Ohio taxpayers and most public employees would pay more, and some workers would have to stay on the job longer before retiring under plans proposed to ensure the long-term solvency of Ohio pension funds badly wounded in the stock market decline.
COLUMBUS - Ohio taxpayers and most public employees would pay more, and some workers would have to stay on the job longer before retiring under plans proposed to ensure the long-term solvency of Ohio pension funds badly wounded in the stock market decline.
The five public retirement funds representing state and local government employees, highway patrolmen, local police and firefighters, teachers and school administrators, and other school employees presented lawmakers with plans that largely ask government, current workers, and retirees to share in the pain.
"We cannot invest our way out of this situation," said Rep. Todd Book (D., Portsmouth), chairman of the Ohio Retirement Study Council. "... That would require the market to go up 20 percent each of the next five years. That's not likely to occur."
The panel asked each retirement system to develop a 30-year financial plan to ensure all its pension, health care, and other benefits obligations would be covered by income, whether from the workers, the governments that pay them, or investment earnings.
Losses suffered in the last year with the implosion of the stock market do not include investments that went sour long before the current recession. The public employees' and teachers' retirement systems suffered a combined $500 million investment loss from the collapse of Enron and Worldcom early in the decade.
The pension funds range in size from the Ohio Public Employees Retirement System, which with $60.5 billion in assets is the largest pension fund in the state and among the largest in the nation, to the Ohio Highway Patrol Retirement System, with assets of $750 million.
Even with the proposed changes, two of the systems - representing teachers and police and firefighters - would improve their long-term outlooks but still fall short of meeting the 30-year goal. That means the funds would take in less in the long term than they would pay out, forcing them to tap reserves.
"There's no way this fund is going to get to 30-year funding," said William Estabrook, executive director of the Ohio Police and Fire Pension Fund. The fund still has about $40 million in debt left on its books owed by local governments from $440 million it took on four decades ago when the state absorbed local pension systems.
The teacher, highway patrol, and local police and fire funds all asked lawmakers to approve increases in what employees pay into their retirement as percentages of their salaries. The teachers' system called for a 2.5 percent hike; police and fire, 2 percent, and highway patrol, 1 percent.
The two systems for the teacher and police and firefighters also sought hikes in what taxpayers will pay through school district and municipal employers. The schools' share would climb 2.5 percent to 16.5 percent of their employee salaries. The share local governments pay for police and firefighters would gradually climb to 25 percent for each, up from 19.5 percent and 24 percent, respectively.
The Ohio Public Employees Retirement System, representing state and local government workers, and the School Employees Retirement System, representing lower-paid employees who are not teachers or administrators, are not seeking increased contributions from either government or employees.
The teachers' system alone projected that its proposed savings on the benefits and income side would be nearly $9 billion over the life of its plan, more than $6 billion of which would come from reducing annual cost-of-living increases from 2 percent to 1.5 percent for new retirees.
Rep. Lynn Wachtmann (R., Napoleon) questioned Mr. Estabrook as to whether the Police and Fire Pension Fund went far enough on the benefits side to bring itself into compliance with the 30-year sustainability goal, noting that increases in local government contributions are passed on to taxpayers.
"There are very few Ohioans out there who haven't had to rethink retirement age, taking a second job, or a lot of things because the world changed for everybody," he said. "Evidently your board feels there should be a very privileged group of people that should be exempt … and that taxpayers should foot a substantial part of the bill."
Mr. Estabrook objected to the suggestion that police and firefighters consider themselves "privileged."
"It's not easy being a police officer," he said. "It's not easy being a firefighter … To change [retirement promises] in midstream, they felt, was unfair. Start it with new hires so that you know exactly how many years you've got to work."
The fund has proposed raising the normal retirement age for police and firefighters from the current 48 with 25 years of service to age 52 for all members entering the system beginning in 2011. New hires could still retire at age 48 but with reduced benefits.
Mr. Wachtmann countered with something he said he used to tell his kids.
"The sooner you understand that life is not fair the better off you are," he said.
In many cases, the changes would affect employees newly coming into the retirement systems or those newly retiring.
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