Don’t let the fact that Gov. Bobby Jindal appears not to have a clue about his state employee retirement reform package fool you. While the governor appears to be backing down on parts of his controversial retirement bills, one strategy clearly has not changed: divide and conquer.
More about that later.
On the heels of a 38-page analysis of the retirement bills which would require state employees to contribute 3 percent more, work longer and accept fewer benefits, Jindal’s office launched a petulant “official response” via his favorite medium, the Baton Rouge Business Report.
The report, by the Dallas law firm Strasburger & Price, said that virtually all components of the retirement bills would be ruled unconstitutional if subjected to legal challenges.
Not so, sniffed Jindal through his press office, and here’s where things get a bit dicey—for the governor.
First, the response to the Strasburger report, ordered by Legislative Auditor Daryl Purpera, said that the firm “relied on a vague conceptual understanding of the proposals, without an actual analysis of the bill text.”
That allegation could just as easily be directed at the governor’s office, based on Jindal’s response and what followed a scant week later.
“We’re open to compromise,” said Jindal’s deputy chief of staff, Kristy Nichols.
Really?
When has Jindal ever compromised on anything?
Perhaps a better question: why would Jindal compromise on anything given his track record?
Even better, after his insistence a week earlier that “The reforms are constitutional,” why would he suddenly change direction?
The answer to all three questions has to be that someone—perhaps someone who actually read the state and U.S. constitutions—whispered in Jindal’s ear that his “reforms,” if passed, would be in for a long, hard—and losing—fight.
But maybe we should examine the nuances of the latest developments—including glaring contradictions between the governor’s “official response” and his latest “compromise” offering.
Remember when that Business Report response trumpeted that there is “nothing in the bill” which directs employee contributions to the general fund? “The employee contributions would go, as always, to the retirement system,” it said.
The official response also said, “The 3 percent employee contribution bill is not a tax and is clearly not revenue-raising. The employee contributions remain the employee’s own money; the employee receives the contributions back either in the form of retirement benefits or as a refund of contributions upon termination of employment.”
Okay, let’s break down the shell game—and make no mistake about it, these bills are nothing more than a not-so-elaborate shell game.
It turns out, thanks to Jindal’s subsequent but inadvertent admission, the 3 percent additional employee contribution indeed would have gone toward employee retirement. But before we grovel at Jindal’s feet in abject contrition, it also turns out that that additional 3 percent would have corresponded to a 3 percent reduction in the state’s contribution and it was that 3 percent that was to go to the general fund.
Tomato, tomahto.
And there’s another awfully charitable compromise offer by the governor, necessitated, no doubt, by pure old-fashioned embarrassment. Jindal has said he will ask lawmakers to include the governor so that he, too, would be subject to the 3 percentage point increase in his retirement cost.
Terribly sporting of you, Guv. But why did you wait until after LouisianaVoice broke the story of your purchasing back 2.2 years of time and the fact that you and other statewide elected officials were exempt from the 3 percent increase? Afraid that doesn’t pass the smell test, much less the open and accountable transparency test.
Well, on second thought, it is pretty transparent.
And then there is that nagging little requirement that employees work until age 67 to qualify for retirement benefits. That, too, has been scrubbed, though not scuttled completely, by the governor in his newborn spirit of compromise.
Under Jindal’s revised plan, employees would be able to retire as early as 55 as they currently are, depending on years of service, with full retirement benefits based on contributions already made into the retirement system. Additional benefits accrued after the bill would take effect, however, could only be collected at a full rate at age 67 or older. If the employee sought to collect the additional befits before age 67, they would be at a reduced rate.
Louisiana State Employees Retirement System (LASERS) deputy director Maris LeBlanc, however said the general feeling is that there would still be the same question of constitutionality because even in its revised form, the retirement plan proposed would break an employment contract. “I would think that would be subject to challenge,” she said.
Of course, the question remains over whether or not the additional 3 percent contribution would constitute an employee tax. If so, it would be in violation of the state constitution because no tax issue can be passed in an even-numbered year.
Now, though, Nichols says that Jindal would support an amendment that would apply the 3 percent to pay down the state’s multibillion-dollar retirement cost-instead of the money going into the general fund. Someone either lied or didn’t know what he/she was talking about in that Business Report official response. It’s that simple.
Is the governor really saying now that after the legislature reneged on its obligations all these years to pay down the retirement funds’ unfunded accrued liability (UAL), that state employees will be asked to chip in an additional 3 percent to make up for what amounts to negligence and fraud on the part of legislators in years past—while not realizing additional retirement benefits?
That’s the way it all shakes out: a shakedown. Think Deduct Box of days of yore.
Not much of a compromise at all for state employees.
But if you think all that is smoke and mirrors, let’s take a look at the divide and conquer strategy.
