Earlier this month Louisiana Governor Bobby Jindal unveiled his plan for a balanced 2013 Executive Budget that will maintain funding for higher education at the same level as this fiscal year. However, some of the measures suggested to close gaps in the proposed budget have raised questions and even outrage within the ranks of state employees.
The budget proposes a total of $25.5 billion in funds, a reduction of $61 million compared to this year’s budget of $25.6 billion. To make up for the shortfall, Jindal has proposed cutting over 6,000 full-time state executive branch positions, privatizing a few state prisons and health centers and reforming the pension system for state employees. The pension reforms alone are expected to generate over $100 million in funds, which will be reinvested into secondary and higher education. Another $55 million is expected to be created for the general fund. Because of this, this plan of action has been well received by members of the academic community.
“This is welcome news for higher education,” stated University of Louisiana System President Randy Moffett in a press release from the governor’s office. “Governor Bobby Jindal’s commitment to keep Louisiana colleges and universities whole shows the value he places on education and that he recognizes the role that higher education plays in the future of our state.”
However, these reforms have proven to be controversial and have met opposition from state retirement programs, especially the Louisiana State Employees Retirement System (LASERS). If passed during the 2012 Regular Session, which will be held March 12-June 4, this pension reform package (consisting of 42 bills) will increase the retirement age to 67 or the highest Social Security retirement age for employees under the age of 55, increase employee contributions to their retirement fund by three percent, make changes to the calculation of final average compensation and the implementation of a cash balance plan for employees hired on or after Jan. 1, 2013.
Cindy Rougeou, executive director of LASERS, and other LASERS officials claim that these reforms are Jindal’s way of creating a “payroll tax” to help cover the state retirement system’s debt accumulated through paying retirement benefits, which has received almost $19 billion in cuts. This debt is known as unfunded accrued liability (UAL).
In her response to Jindal’s proposal, Rougeou states that this action, if enacted, is unfair, ineffective and violates agreements made between employers and employees upon hiring.
“Singling out rank and file members, as is being proposed, raises serious questions of fairness and focuses the proposal on only a small portion of the UAL,” stated Rougeou. “Promises to current employees must be kept. Changing the rules in the middle of the game for mid-career employees is not a promise kept.”
According to Kevin Brady, the director of Human Resources at Southeastern, the retirement plans of most faculty and staff positions on campus will be affected by these changes should they be enacted.
“There are two types of employees that belong to state retirement systems: classified and unclassified,” said Brady. “Generally, a classified employee, when they start, is a member of LASERS; on our campus that’s roughly a little less than 30 percent of our total staff eligible for retirement. Everybody else is unclassified, with very few exceptions, and they’ll go into Teacher’s Retirement System of Louisiana (TRSL). Here, that’s about 70 percent of our staff eligible for retirement, which are basically full time employees.”
Brady also said that employees within the TRSL program have the option of enrolling within on optional retirement plan (OPR). OPRs will not be affected, as the bills only affect LASERS and TRSL.
Professor of History Dr. Ronald Traylor is a part of the 70 percent of employees enrolled in TRSL.
“I think it will be effective probably in the short run, but in the long run I’m not so sure,” said Traylor. “You know, we have a brain drain here in Louisiana. We always do. We take our best and our brightest kids and we send them to a Louisiana school and they receive a good education and then they immediately flee from the state of Louisiana and they go to either Houston, Dallas or Chicago or New York. My concern is that it is going to be a reverse brain drain; that people who would be coming to Louisiana to teach or would be staying in Louisiana to teach are going to go elsewhere. As in most areas, it’s usually about the money.”
While he thinks that the $100 million in funds to be generated for education by the retirement package sounds great on paper, Traylor thinks that several questions are still unanswered as to how the money will be used.
“The problem in Louisiana is always the difference between the promise and the implementation,” said Traylor. “There’s usually a vast gulf between those two things. I’m a little bit more conservative than most folks, and I’ve got to tell you that I’m really a skeptic when it comes to the use of tax dollars by government at any level.”
Brady has another view of the short and long-term affects of the package
“In the long run, I really don’t think there will be much of an affect because I think you will just come to know that’s what it is: ‘Okay, I’ll work ‘til I’m 67,” said Brady. “In the short run, yes, it will have an affect because people will be upset about this. But you have to keep in mind that the legislature could change and it could even get thrown out between now and when the session starts.”
In any case, Traylor, who is 65 years old, says that despite the unsure road ahead, he isn’t worried about working a few years more or adding another 3 percent of his paychecks to his retirement fund because he doesn’t plan to retire from teaching. Ever.
“I worked for Chevron Chemical Company for 21 years and retired from them. While I was working, I got my Masters and was almost finished with my Ph.D,” said Traylor. “I went right from a chemical plant into the classroom and I love what I’m doing so much. I was 58 years old when that happened and I love what I’m doing too much to retire. I hope to be found dead, slumped across my desk in Fayard Hall at the age of 90.”