from 9.3 percent currently. The rate for fire-fighters would go up to 11.3 percent from 9.3 percent at present. New firefighters and police officers hired after July 1 would have to work 25 years and reach age 50 before collecting a pension. Currently, they can retire after 20 years and collect at age 45. The bill also changes the retirement system board by ending the super-majority that labor unions have on it to a group that evenly shares power between labor and management appointees. The compromise reduces how much new employees can use special duty or overtime pay in the later years of work to artificially boost their pension. A retirement payout for them would be capped at no more than 85 percent of their base pay or $120,000 whichever is less. June 9, 2011.
  • House and Senate negotiators reached a tentative agreement on reforms to the state's public pension system on June 6 that will shift more of the costs onto employees. Negotiators settled the last two issues holding up the compromise that lawmakers could vote on June 8. One would limit part-time workers to 32 hours a week before they would have to contribute to the pension system. An exception was made for retired police officers hired by communities seasonally for events such as motorcycle week in Laconia. The provision is intended to prevent double-dipping where retired police officers return to work and collect both a pension and a full-time salary.Negotiators agreed to stick with current law and allow retired workers to return to work if they suspend their pensions. Under the compromise, firefighters, police, and state and municipal workers would pay more into the system starting July 1. June 6, 2011.
  • Senate bill raises mandatory contributions by employees, increases retirement ages and required years of service, and reduces the compensation that can be considered in pension formulas. For the most part changes will apply to employees hired after June 30, 2011. Sen.. Majority Leader Jeb Bradley is the prime sponsor. Bill passed Senate on March 16, 2011.
  • House Finance Committee on March 28, adopted a provision to suspend collective bargaining rights for public sector workers if their contracts expire. Earlier the House has approved legislation to end mandatory Evergreen Clauses in municipal labor contracts. Under an Evergreen Clause, the terms of an expired labor deal remain in place, including scheduled salary increases, until the public body and its employees union agree to a new deal. Critics contend that Evergreen Clauses keep unions from the bargaining table with no reason to ever agree to contracts with significant pay cuts.

New Jersey

  • Unions sue New Jersey over pension reform. September 2, 2011.
  • N.J. Teachers union denies Democrats endorsements. August 15, 2011.
  • Governor Christie signed into law the measure to require public employees and retirees to pay more towards health care and pensions. LATImes. June 28, 2011.,0,2129446,print.story
  • Lawmakers on June 24 voted to enact a sweeping plan to cut public worker benefits after a long day of high-pitched political drama in the streets of Trenton and behind closed doors. Union members chanted outside the Statehouse and in the Assembly balcony, and dissident Democrats tried to stall with amendments and technicalities. Although they successfully convinced top lawmakers to remove a controversial provision restricting public workers' access to out-of-state medical care, they failed to halt a historic defeat for New Jersey's powerful unions and a political victory for Republican Gov. Chris Christie. Unions have blasted the bill for ending their ability to collectively bargain their medical benefits. Health care plans for 500,000 public workers would be set by a new state panel comprised of union workers and state managers, rather than at the negotiating table. A sunset provision would allow unions to resume collective bargaining after increased health care contributions are phased in over four years. In addition, police officers, firefighters, teachers and rank-and-file public workers would all pay more for their pensions and health benefits. Supporters of the bill say the state needs to cut costs because the pension and health systems are underfunded by more than $120 billion total. The Christie administration estimated the bill would save $3 billion in health benefits over the next 10 years and $120 billion in pension costs over 30 years. Much of the pension savings are from the controversial elimination of the cost-of-living adjustments for retirees, which unions have threatened to challenge in court.Over the years, lawmakers and local leaders from both parties have offered increased benefits to public employees, often in exchange for political support. But even as benefits improved, the state and municipalities failed to meet its financial obligations. Since 2004, the state has not made $15.11 billion in required payments to the pension funds, while the municipalities have skipped $1.9 billion. Public employees, meanwhile, have fully paid their required contributions. June 24, 2011.
  • The bond rating for New Jersey's state government has been downgraded one step to Aa3, the fourth-highest level, by Moody's Investors Service, which cited a "weakened financial position" and an economic recovery lagging behind the nation. Only Illinois and California have lower ratings from Moody's, according to data compiled by Bloomberg News Service. Moody's cited New Jersey "rapidly rising fixed costs, relatively slow economic recovery, and a lack of specified plans to rebuild fund balances." Rising health-care and pension costs were also cited as a concern. Gov. Chris Christie skipped a $3 billion payment into the state retirement system in the 2010-11 fiscal year and urged the Democratic-controlled Legislature to pass his proposed pension and benefit changes. Fixed costs such as debt service, pension contributions and benefit payments may reach 30 percent of revenue within eight years, from 13 percent in fiscal 2010, Moody's reported, making financial management more difficult. April 27, 2011.
  • New Jersey Unfunded liability is $160 billion and real current funded ratio is 30%. February 8, 2011