“We’re drowning in debt, and our pension systems are unsustainable,” Nichols said last week.
Jindal has said repeatedly that the proposed retirement changes would help reduce the costs of pension programs (note the plural use of the word programs as opposed to the singular application in the bills) that have a combined UAL of more than $18 billion.
“The legislature has a constitutional mandate to maintain a sustainable retirement system—an obligation which exists both to protect the retirement system and taxpayers,” the administration said in its response to the Strasburger report.
Good political rhetoric that sounds reassuring on the surface. But let’s peel back a layer or two.
Remember that UAL in excess of $18 billion?
There are four retirement systems: LASERS, the Teachers Retirement System of Louisiana (TRSL), the Louisiana School Employees Retirement System (LSERS), and the Louisiana State Police Retirement System (LSPRS).
The LASERS UAL is $6.3 billion, only about a third of the total, and is 57.7 percent funded, second only to LSERS, which is 61 percent funded and which has a UAL of $863 million. The state police system has a UAL of $313 million and is 55.6 percent funded.
TRSL, by comparison, has a UAL of $10.8 billion and its 54.4 percent funding, the lowest percentage of the four.
Yet, Jindal, who says, “We must act now in order to keep our promise to workers, protect critical services…and protect future generations from more debt and higher taxes,” addresses only LASERS in his proposed pension reform. As in singular.
Could there be a reason for not including the other three systems?
Simple logic would seem to dictate that the burden be shared proportionately between teachers, civil service employees, school employees and state police.
But logic has never held a place of prominence in this administration.
Ulterior motive, however, is quite another matter.
Nichols, speaking in a telephone conference with reporters last Friday, was unable to go into details about the governor’s revised plan because “specifics were not available.”
That certainly has a familiar ring to it. Seems the recently passed education bills also were sorely lacking in specifics—not that it mattered to legislators who fell into line like so many sheep.
But just as you learned here of the governor’s purchase of those 2.2 years of time and of his being exempted from the 3 percent increase in contributions, remember that we were the first to warn you about the divide and conquer tactic.
It’s more important than ever that state employees, teachers and school employees show a united front.
Who knows who would be next on Jindal’s hit list?
Louisiana Voice 
When I read Kristy Nichols statement “We’re open to compromise,” I began to laugh. Your next two paragraphs were just what I said to myself and then I read yours! It’s nice to know somebody thinks like I do! I like to have company!
It’s good that you pointed out the “divide and conquer” strategy Jindal is using. It is one we should all be aware of.
“It’s more important than ever that state employees, teachers and school employees show a united front.”
Come help us fight!
http://www.pension2012.org
http://www.facebook.com/pension2012
You might also want to point out that the retirement systems are not “drowning in debt.” The UAL is the amount that would be needed if all benefits were payable today. That scenario is next to impossible. There is enough to meet current obligations and still have a surplus. In addition, the UAL is on track to be paid off by 2029, assuming that governors and legislators don’t continue to refuse to meet their mandated payments. http://www.lasersonline.org/news&newsID=79
Maybe Louisiana would not be drowning in debt if the legislature wouldn’t be so generous with tax breaks to corporations–some making millions in profits and others going bust! Bully Jindal is not finished with teachers or state workers. Can you please get information on SB 413? It looks live a move to privatize school cafeterias. Can’t wait till this session is over and Bully Jindal is finished with his war on teachers and state employees.
If the governor truly wants to show his inclusiveness, he will ask that the law be changed to make ALL of the rank and file provisions of LASERS apply to him: years of service, final average computation, and percentage multiplyer. He may feel that his purchase of service credit might not be worth as much, or as he put it, “a good decision for his retirement planning at this time.” If his proposals pass, this will be the same thing that is happening to thousands of rank and file employees. Why should someone become retirement eligible at 16 years just because he is governor, or have a 3.5% multiplyer (If this is true.)? Do rank and file employees not have a right to also make good decisions for their retirement planning? I wish him well if he gets picked as a VP running mate, but you better keep an eye on your Medicare and social security if he gets elected.
Echoing K2Teacher’s excellent comments: Tom previously reported that
– Jindal is throwing $3 BILLION A YEAR at his corporate contributors
– Jindal lies about how many jobs have been created
– Jindal has current legislation to make the corporate givaway even more secrative and therefore more likely to be abused
– Jindal doesn’t use any of his supposed intelligence to create legislative inititives to benefit LA, he just does what his contributors, through ALEC, tell him to do
– Jindal uses the budget crisis that he created to justify
> elimination of services needed by the citizens of LA
> no raises for state employees for years
> unnecessary increases in OGB rates to make a take over more financially attractive (another “tax” just on state employees)
> hurting the LA economy by firing state employees
> lying about the necessity of changing a retirement system that will be just fine if the legislature fulfills its obligations as the constitution requires
> lying in saying that state workers should taxed to pay for the UAL that was created by prior failures of he legislature to fulfill its constitutional obligations.
