Think Tank Recommends that Louisiana Consolidate Pension Plans

March 15, 2005 ( - A nonprofit think tank has called for Louisiana to combine the management of its four largest pension funds to save costs and produce a cohesive strategy to combat rising debt.

The Public Affairs Research Council (PAR) has suggested that the largest public employees’ pension funds need to combine due to an increasingly large unfunded accrued liability within the state, according to Baton Rouge newspaper The Advocate.

PAR has come out in support of the idea as Senate Bill 7, backed by Republican Walter Boasso, will enter the political arena in the upcoming state legislative session. The bill would establish a 17-member board to govern the Teachers’ Retirement System of Louisiana and the Louisiana State Employees’ Retirement System.   Leaders of both funds oppose the bill.

A large motivating factor for the reform is the large amount of debt issued by the state in order to borrow money, according to The Advocate. With poor investment returns seen in 2001 and 2003 and an unfunded accrued liability of over $8 billion when Governor Kathleen Blanco entered office, the state is paying off debt at a rate of $560 million a year. In 2029, this figure is estimated to be $2.2 billion, according to the newspaper.

PAR also recommended that any new pension system should set retirement age at 60 as well as prohibit the rehiring of retirees and eliminate incentives for workers to keep working past retirement age.

Other states have considered this option, with Vermontlawmakers recently approving a plan to consolidate their three state pension funds, a move that is expected to save $1 million a year in management fees (See Vermont Lawmakers OK Pension Consolidation ).