New Mexico

  • Chapter 178, Laws of 2011 (HB 628) makes three primary changes for pension contributions for state employee plans administered by the Public Employees Retirement Association (PERA) and the Educational Retirement Board (ERB):
  • Extends the two-year 1.5% contribution shift implemented for FY10 and FY11from the employer to the employee for those employees making more than $20,000 for another two years (FY 2012 and FY 2013), but provides for the cancellation of the extension to FY 2013 contingent upon specified levels of General Fund revenue and state reserves;
  • Makes a one-year contribution shift of 1.75% from the employer rate to the employee rate for those making more than $20,000 for FY 2012; and
  • Delays the two remaining 0.75% increases for ERB members, currently scheduled for FY 2012 and FY 2013, to FY 2014 and FY 2015.

New York

  • Comptroller Tom DiNapoli announced substantial increases in the amounts local governments and school districts must shell out next year to cover employee pensions. With little left to cut, property tax increases may be the only solution in some places. According to DiNapoli, the average contribution rate will rise about 16 percent, with an average hike of 19 percent for police and firefighters. Rates rose by as much as 37 percent this year. The increases take effect in February. August 28, 2011.
  • "Cuomo Says Curbing Public Pensions Will Be His Top Goal in '12," trumpets the headline on today's New York Times article about a "wide-ranging interview" with New York's governor. Unfortunately, the article focuses on political style over substance and doesn't offer much meat to back up the headline, beyond this: The governor praised the state's largest public employee union for agreeing to wage and benefits concessions this year, but also criticized unions for resisting lower retirement benefits for what he described as "the unborn" -- future state workers for whom he wants to reduce pensions. "This will be the bar for next year," Mr. Cuomo said of his pension proposal. The first sentence of that passage refers to the governor's recent contract deal with the Civil Service Employees Association, which is still subject to member ratification vote that won't be completed until Aug. 15. As for Cuomo's pension proposal, it would sharply reduce current defined-benefit levels (for local as well as state workers) -- but it falls short of fundamental reform, since it does not include any structural change. The governor has not proposed a shift to the defined-contribution model for any group of workers, even as an option. Meanwhile, Cuomo yesterday staked out a strong position against the kind of fiscal chicanery all too many state and local governments have practiced in an attempt to dodge payment of their full pension contributions. The governor vetoed a bill that would have allowed New York school districts to issue bonds to cover their projected teacher pension cost increases over the next three years. The bill not only constituted a fiscal abuse; it also sidestepped Cuomo's newly enacted local property tax cap.
  • E.J. McMahon of the Empire Center for NYS Policy posts his reaction to the just-announced labor deal in New York State. Not surprisingly, despite some modest concessions, it appears as if public sector unions have once again gotten much more than the rest of us and been forced to give-up much less.
  • On the same day that he announced a proposal to cut retirement benefits for all new state workers, New York Governor Andrew Cuomo moved ahead on plans to lay off as many as 9,800 current employees to help the short-term finances of the state. The Times-Union of Albany obtained a memo indicating that layoffs are scheduled to begin July 15, unless Cuomo and the state's major public worker unions agree on new contracts before then. The governor has been demanding $450 million in concessions from the unions since their contracts expired April 1, though negotiations remain stalled. July 15.
  • Gov. Andrew M. Cuomo, joined a parade of officials from across the country who are seeking to rein in spending by limiting public employees' pensions, proposed on June 8, to broadly limit retirement benefits for new city and state workers in New York.
  • Gov. Cuomo said New York State and New York City simply could no longer afford to offer new employees the generous benefits their predecessors received. Among the most significant changes the governor proposes is to raise the minimum retirement age to 65 from 62 for state workers, and to 65 from 57 for teachers. "The numbers speak for themselves - the pension system as we know it is unsustainable," the governor said in a statement. "This bill institutes common-sense reforms to bring government benefits more in line with the private sector while still serving our employees and protecting our retirees." Mr. Cuomo's proposal escalates a battle between the first-term Democrat and a major Democratic Party constituency: public-sector labor unions. Under his new proposal, the governor would require state employees to contribute 6 percent of their salaries into the pension system - up from 3 percent currently. And in an effort to curb rampant padding of pensions by workers who step up their overtime in their final year of employment, Mr. Cuomo would exclude overtime from pension calculations. The changes would affect newly hired workers in a pension system that covers 175,000 state employees and hundreds of thousands of employees of local government and teachers, as well as 300,000 New York City employees. June 9, 2011.
