Terry Corbell, The Biz Coach
By Terry Corbell
Business Consultant

Common Sense Needed for Washington State Pension Reform

Updated March 19, 2012

It’s no secret that Washington state has a nightmarish budget deficit. Lawmakers have consistently failed to solve the red ink, which is exacerbated by lavish public-employee pensions.

My two salient concerns:

1.  Public-sector pensions are on average about 74 percent higher than the private sector.

2.  The Legislature has been delinquent in funding them in the billions of dollars.

But lawmakers aren’t exactly shy about high spending and taxes.

Fortunately, I’m not alone in sounding the alarm. Concerned analysts also include Jason Mercier of the Washington Policy Center, www.washingtonpolicy.orgin a 2010 Op Ed in The Seattle Times.

“According to the state actuary, two of Washington’s nine pension plans are already in the red with unfunded liabilities totaling nearly $7 billion,” he reminded readers. “This does not include an additional $8 billion in unfunded post-retirement benefit liability, primarily for retiree health care. Unlike pensions, however, these other retirement benefits are not a contractual right, meaning the Legislature has the ability to make changes as necessary.”

He, too, understood the adverse pension impact on the state’s budget.

“Already our state is facing nearly a $6 billion projected budget shortfall for 2011-13. Included in these projections is the need for additional pension contributions” Mr. Mercier wrote. “The state’s Office of Financial Management projects that an additional $700 million in pension payments above the base will be required in the 2011-13 biennium.”

The forecasts proved to be accurate.

He further stated that pension costs will continue to grow – to $1.2 billion during the 2013 to 2015 budgeting cycle.

“To help avoid kicking the pension liability can further down the road while putting the state’s credit rating in jeopardy, it may be time to pass a constitutional amendment that forces state officials to make the required pension payments and creates a higher threshold to provide enhanced benefits,” he observed. “While funding these past pension promises may crowd out other spending, the alternative puts taxpayers in a worse position.”

He offered another vital solution:

“Meanwhile, legislators must stop enhancing retiree benefits until all the state’s pension plans return to healthy status,” Mr. Mercier explained. “Exacerbating taxpayer exposure while billions in unfunded liabilities exist is the height of irresponsibility. It may also be time for additional reforms to help minimize future pension liabilities.”

It’s also worth noting that constitutional pension reforms were advocated by State Treasurer Jim McIntire.

Amen.

From the Coach’s Corner, here’s another piece on pension reform: Washington Labor Leader Is Right – It Is ‘Class Warfare’.

“Pension reform can be hard to talk about. In the long run, reform now means fewer demands for layoffs and less draconian measures in the future. It’s in the best interest of all Californians to fix this system now.” 

-Jerry Brown

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Columnist Terry Corbell is also a business-performance consultant and profit professional. Click here to see his management services (many are available online). For a complimentary chat about your business situation or to schedule Terry Corbell as a speaker, why don’t you contact him today?

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Seattle business consultant Terry Corbell provides high-performance management services and strategies.