I am here on behalf of the members of NDTA to support any and all efforts to reform the public pension system. It is our firm stance that the status quo of the public pension is not acceptable, and that the state should not even entertain the notion of any bailout until significant reforms to the system are made.
We fully support a freeze on new enrollment in the current define benefit program for all new employees, and any current employees with legal binds to the defined benefit program.
I would also like to offer a constructive suggestion for how to truly reform the pension system.
The goals of this suggestion are simple:
· Remove the state from the pension and retirement equation entirely.
· Empower public employees to have greater control and options with regard to their own retirement decisions.
· Fully compensate employees with a hold-harmless requirement on the transition process.
These three goals can be fully achievable within this conceptual framework and are far more acceptable to both ends of the political spectrum than one might think at first glance.
I've included a basic diagram with my written testimony that makes this concept easily understandable. I also sent a copied to you via email yesterday.
Again, this is a conceptual framework and its details have yet to be determined.
The concept we propose is a far more efficient and cost-effective way to promote overall reform than for the legislature to dictate new rules to try changing the previous agreements. We need to look at how public employees at the grassroots level can come to you and demand reforms from the bottom-up.
The keys to this proposal include:
· Taking the 8.14% that the state currently puts into the retirement fund for each employee and package that with the Governor's proposed 3&3 salary increase that includes bumping the 8.14% up to 10.14%
o This will address the so-called 12% Salary Equity Deficit that the Public Employees Association and the Hay Group claim exists without a fiscal note beyond the Governor's proposed salary budget.
· Once the employee's salary has been increased by the level of current retirement contribution, the entire 10.14% retirement portion will be deducted from each employees paycheck. Even with the increased salary, simply seeing that retirement deduction on the paystubs will immediately make every employee demand more control and more options over that payroll deduction.
This plan will create a natural attrition rate of current enrollees asking to be removed from the current program and into the new defined contribution programs.
While there will be costs to this transition, eliminating the threat of an ever growing, unfunded liability will render a huge return.
Just as with any defined contribution plan, the state will need to decide which contribution matching level is sufficient and desired, but that will no longer be an open-ended, bottomless pit of future obligation that the current system mandates.
The time is now for the state to get out of the retirement planning business, normalize salaries to where interest groups claim those levels should be, empower state workers to control over their own finances, and do so without breaking the bank or creating a never ending bailout.
The choice is yours. Thank you.
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