Friday, May 17, 2024

Louisiana voters could vote on amendment to replenish state pension funds

by BIZ Magazine

Legislation moving through the Louisiana House would amend the state constitution to mandate higher payments with surplus funds to address unfunded pension liabilities.

House Bill 47, sponsored by state Rep. Richard Nelson, R-Mandeville, is a constitutional amendment that would increase current provisions requiring 10% of surplus funds to go to the unfunded accrued liability of the Louisiana State Employees’ Retirement System and Teachers’ Retirement System of Louisiana.

Nelson explained in the House Appropriations Committee on Monday that the constitution only mandates the payments for initial liabilities for the two systems that existed in 1988. HB 47 would increase the required payment to 25% of surplus funds, and expand the provision to the Louisiana School Employees’ Retirement System and Louisiana State Police Retirement System, as well as more recent liabilities for LASERS and TRSL.

“This would update the requirement so that even when (the pre-1988 unfunded accrued liability) is paid off, which is supposed to happen in 2029, we continue to allocate money to pay off that UAL debt,” Nelson said. “It’s about 7.5% interest, you pay it on about $17 billion is what our unfunded accrued liability is.

“We pay a significant amount of interest, about $1.3 billion a year,” he said.

Nelson sponsored a similar bill last session that initially called for 50% of the surplus to go toward the UAL, and it was later amended to 25%. The legislation cleared the House but languished in the Senate.

HB 47 would require the Legislature to begin paying the 25% of surplus funds in fiscal year 2024-25 and each year after. The bill would allow the Legislature to determine how the money is appropriated between the four funds, but would distribute the payments proportionally based on each system’s share of the overall UAL if lawmakers don’t prescribe otherwise.

“We basically have $17 billion on our credit card and we have to pay this interest every year, which equates to almost a new Baton Rouge bridge every year in interest,” Nelson said.

Nelson argued that while other pending legislation to use current surplus funds to pay down the UAL is a good move, requiring increased payments into the future is a way to ensure the debt will not continue to burden future generations.

If approved by the Legislature, HB 47 would be put on the statewide ballot for voter approval on Oct. 14.

The bill received no opposition in the House Appropriations Committee, where it was approved unanimously and sent to the Committee on Civil Law and Procedure.

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