  • These days, New York Gov. Andrew Cuomo is quite the look-to guy. Recently, Gov. Cuomo, a Democrat who convinced the more radical members of his party that New York could not thrive with a tax-and-spend budget, announced his intention to make some significant and sensible changes to his state's troubled pension system. "We can't afford the public pension system that we have in this state - period," the governor said.
    The plan Gov. Cuomo unveiled is expected to save the Empire State $93 billion over the next 30 years. It sensibly begins with a provision that would raise the retirement age to 65 for all public employees (excluding those who work for New York City) hired after the change takes effect. Currently, most career public employees in New York can retire with full benefits at 62; for teachers, 57. In addition to this, early retirement, which now is allowed once someone turns 55, will be eliminated. Since people are living longer and healthier lives, and staying active into old age, why not take these steps? The Cuomo plan also would force public employees to contribute twice as much toward their pensions to take some of the burden off taxpayers; require public employees to have worked for at least 12 years (as opposed to the current 10-year requirement) before becoming eligible for a pension; cap pensions for the highest paid state employees, based on the governor's $179,000 annual salary; eliminate a "multiplier" that boosts a pension after 20 and 25 years of service; and give employees the option of setting up 401(k) accounts, in an effort to "draw in non-unionized employees and those with shorter career spans in government," according to a Wall Street Journal report. This plan is not perfect. The Journal said the plan does nothing to combat the expected rise in taxpayer contributions to the pension system over the next five years. Republican-American. May 21, 2011.
  • Governor Andrew Cuomo announced on May 16 that he will introduce a plan to reform state pensions, but union officials say the proposal puts the burden on the backs of workers. Cuomo says the plan would save the state $93 billion over 30 years."The cost of public pensions is going through the roof," Cuomo told a crowd of supporters at Hofstra University. According to the governor, paying for the pensions of state workers is unsustainable. "We have to reduce pension costs or we'll never stop taxes from going up," said Cuomo.
    In 1999, public worker pensions cost the state $1.3 billion. In 2014, the price tag will reach $6 billion. Current and retired government workers, educators, police and firefighters wouldn't be affected by the state pension reform, but a number of changes would be enacted for anyone hired after the law is passed. According to state officials briefed on the plan, the minimum retirement age would rise to 65, early retirement would end, new employees would pay twice as much toward their pensions, and pensions for the highest paid would be capped. May 16, 2011.
  • Gov. Cuomo announced settlement of a contract agreement with a state employees' law enforcement union which includes a pay freeze, calls for sharp increases in workers' contributions to healthcare plans, and ends automatic "step" pay increases. In commenting on the contract settlement with the 1160-member Council 82, he said the New York Law Enforcement Officers Union was a model for other larger unions. Negotiations are presently going on with the Civil Service Employees Association (CSEA) and the Public Employees Federation (PEF), two of the largest in the state. QGazette. April 20, 2011.
  • 55 bills have been introduced in NY that enhance pensions. Despite the fiscal pressures faced by New York State, New York City and other local governments, legislators have so far introduced 55 bills enhancing or protecting public employee retirement benefits. Most of these bills are so-called "pension sweeteners" that would increase the generosity of public pensions. The most egregious of them would add at least $300 million per year to the cost of the State's pension contributions and $560 million per year to local governments' costs. Several would roll back the reforms of Tier V legislation passed just 13 months ago. An additional proposed gimmick would increase the costs to school districts in the long run, by allowing them to cap their required contributions in the short run and borrow the remainder.Times Union. April 11, 2011.
  • NY Times editorial on State Workers and N.Y.'s Fiscal Crisis points out that NY State is paying 10 times more for state employees pensions than it did just a decade ago. NY Times. March 5, 2011.
  • Empire Center predicts school districts will have to quadruple their pension contributions over the next five years which will require an 18 percent rise in school property taxes for pensions alone. January 2, 2011.
  • Manhattan Institute release study showing NY taxpayers have a $205 billion unfunded pension liability for retired state and local government employees. Empire Center. October 13, 2010

