Sunday, July 22, 2012
Thanks to an extraordinary bipartisan effort, the Ohio Senate has completed work on legislation to bring much needed reform for Ohio’s major public- employee pension funds. The Senate passed bills in May that call for significant changes — and significant savings — for the Public Employees Retirement System, the State Teachers Retirement System, the Highway Patrol Retirement System and the Ohio Police & Fire Pension Fund (of which I serve as executive director).
More recently, on July 11, the Ohio Retirement Study Council heard the long-awaited report of its pension reform consultants. That report — while praising the reforms developed by the retirement systems and passed by the Senate — also emphasized the urgency of enacting reforms to keep the pension systems financially strong and stable.
Now it is up to the Ohio House of Representatives to act soon.
The problem is well- documented. Operating under existing law, Ohio’s public- employee retirement systems are struggling to meet the state requirement that they be fiscally able to fund all anticipated pension payouts for the next 30 years.
More than three years ago, each of the systems proposed changes that would allow them to maintain strong financial positions and meet the 30-year requirement. But these changes required legislative approval, and until the Senate vote in May, no legislative action had taken place.
Every day that passes is costly. Without passage of the reform legislation, the pension systems as a group are forgoing millions each day in potential savings. OP&F alone saw these liabilities increase nearly $2 million per day during 2011.
The legislation (Senate Bill 340) that affects OP&F makes specific changes to retirement age and employee contributions that will strengthen our fund and give our governing board the flexibility to make additional changes should they be necessary to ensure fiscal stability. Each pension system has proposed such reforms.
In our case, the legislation raises the minimum from 48 to 52 and raises the member contribution to the fund from 10 percent to 12.25 percent. Each of these changes would be phased in over the next three years.
NO INCREASE IN CONTRIBUTIONS
Most significantly, the legislation does not require any increase in contributions from employers. In our case, of course, those employers are nearly 1,000 cities, villages and townships that provide police and fire services to their residents. To put that as plainly as possible, it will not cost local police and fire agencies — and hence taxpayers — any additional money.
States and local communities all over the country are dealing with serious issues regarding their public- employee pensions. Ohio has a chance to address its pension issues responsibly and avoid the kind of fiscal crisis that so many other states are now facing.
But time is the enemy. The plan for OP&F as passed by the Senate would have brought our fund into compliance with the 30-year law — but we brought the current plan to the General Assembly more than a year ago, and since then we have already accumulated an additional $670 million in unfunded liabilities. The same is true in varying amounts for each pension system.
The Senate recognized the urgency when it acted in May. Its decision to move the legislation forward was the most important action to date to reform our public employee pension systems.
Our board strongly supports the legislation. Our members understand the need to make significant changes, as do local governments charged with providing police and fire service to their residents and taxpayers.
We urge the House to move quickly in considering Senate Bill 340 and the other pension-fund reform bills, and bring them to a vote soon.
William J. Estabrook is executive director of the Ohio Police & Fire Pension Fund.