Fresh out of a meeting with Bob Williams, president of State Budget Solutions, about how to fix state retirement systems, some Idaho legislators are open to the idea of reforming the Gem State's public retirement program.
Williams, in town on behalf of the Idaho Freedom Foundation to discuss public pensions, told IdahoReporter.com that retirement programs are too risky, volatile and expensive. He recommended the state change the way it does business to reduce the burden on taxpayers.
Rep. Jeff Thompson, R-Idaho Falls, has spent the past several months examining Idaho's options for pension reform and is an advocate of switching to a defined-contribution 401(k)-style system for the Gem State.
The majority of public workers take part in a defined-benefit program, which means they get a guaranteed benefit upon retirement based on years of public service and highest wages through a 42-month period. The program is administered by the Public Employee Retirement System of Idaho, otherwise known as PERSI.
Instead of the guaranteed monthly pension payment, Thompson is examining a system that would have the state and workers contribute to a retirement account that would then gain or lose value based on stock market fluctuations. "We continue to have those discussions and move forward," Thompson said.
Thompson gave no time frame for formalizing a pension reform plan, but said he is continually working on the issue. "It's going to take some time," Thompson explained. "We're having those discussions and looking at what the best path forward is for Idaho and the great people of Idaho."
Switching to a defined-contribution system would essentially eliminate the unfunded liability of the state's pension program, which sits at more than $1 billion. Valued at $11.545 billion, the pension system is about 90 percent funded.
Rep. Steven Hartgen, R-Twin Falls, who has been actively involved in talks about reforming the state's judicial retirement system, a program completely separate from PERSI, says it's very likely that the judge's pension system will see some major tweaks during the 2012 legislation session, but he didn't give specifics on what might come forth. "A number of us have been working on that," Hartgen said.
The judicial retirement program has an unfunded liability and some lawmakers feel the program pays too much and that judges don't contribute enough to the system. Proponents of the program believe the high benefits are necessary to keep talented judges in Idaho.
Pension-spiking, a process through which legislators with long careers in the Statehouse get appointed to high-paying jobs, adding thousands annually to their pensions, is one area Hartgen says will be changed in PERSI. "That's an issue and it's highly visible and people think that should not be allowed," Hartgen explained. "And I think you'll see a bill on that subject as well."
Rep. Dennis Lake, R-Blackfoot, advocated a bill to separate legislative pension credits from the PERSI program, but it never received a formal hearing. Lake has pledged to bring it back this year.
Note: The Idaho Freedom Foundation publishes IdahoReporter.com. Video for the story by Mitch Coffman of IdahoReporter.com. See what Bob Williams told a group of lawmakers about public pensions here.