Changing the subject, but still building off K2Teacher’s insight: Jindal is a bully, and like most bullies, he is a COWARD:
– He hides in the mansion
– He won’t allow this state owned/provided building to be used for public meetings like every other governor has
– he won’t let anyone be around the back entrance to the capital where he slithers in and out
– he won’t allow ordinary citizens on the 4th floor
– He wouldn’t even allow teachers to be in their capitol building until he had scurried to safety
Do these sound like the actions of a man qualified for higher office?
Hear-hear, 70791. Good summary. Jindal and his lackey legislature are responsible and should be held accountable for allowing the UAL to grow over the past 15 years-before and during Jindal’s time as governor. Rather than coming up with a fiscally sound and responsible plan for the state to fund its own share of the retirement pensions and address the UAL, Jindal effectively turned his back on the issue. He was too busy passing out corporate sales and income tax exemptions to business cronies. See the Feb 19th article on LouisianaVoice by Tom Aswell. If his figures are correct, it would seem that the 5-year loss of revenue on Jindal’s watch exceeds the UAL. So it would seem that it was totally within Jindal’s reach to have corrected the UAL problem the state now has by utilizing the revenue that was available to him, had he chosen to.
A 3% increase in state employee contributions to fund three other systems with higher UALs. Jindal’s strategy is these other groups should be grateful they are not the ones asked to pay off Louisiana’s UAL debts. This too, is unacceptable.
Don’t know about your agencies, but the mass exodus of mid- and high-level professionals is starting in ours. Why wait? Even if it doesn’t pass this year, the assaults will continue for the next two.
Louisiana is going to lose the best and the brightest to the states on either side of us. It is truly time for Unity in the work place; as citizens of this great state we should also pull together and let the people at the capitol know where the real power is: The Power belongs to the people and everyday people will not be bought.
Should we all pack up and leave or take a stand and fight for what we know can help this state?
Excellent comment. We also need to hold each representative and senator responsible. We elected them, not the governor or national republican party. I predict a backlash of people leaving the republican party over having the “reforms” shoved down our throats.
Why is it that those of us who really want to know the truth have to come to a site like this? Why can’t we see this type of reporting from any of our local TV stations or newspapers! Keep up the great factual accurate reporting.
Can someone explain how reworking state retirement is considered “unconstitutional?” Never knew that state retirement plans are covered in the Constitution. What article or amendment would that be?
So glad you asked that. First of all, Article X, Paragraph 29 of the Louisiana Constitution does, in fact, specifically protect public pension benefits. There are also provisions in both the Louisiana and U.S. Constitutions which prohibit contract impairment due to diminished benefits. Moreover, the Takings Clause of both the Louisiana and U.S. Constitutions prohibit divesting public employee benefits without just compensation. Finally, there is the Due Process Clause in both the Louisiana Constitution and the Fifth Amendment to the U.S. Constitution which prohibit the depriving of employees’ of property rights (in this case benefits) without due process. And then, there is 42 U.S.C, which prohibits public officials from enforcing unconstitutional laws.
But hey, don’t take our word for it: go to http://wwwlasersonline.org and read the Strasburger Report. Or you could read earlier posts of LouisianaVoice where each of these issues is discussed.
So, to answer your question: yes, reworking state retirement would be considered “unconstitutional” as has already been done in Alaska, Arizona, Colorado, Delaware, Florida, Hawaii, Illinois, Kansas, Maine, Massachusetts, Michigan, Minnesota, New Hampshire, Pennsylvania, Rhode Island, Tennessee, Washington, West Virginia and, yes, even Louisiana (in eight separate cases).
If it is legal to increase the employee contribution rate by 3% for certain employees then the rate could ostensibly be increased to 23%, or 33%, or even 53%. Actually, the sky would be the limit, IF it were legal. Any increase in the retirement rate would be an impairment of benefits and the difference between 3% and 53% is only a matter of degree. That’s why the Constitution refers to the relationship between the state and its employees for retirement benefits as a CONTRACT. Thank God the framers had the foresight to anticipate that someday someone might come along and mess with employee benefits for political gain.
The “fiscal crisis”, as current situation is so often called, that seems to be the excuse for everything from budget cuts, to privatization of state services, to reductions in employee benefits was not due to an Act of God, a downturn in the economy, or even a miscalculation in the revenue forecast. The “crisis” is primarily the result of nearly one billion in TAX CUTS that have been enacted over the past 7 years (look them up on the Legislative Fiscal Office website for yourself). The proposed 3% increase in the employee contribution rate is (I believe) less than $30 million, a mere pittance by comparison. It is hard to imagine that legislators would accept such a fool’s errand from the administration when it won’t help next year’s budget problem (in all probability it’ll make it worse if forthcoming amendments actually do make it a deferred benefit), won’t help the UAL (the legislation will be declared unconstitutional), and will make tens of thousands of state employees hopping mad (a certainty). I wouldn’t have any part of this unless I was thinking that my next job or bid for public office was somewhere outside of Louisiana.
