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Editorial: State’s early retirement deal begs for repeal

Sat., March 31, 2012

A dormant proposal to change Washington state’s pension system was revived when three Senate Democrats crossed the aisle, giving Senate Republicans the upper hand in budget negotiations.

Last year, Gov. Chris Gregoire called on the Legislature to make changes in the state pension system that reflected fiscal realities. One of them was the repeal of generous early retirement incentives that were added in 2007. The House Ways and Means Committee found the change to be sensible and passed it on a 25-2 vote. However, the House Rules Committee shoved the bill into a desk, and the reform has been stifled ever since.

Employee unions got their way, but the problem persists.

Sen. Joe Zarelli, R-Ridgefield, has reintroduced this reform and is pressing Democratic leaders to accept it as part of the delicate negotiations to end the current budget impasse. Some Democrats are complaining that the change won’t do much to cut the current budget, and that’s true. But this is a good idea for the long haul, so we can’t fault Zarelli for pursuing it now that his political hand has been strengthened.

Unions recently launched a campaign to cast Zarelli in the role of Darth Vader with a series of over-the-top attacks. It is an election year, so hyperbole is to be expected. However, the reform goes beyond mere ideological differences because it had widespread support last year.

So let’s skip the political sniping and look at the proposal.

Last year, at the urging of the governor, the Legislature passed a repeal of the automatic annual benefit increases granted to public employees under the state’s oldest – and least fiscally fit – pension plan (PERS 1). That change will save the state an estimated $9 billion over the next 25 years. Gregoire also wanted to rescind the early retirement incentives that the Legislature adopted in 2007, which granted workers 62 years old with 30 years of service full pensions. If they retire sooner, the penalty was softened substantially. Repealing the 2007 changes for new employees would save the state an estimated $2.3 billion over 25 years.

This change, coupled with last year’s reform, would go a long way toward aligning the state’s pension obligations with economic and budgetary reality. The Legislature has had a very difficult time balancing the budget in recent years, and adding that early retirement sweetener has soured the long-term outlook. It needs to be repealed.

Oddly, the pension proposal that’s garnered the most attention is actually – and actuarially – the least meaningful. The Zarelli budget called for skipping an annual pension payment to help balance the budget. But the governor has said that this gimmick – along with the Democrats’ plan to delay a payment to schools – is now off the table.

With that side dish out of the way, lawmakers can now focus on the meat of the proposed change, which is ending the early retirement incentives.

This had broad, bipartisan support last year. It won’t help the state’s long-term fiscal health to take it hostage this year.

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