North Dakota

  • Senate Bill 2108 as submitted to the governor increases member and employer contributions for the NDPERS main retirement system, Judges, defined contribution and Highway Patrol systems by 1 percentage point each in January of 2012 and 2013. The law enforcement plan increase is 1/2% for the member and 1/2% for the employer. For the main retirement plan, the two-year increases will be from 10.3 percent for employees to 12.3 percent, and for employers, from 16.7 percent to 18.7 percent of compensation. Source: North Dakota Legislature. SB 2108



  • Oklahoma Attorney General Scott Pruitt said he was launching an investigation of banks and investment businesses, following up on communications he has received about possible wrongdoing that could have lowered investment returns to state pension funds. He also told reporters at the state Capitol the probe would follow a path similar to that taken by officials in California, Virginia and Florida to "recoup" some $200 million in earned assets. The Republican attorney general joined two key GOP legislators - House Speaker Kris Steele of Shawnee and Randy McDaniel of Oklahoma City - at a press conference where they announced intentions to conduct public hearings on further state pension reforms in October and November. July 29,2011.
  • Gov. Mary Fallin signed five pieces of legislation on May 10 that will overhaul the state's unfunded pension system from red to black. "If we did not address our $16 billion unfunded liability to our public pension systems, our state would be headed toward a kind of fiscal catastrophe that would hurt our state," Fallin said. House Bill 2132, authored by House Speaker Kris Steele, R-Shawnee, and Senate Pro Tem Brian Bingman, R-Sapulpa, would reduce unfunded liability in state pensions by $5 billion by eliminating unfunded cost of living adjustments, Fallin said.
  • HB 1010 extends the retirement age of the Uniform Retirement System for Justices and Judges who began work after January of this year. The measure increases the retirement age from 65 to 67 years for members with eight years of service. The retirement age extends from 60 to 62 years of age for new members with 10 years of service.
  • SB 347 will exclude retirement benefits for employees convicted of crimes related to their office, Fallin said. "Taxpayers shouldn't have to subsidize the retirements of those who betrayed the public trust," she said.
  • SB 377 will raise the retirement age of new teachers coming into the system from 62 to 65 years of age, Mazzei said.
  • "Senate Bill 794 is another important piece because it says from now on, legislators need to have the same type of pension system as our regular government employees do," Mazzei said.
  • The total 30-year savings of all of these bills is $6.8 billion, Mazzei said. "It's a huge accomplishment that tells our hard-working teachers, and government employees, firefighters and law enforcement officers that your retirement pensions in the future are secure," Mazzei said. May 10, 2011.