All good points George. One other thing to consider is the cost of the mass exodus of workers who are eligible to retire that will leave before they can be affected by whatever new legislation comes to pass. If 15 or 20,000 workers retire at one time, what drain will it cause to the system? Have they run the numbers on that? I believe that the administration views workers as little more than slaves that can be treated as inanimate objects with no feelings, no right to speak, and the power to do only what they are told to do. Did it ever occur to the potentate that we vote?
Another good point, Rory. The mass exodus of vested state employees will have an immediate fiscal impact on the state. The 8% contribution that each of these employees is presently making into the retirement system will halt, and their retirement benefit will begin. By retiring early each of these employees will pay into the system for fewer years and receive pension benefits from the system for more years than they otherwise would have-facts that could not have escaped the attention of the governor and his lackeys. So since a mass exodus of state employees would have a negative impact on the fiscal solvency of the retirement system, why would the governor engineer it? The answer to this is I’m sure the same as the answer to every other question regarding Jindal’s legislative agenda-follow the money. Public pension funds turned into private sector 401K-type savings accounts = money for ALEC members in the financial services industry who would undoubtedly be the exclusive provider of such services.
Tom, thank you for your outstanding reporting on this and so many other related issues of corruption in this administration. If not for you, I would never have been able to connect the dots. I heard you today on Jim Engster’s radio program, and am glad that your message is being spread beyond the internet. Hopefully, Jim will have you on again before the session ends and perhaps we will hear you on other media outlets. Keep up the great work. We need you!!
After 4 years of no cost of living or merit raises, I’m out. Raise the contribution with no benefit, sorry. Just another technical professional leaving a gap in services in state gov’t.
Same here garbob!
Read the following excerpt. It discusses the worker’s having to pay more money because of taxes and wants them to have a lesser burden by having less taken out of their checks. This is apparently true for all but the state and government workers. They are to be punished for the excesses of the executive and legislative branches of government in this fine state of Louisiana!
I copied this from an ALEC document, entitled “Rich States, Poor States
ALEC-Laffer State Economic Competitiveness Index” written by, Arthur B. Laffer, Stephen Moore and Jonathan Williams (http://www.alec.org/docs/RSPS_5th_Edition.pdf)
Taxes create a wedge between the
cost of working and the rewards
from working.
To state this in economic terms, the difference between the price paid by people who demand goods and services for consumption and the price received by people who provide these goods and services—the suppliers—
is called the wedge. Income and other payroll taxes, as well as regulations, restrictions, and government requirements, separate the wages employers pay from the wages employees receive. If a worker pays 15 percent
of his income in payroll taxes, 25 percent in federal income taxes, and 5 percent in state income taxes, his $50,000 wage is reduced to roughly $27,500 after taxes. The lost $22,500 of income is the tax wedge, or
approximately 45 percent. As large as the wedge seems in this example, it is just part of the total wedge. The wedge also includes excise, sales, and property taxes, plus an assortment of costs, such as the market value of the accountants and lawyers hired to maintain compliance with government regulations. As the wedge grows, the total cost to a firm of employing a person goes up, but the net payment received by the person goes down. Thus, both the quantity of labor demanded and quantity supplied fall to a new, lower equilibrium level, and a lower level of economic activity ensues. This is why
all taxes ultimately affect people’s incentive to work and invest, though some taxes clearly have a more detrimental effect than others. An increase in tax rates will not lead to a dollar-for-dollar increase in tax revenues, and a reduction in tax rates that encourages production will lead to less than a dollar-for-dollar reduction in tax revenues. Lower marginal tax rates reduce the tax
wedge and lead to an expansion in the production base and improved resource allocation. Thus, while less tax revenue may be collected per unit of tax base, the tax base itself increases. This expansion of the tax base will, therefore, offset some (and in some cases, all) of the loss in revenues because of the now lower rates.
Excellent point on driving out the state employees that are now close to retirement. This will cause a drain on future contributions that the so called smart folks at the Capital never included in the planning process. The agenda here never included prudent financial analysis or good government decision making. Good luck on retaining the newer state employees with this loyalty.
Good luck on finding new employees to begin that are willing to and actually can make ends meet on 89% of their salaries, BEFORE health insurance, federal tax and state tax! Without the additional 3% salary deduction that Jindal wants, these items for me total 33% of my salary, leaving me 67% to make ends meet. With a defined benefit pension no longer offered as part of your compensation, what would motivate one to go into state service for what amounts to subsistence pay?