Caldwell: State treasurer goes to bat for pension protection
Washington state Treasurer James McIntire will ask the 2011 Legislature to approve a state constitutional amendment that would require at least 80 percent funding of annual state pension contributions.
With revenues stagnant or falling, pensions are too easy a target for lawmakers pressed to meet the state’s immediate needs, let alone those 20 or 30 years in the future, he says.
An amendment would take the pressure off those who, even in good years, consider pensions a last priority.
“This is a matter of how do you pay debts that we’ve already accrued,” McIntire says.
But getting an amendment passed in a bad economic environment, and a political season poisoned by public anger toward government and government employees, will be a challenge. It takes a two-thirds vote in the Legislature, and a majority vote by the people.
McIntire recognizes the task. For starters, he addresses what he says is the misperception that state pensions are luxurious.
The average pension is slightly more than $20,000, and 96 percent of retirees get less than $50,000. Except for those who began working for the state before 1977, workers are not eligible for pensions until they reach age 65.
The problem is the state’s budget, and money-shuffling and raiding that helps balance revenue and expenditures until state chief economist Arun Raha delivers news of yet another shortfall. Each time pension contributions are pushed into the future, the problem becomes worse.
Inadequate appropriations over the last decade threaten to create intolerable burdens for Washington taxpayers.
As with every other savings program, personal or institutional, the sooner money is set aside, the less will have to be committed later. Three-quarters of the money in the pension reserves was generated by investment returns.
State and local governments are a combined $6.9 billion in the hole on two pension plans thanks to commitments made up to 1977, when extensive reforms were enacted. The state’s eight other retirement plans are more than fully funded, so much so – the surplus is $179 million – that Washington ranks fourth among the states for the soundness of its pension programs.
But State Actuary Matt Smith warns the surpluses may be short-lived.
Some or all of those pension funds may fall into the red zone for a few years as the state recovers from investment losses that culminated in a 23 percent plunge in 2008. The Commingled Trust Fund averaged better than 8 percent over the last 20 years, mostly on the strength of its performance in the 1990s. Returns were negative in four of the last 10 years.
In a report issued last month, Smith’s office noted that every time the Legislature punts on fully funding pensions, covering the shortfall in subsequent sessions was harder even when revenues improved.
And in a presentation to a select legislative committee last week, one slide showed unfunded obligations nearly equal to current plan costs in another 15 to 20 years.
McIntire says he is optimistic Washington will not go down that path, based on the past willingness of legislators to enact reforms that have the state far ahead of most others in addressing pension issues.
“This is a well-managed system,” he says.
McIntire says there is bipartisan interest in his bill. Labor and business interests alike are open to reform.
“I’m going to keep pushing,” he says.