  • The prospect of budget-busting costs to bail out the state's public employee retirement fund has been dogging government employers across Oregon since the financial market meltdown in 2008. Contribution increases kick in come July, adding $1.1 billion to taxpayers pension fund tab for the 2011-2013 budget cycle, effectively doubling their PERS bill. The increases prompted bold talk of pension reform before the 2011 legislative session. A report from the staff of outgoing Gov. Ted Kulongoski outlined a host of potential changes, and Gov. John Kitzhaber indicated he was on board for at least a few of them. Yet as state lawmakers head toward the home stretch of the 2011 Legislature, shaking the sofa cushions for cash to run schools, talk of PERS reform has died to a whimper. Apart from PERS housekeeping, only one bill and one concept remain from the 35 measures that were introduced at the beginning of the session. And those have been watered down to the point they offer less savings than first hoped. May 28, 2011.
  • A bill that would cut a PERS tax benefit for future public retirees who move out of state has moved forward in the Oregon Legislature. The House Business and Labor Committee voted unanimously Wednesday to move House Bill 2456 to the Ways & Means Committee with a recommendation to pass. Public employees who retire under PERS currently receive extra money each year to cover the cost of Oregon state income taxes on their pension benefits. However, retirees receive that money even if they've moved out of state and no longer pay Oregon taxes. The original version of this bill would have eliminated the tax benefit for all public retirees who moved out of state, as originally recommended by former Gov. Ted Kulongoski's Reset Cabinet. That panel predicted that such a move could save Oregon $5.9 million for state general-fund agencies and $17.9 million in the state's support for schools and community colleges in 2011-13. Those savings are likely to be blunted by an amendment adopted Monday that will cut the tax benefit only for public workers who retire after Jan. 1, 2012, and then move out of state. Staffers at the Legislative Fiscal Office are working on a revised fiscal impact statement for the bill. The report is expected to be available by the time Ways & Means takes up the measure. The tax issue stems to 1990, when a change in the federal tax code meant that Oregon couldn't tax federal retirees unless it also began taxing its own public retirees. Within a couple of years, the state adopted a solution by giving PERS retirees an added benefit boost equivalent to the income taxes being taken out of their pension checks. Source:, April 21, 2011

Rhode Island


  • The bill to end collective bargaining by Tennessee teachers suffered a setback on May 3, and the top House Republican leader said it may be difficult to pass this year. Supporters of the bill had expected the House Finance Committee to approve the repeal and send it to the House floor for final approval. The Senate approved the bill Monday. Instead, the Finance Committee voted 14-11 to send it back to the Education Committee for detailed review of a last-minute, 17-page amendment. Lawmakers gave conflicting views on how big of a setback it is. The education committee is closed for the year, but its chairman said he would likely re-convene it to hear the bill. Commercialappealcom. May 3, 2011. /



  • Utah wins national public pension award, but still is at risk. If the best state in America at protecting public workers' pensions still has to worry about falling short, how bad are the worst states? Catastrophic. That's the message from Utah state Sen. Dan Liljenquist, who Thursday accepted the first awards presented by State Budget Solutions, a national nonpartisan organization researching specific fiscal reform. Liljenquist, R-Bountiful, accepted the "Reality Check" award for his state, and the "Real Leader" personal award for recognizing and acting immediately on Utah's public pension crisis. Even with the reforms, Utah faces an existing unfunded liability estimated to range from $3.6 billion to $18.6 billion. Other states face liabilities that now are as high as $200 billion. The total for all is more than $3 trillion - about $10,000 for every child, woman and man in the United States - and growing every day. June 2, 2011.


  • The state's teachers agreed to a plan requiring them to work three additional years before retiring and contribute 1.6 percent more of their pay towards their pension. The state's other large union, which represents most public workers outside of education, voted to increase pension contributions by 1.3 percent over the next five years; the governor and legislative leaders say they will approve it. The state is reaping significant savings from the public pension cuts. Vermont's budget shortfall of about $150 million will shrink $15 million in the current fiscal year from the teacher retirement reforms, $2 million from the pay cut and $5 million from the higher state employee contributions. Teachers keep their defined benefit plan, with larger retirement checks. Other state workers retain current pension benefits, although their checks do not go up. STATELINE. March 16, 2011


  • Gov. McDonnell proposed budget amendments today that would establish anoptional defined benefit plan, similar to a 401(k), for state employees. The Senate Finance Committee killed the proposal three times this year, including one bill introduced on behalf of the governor. McDonnell also proposed putting an additional $27.8 million into the Virginia Retirement system through increased employer contributions. The governor wants to give local governments the option of requiring their employees to pay 5 percent of salary toward pension, regardless of when they were hired. march 30, 2011.
  • State has $17.6 billion unfunded pension liability and needs a 44% return on investment just to maintain the status quo. Gov. Bob McDonnell. December 17, 2010.


  • Substitute House Bill 2021 gets rid of automatic yearly increases in pension payments to the state's Teachers Plan 1 and Public Employees Plan 1 participants. But it adds a higher minimum payment for those who retired long ago. Proponents say eliminates almost $4 billion in future Plan 1 pension liabilities (of about $7 billion on the books). It also saves around $524 million in state contributions from all funds in the short short term. Bill has passed the Legislature and was signed by the Governor on May 16, 2011. The Olympian. April 22, 2011.


