Council 2 logo

Summer 2012

Worst pension attacks defeated

by County and City Employee staff on August 11, 2012

 Changes to the state pension system emerged as the greatest direct impact on local government employees in the state’s 2012 legislative session, which ended in mid-April. But, thanks to intense lobbying by the labor union coalition, which includes Council 2, the fallout was less damaging than it might have been.

In the early going, the session seemed to pose little threat to public employee pensions as three bills imposing severe cutbacks on pensions were thought dead. But they were revived by three Democratic senators (Rodney Tom, Jim Kastama and Tim Shelton) who joined Republicans in supporting them.

The worst of the revived bills would have closed Plan 2, siphoned $130 million from the pension system and eliminated all the Early Retirement Factors (ERFs).

In the end, and because of ithe labor-union coalition lobbying, it was only the ERFs that took a hit and only new hires from next year will be affected.

Here is the result:

Employees hired after May 1, 2013 will be assessed a 5 percent penalty for every year prior to age 65. For example, 60-year-old employees with 30 years of service will receive a 25 percent reduction in their pension benefits. The penalty for the same current employee is 5 percent.

“This measure had nothing to do with the health of the pension system or the current budget deficit,” explains Council 2 Deputy Director Pat Thompson. “It was ideologically based.”

The bill also includes a study on what the benefits reduction will mean to employees who might have difficulty performing jobs after 30 years of service.

“That’s right,” Thompson adds, “They’re directing the Select Committee on Pension Policy to study the bill’s impact after they passed it!”

Current employees are not directly affected by this measure but future attempts to undermine public employee pensions are likely.

The session was not all negative. Among the positive aspects was the passage of a measure that will help generate 18,000 construction jobs and will therefore help our state’s economic recovery.