” If he [the governor] gets into a war, he’ll lose,” Bronner said after his speech to the Birmingham Kiwanis Club, according to a Birmingham News report. Bronner’s remarks come in response to Governor Bob Riley’s administration studying options for dealing with a major cash crunch, some of which comes from increases in pension costs.
Under Riley’s proposals, the state may alter cost-of-living raises for retired state employees or change the retirement rules for new hires. Those moves might be politically possible, but the resulting savings would not show up for several years, Bronner said.
Tinkering with the system though will not solve the problem though Bronner says since he sees the increasing cost of health coverage is the real problem long term. Health insurance costs are expected to carry a huge price tag and Alabama will need another $140 million to continue operating Medicaid, he said. To cover this Bronner is requesting a $141 million increase in the state’s pension contribution over the next two years.
Bronner’s request comes after a move in 1998 by the Legislature to change pension accounting procedures and lower the amount the state was contributing to the fund. Since then, the state has saved about $2 billion it would have sent to RSA under the old rules.
However in 2001 and 2002, Alabama pension fund, like many other across the country fell on hard time due to investment losses. Bronner says pension costs will stabilize as the market bounces back.
Overall, Bronner said the real problem is that Alabama does not does not collect enough in taxes to support state government. Alabamians pay less in taxes per capita than residents of any other state. This comes in addition to the state offering on of the nation’s most generous pension systems for its teachers and public employees. It allows an employee to retire after 25 years of service and draw half his or her average salary, regardless of the employee’s age.
Yet Bronner said it would be unfair to change the rules on retirement and benefits for workers already paying into the system. And requiring additional contributions from current employees would amount to a pay cut for state workers. If those changes are proposed, Bronner predicted overwhelming opposition from state employees.
Bronner is not the first Alabama figure head to predict a war should Riley’s proposals be adopted. In October, Mac McArthur, executive director of the Alabama State Employees Association told the Birmingham News that it would be “a hell of a fight” if Riley were to suggest a phasing out of the phase out the Deferred Retirement Option Plan (DROP) when the Alabama Legislature kicks off its 2004 session in February (See AL Workers Vow War if DROP Dropped ).
Riley is considering such a move due to the price tag the program carries – estimated at $26 million annually when the program was approved last year. Thus, Riley thinks the program has become prohibitively expensive with the number of high-paid employees taking advantage of it.
DROP gives teachers and state employees who are at least 55 years old and have at least 25 years experience a lump-sum bonus if they agree to work an extra three to five years before retiring. There are 3,138 teachers and other public education employees and 915 state employees participating in the deferred retirement program, according to the state retirement systems.