Louisiana’s four constitutionally mandated state employee retirement systems have unfunded liabilities of more than $18 billion, but steady progress is being made to chip away at that debt, the chairman of the state House retirement committee said.
For decades, lawmakers underfunded state pension commitments, said Rep. Kevin Pearson, a Slidell Republican. But 30 years ago, voters approved a state constitutional amendment calling for that debt to be retired by 2029.
“It is just like any state-guaranteed bond; you have to pay it off,” Pearson said. “And we are doing it.”
By 2029, Pearson said, the original debt will be paid, though that doesn’t mean the systems will be debt-free. The Teachers’ Retirement System of Louisiana, for example, currently has an unfunded accrued liability, or UAL, of about $10.5 billion, which he expects will be about $6.3 billion in 2029.
“UAL will still be created, always,” Pearson said. “It would take a long time for the system to get funded 100 percent.” But the systems are on a more sustainable path thanks in large part to more professional management, he said.
A couple dozen retirement-related bills have been pre-filed for the legislative session that starts April 8, though most are fairly technical and limited in scope. Last year, a bill that would have made a significant change was quietly shelved, reportedly due to opposition from Gov. John Bel Edwards.
That proposal would have created a hybrid retirement plan for new hires entering the Louisiana State Employees' Retirement System, or LASERS. A portion would be a traditional defined-benefit pension, but the remainder would be more like a private-sector 401(k). Implementing the hybrid plan wouldn’t have affected the existing UAL, but it might have reduced future debts, said Barry Erwin, president and CEO of the Council for a Better Louisiana.
While the state is on track to pay its longstanding debt, the process of doing so diverts money from the general fund, which means less money is available for other needs, Erwin said.
“We’ve got this big debt that we’re paying off, but we can’t go about creating new debt on top of that old debt,” he said. “Probably the rule should be: Stop creating new debt.”
This year is an election year, and Erwin does not expect to see major, potentially controversial changes to the state retirement systems. But he says bigger ideas, like the hybrid plan, have a better chance to gain traction after the elections are over.
“Its time will come,” he said.