Politics & Government

State lawmakers eye pension changes for new public sector workers

State lawmakers may increase the age when new public employees can retire with full pension benefits, and cap the amount of income used to calculate future public employees’ pension checks.

The separate proposals are part of a push by some Republican lawmakers to reduce the state’s long-term public pension liabilities.

“The problem is, we have to be very wary of pension costs for future generations,” said Senate Majority Leader Mark Schoesler, R-Ritzville. “It’s very important that we keep that system solvent.”

But public employee groups told lawmakers Tuesday that the state’s pension system is doing just fine, and that the proposals being considered in the Senate would hurt the state’s ability to recruit and retain staff.

Senate Bill 5982 would add two years to the normal retirement age for people who enter most public employee pension plans in Washington after July 1, 2015. That would mean a standard retirement age of 67 for most new public agency employees, and a standard retirement age of 55 for new law enforcement officers and firefighters.

The new retirement ages wouldn’t apply to current or former public employees — only those who first enroll in a public pension plan after July 1.

Under the bill, public employees still would have the option of early retirement with partial benefits, as they do today. However, payments received with early retirement would be calculated based on the difference from the new full-retirement age.

Another measure, Senate Bill 6005, would set the state’s average annual wage as the maximum salary that could be used to calculate a public employee’s monthly pension benefit — even if an employee’s actual salary is higher than that. The state Employment Security Department reported that the state’s average annual wage in 2013 was $52,635.

The proposed limit on calculating pension benefits would apply only to those entering a plan after July 1, and wouldn’t include members of the Law Enforcement Officers’ and Fire Fighters’ Retirement System Plan 2 (LEOFF 2).

The two proposals received public hearings Tuesday before the Senate Ways & Means Committee, with labor organizations and public employee groups testifying against both bills.

Matt Zuvich, a lobbyist for the Washington Federation of State Employees, said there’s no reason to overhaul a pension system that is working well and has little unfunded liability.

A 2012 analysis of state pensions by The Pew Center on the States ranked Washington as fourth in the country for the combined funding of its pension plans, while a March 2013 report from State Treasurer Jim McIntire called Washington “a national model for pension reform.”

In addition to keeping the pension system solvent, lawmakers “also have a responsibility to be able to attract the best and brightest to state service,” Zuvich said.

“I just don’t see why we want to sign up to be in a race to the bottom in our ability to recruit,” Zuvich said.

Other opponents argued that someone who starts working for a state agency at age 25 should have the ability to retire with full benefits at age 65, rather than waiting until they’re 67.

“I don’t think it’s too much to ask that after 40 years of service they be able to retire with dignity and stability at that age,” said Joe Kendo of the Washington State Labor Council.

Sen. John Braun, who sponsored both proposals, said he introduced the bills to try to address how today’s state employees are projected to live longer, and thereby will need to collect more years of retirement benefits.

Braun, R-Centralia, said the state’s unfunded pension liabilities will increase over time if lawmakers don’t do something soon.

Braun’s proposal to increase the retirement age for most public employees would save state and local governments about $3 billion in the next 25 years, according to an analysis by the Office of the State Actuary.

His plan to calculate public employee retirement benefits based on the state’s average wage would save state and local governments even more: About $8.7 billion over 25 years, the state actuary estimated.

“If we’re living longer, we have to figure out reasonable ways to pay for things like retirement systems,” Braun said. “This is just adjusting for that.”