Bill will restructure pension debt

• By SARAH CHACKO
• Advocate Capitol News Bureau
• Published: Jun 28, 2009 - Page: 10A

• Print
• Email
• Save
• Reprints
• Twitter
• Share

• Del.icio.us
• Digg
• Facebook
• Reddit
• 

A bill that cleared the Louisiana Legislature last week is expected to lower what state officials call the “largest direct debt of any state entity.”

The state employees and teachers retirement systems have a combined debt of about $11 billion.

Generally, tax dollars go toward paying down the debt. The amounts of those payments are expected to balloon every year leading up to 2029, when the bulk of the debt is due.

Senate Bill 296, which has been sent to the governor for his signature into law, is aimed at making those future payments less dramatic and to save taxpayers about $557 million, said state Sen. Butch Gautreaux, the Morgan City Democrat who chairs the Senate Retirement Committee.

SB296 basically would refinance some of the debt after making a large extra payment and create a new payment structure. The moves are expected to save the state more than $550 million.

Most of the debt — $9.7 billion of it — was incurred before 1988. It is called the initial unfunded accrued liability, or IUAL.

The state was supposed to be making payments on the IUAL at an increasing amount, until the due date of 2029.

But the payment schedule has been increasing faster than the state has kept up, said Shelley Johnson, actuary for the two state systems.

“Those payments are going to be unaffordable in the future,” Johnson said.

Since 1988, the state has been required to contribute to the system what actuaries say is needed to pay its liabilities, which include benefits.

But in some years, the systems had insufficient funds or investment losses that did not cover their liabilities. That shortfall created another debt, called an unfunded accrued liability.

Additionally, over the years “side” funds, such as monies from the settlement of a lawsuit with Texaco, were created to help pay part of the unfunded accrued liabilities and the pre-1988 IUAL.

SB296 would consolidate the various accrued liabilities created since 1988 within each of the two retirement systems.