  • Gov. Walker signed legislation on March 11, to increase employee contributions to pensions from 0% to 5%.


Wilshire report: State plans will fall short of assumed rate of returns. None of the state retirement plans studied by Wilshire Associates will be able to meet its actuarial assumed rates of returns over the next 10 years. Among the 126 systems studied, the medium plan will return an estimated annualized 6.5% on assets over the next 10 years, 1.5 percentage points short of the median actuarial long-term assumed rate of 8%. Pensions & Investments. March 8, 2011.

State, local pension funds understate shortfall by $1.5 trillion or more. Washington Post. March 3, 2011.

Bill Gates, Jr. on pensions.

The percentage of private sector workers participating only in a defined benefit pension plan declined to 3 percent in 2008 from 28 percent in 1979, according to the Employee Benefit Research Institute. Those participating in a defined contribution plan, or a combination of the two types, increased to 43 percent from 17 percent. Daytondailynews. March 11, 2011.

Defined Contribution (DC) Plans

1. Mandatory DC Plans

a. Alaska -2005

b. Michigan -1997

2. Mandatory DC + DB Plans

a. Indiana

b. Oregon -2003

3. Optional DC Plans

a. Colorado

b. Florida

c. Montana

d. North Dakota

e. Ohio

f. South Carolina

g. Vermont

h. Washington


1. According to the U.S. Governmental Accountability Office (GAO), "the state and local government sector experienced a decline in pension asset values of 27.6% -from $3.2 trillion at the end of 2007 to $2.3 trillion at the end of 2008. GAO July 2010 update.

2. Unfunded pension liabilities for state and local governments is between $1 trillion (Pew Estimates) and $3 trillion (SBS estimates)

3. Unfunded retiree health care liabilities is at least $558 billion (Center for State & Local Government Excellence).

4. Many States inflate annual return on investment estimates which lowers amount they must contribute to pensions. i.e.. many states assume an 8 percent annual return on investment.

5. Most States "smooth" investment gains or losses over a five to eight year period. as a result the major decline in pensions investments over the past two years is hidden from the public and most legislators.


1. States need to switch from a defined benefits program to defined contributions.

2. In calculating the average salary for retirement, States need to switch to an average of the last five years of salary. Many states currently do the last two years. In calculating average salary for retirement, states need to omit unused sick leave; unused vacation; overtime; and double dipping (allowing a public employee to retire and then be rehired while collecting a pension).

3. Require legislators to cost out all pension enhancements before they vote on any enhancements.

4. 2010 pension and retiree health care reforms in the various states. As a result of 2010 legislation there are three significant lawsuits which will determine how much legislators can change existing pension systems.

5. The significant lawsuits I'm aware of are in Colorado, South Dakota and Minnesota, in all three related to reductions in post-retirement benefit changes for existing retirees and current employees. Michigan unions have threatened to sue over the 2010 requirements that teachers under enacted legislation and state employees under pending legislation would have to contribute for retiree health care, with the funds to be held in a trust fund for future use.

6. N.H> and Kentucky have taken steps to address unfunded retiree health care in the past three years.

7. Utah's reforms.

Ask the hard questions/demand data

Be hypothesis driven/avoid ideology

Involve all parties/build partnerships

Circulate reform proposal broadly

Be kind, polite and responsive

Keep moving forward

Demand comprehensive, long-term financial modeling from pension actuaries.

Reality is NOT negotiable- let the data do the work.

Future employees are not an effective lobbying force.

Know the details and you will own the issue

8. Georgia adopted a hybrid Defined Contribution model in 2008 and implemented it in 2009.

State Pension Unfunded Liabilities-How Bad Is It Really?

1. State Budget Solutions update on State Pension Liabilities January 12, 2011.

2. The Impact of Public Pensions on state and local budgets. Center for Retirement Research at Boston College. October 2010.

3. The trillion dollar gap. Pew Center on the States. February 2010.

4. American Enterprise Institute- An Options Pricing Method for Calculating the Market Price of Public Section Pension Liabilities. 2/16/10.

5. American Legislative Exchange Council (ALEC) -State Pension Funds Fall off a Cliff. 2010.

6. Kellogg School of Management and NBER. Dire outcome predicted for municipal pension systems. Cities and counties could add $574 billion to the $3 trillion in unfunded liabilities for the states. Kellogg School of Management. October 12, 2010.

7. State of State Pensions-Interactive Map. Mercatus Center at George Mason University. August 31, 2010.

8. Government associations released a "Fact Sheet" in February 2011, on State and Local pensions that appear to minimize the long-term unfunded pension liabilities. These groups are: National Conference of State Legislatures ( ; National Association of Counties (; United States Conference of Mayors (; National League of Cities (; International City/County Management Association (; National Association of State Auditors and Comptrollers and Treasurers (; Government Finance Officers Association (; International Personnel Management Association for Human Resources (; National Council on Teacher Retirement (;and National Association of State Retirement Administrators (

9. State and Local Pensions - An Overview of Funding Challenges. Center for State & Local Government Excellence. January 2011.{A260E1DF-5AEE-459D-84C4-876EFE1E4032}/uploads/{DE913A11-1C4F-475D-BF0E-1662B0C67612}.PDF

10. Center on Budget and Policy Priorities believes claims of state and local budget meltdown are exaggerated. January 20, 2011.

News Articles

1. Bailouts or Bankruptcy for State and Local Government Pension Problems? Enterprise and Free Markets. December 15,2010.

2. Activists seek new tactics to break old pension deals. Stateline. January 7, 2010

3. Public Pension Cost Cover-up? The Union Effort to Kill Transparency. December 20, 2010.

4. The Center for State and Local Government Excellent has created an interactive map showing a sample of state and local governments that have negotiated changes in pension plans. Center for State & Local Government Excellence. November 15, 2010

5. The Rollback on public pay and pensions begins. November 10, 2010

6. NCSL September 1, 2010.

7. States cutting public sector retirees benefits.

8. Amid backlash and budget deficits, government workers' pensions are targets. Washington Post. October 6, 2010.

9. The "Build America" Debt Bomb masks real financial situation of state and local governments. WSJ. November 22, 2010.

10. State burden per capita for public debt. This does not included unfunded pension and retiree health care obligations; unemployment insurance loans from the federal government; etc. October 3, 2010.

11. Unmasking Hidden Costs: Best Practices for Public Pension Transparency. Manhattan Institute. February 2011.

12. Governor Christie says 'sue me' as pensioners challenge cuts.

13. US. States Widen Currency-Trade Probes. WSJ. February 2, 2011.

14. Time for Government Pension Reform. Bacon's Rebellion. January 5, 2011.

15. Rethinking the Public-Pension Punching Bag. Bloomberg Businessweek. January 11, 2011.

16. Rising State, Local Pension Deficits, One more Way to Cheat our Kids. Investors Business Daily. December 21, 2010.

17. How Can We Fix America's Deadbeat States? Money Morning. December 21, 2010.

18. States' pension crises could become Congress' headache. George Will. December 27, 2010.

19. Union Rollback. Investors Business Daily. December 27, 2010.

20. Battle looms over huge costs of public pensions. NY Times. August 5, 2010.

21. Stressed states are forcing workers to retire later. WSJ. August 2, 2010.

22. States, Public Unions Wrestle over pensions. February 9, 2011.

Legal issues on pensions. Social Science Research Network. March 24, 2010. States test whether public pension benefits given can be taken away. August 10, 2010. AND WSJ. Sept. 15, 2010.

Key questions to ask regarding pension reform and the status of the pension system. Most actuaries do a good job of looking behind. What is needed is a forward looking forecast that answers the following questions.

  • What will happen to employer contribution rates over the next 40 years if Utah fully funds its pension system?
  • What will happen to the state's pension fund if it freezes its contribution rates at 2008 levels?
  • What will happen to the state's pension fund if it freezes contributions at 2008 levels for 3 years and 5 years?
  • Since contribution rates depend on investment returns, model the above scenarios based on investment returns of:
  • o 7.75%
  • o 8%
  • o 6%
  • o 7%
  • o 8.5%
  • o 13% returns in 2009 and 9% afterwards (this was a supplemental request made by Senator Jon Greiner)
  • Finally, what will happen to contribution rates if Utah closes its existing systems and put all new employees on a new retirement program with employer contributions of 8%