"Always vote for principle though you may vote alone, and you may cherish the sweetest reflection that your vote is never lost." – John Quincy Adams Two of my three committees are now in the most difficult part of the budget process. We face a projected budget shortfall of nearly one billion dollars and now we must begin recommending cuts. My Executive Departments and Administration Committee is reviewing much of the spending of the state agencies. House leadership has a target for savings of 25% from all agencies when dealing with any funding bills. Another of my committees is the Special Committee on Pension Reform where cuts are also expected. Our task is to bring the pension fund back to solvency and a number of bills have been filed which have very severe cuts. The decisions we make can best be described as being "solomonesque". One bill, HB 537, would have deferred the retirement benefits on a sliding scale from 1% on the low end to 20% for higher earners. A hearing was scheduled for Friday afternoon. The crowd was too large to fit in the scheduled room so the hearing was moved to the House Chamber which barely accommodated the participants. As the hearing began, the chairman was presented with a letter from the Retirement System Board stating that the bill would violate the "defined benefit" section of IRS regulations rendering the entire retirement fund no longer tax favored. We could not proceed and the bill was thankfully declared inexpedient to legislate (killed). |
Another bill, HB 231, was a proposal to cut the medical subsidy benefit for retirees, again on a sliding scale, by as much as 95% for the highest earners. The average cut was a whopping 50%. The current benefit costs the state $38 million and the goal of the Finance Committee was to cap the cost at $20 million. I noted that the agency cuts were targeted at 25% and expressed the belief that a nearly 50% cut in retiree health subsidies was too big a bite. I recommended a 25% cut in the health subsidy for parity, the same as the agency cut targets, capping the cost at $28.5 million instead of $20 million. That suggestion was accepted by the committee thus restoring half of the reduction – still a painful cut. My principle is that we need to honor retiree commitments as much as possible considering our lack of funds. Those already retired have made their life plans based on the promises of the state. I don’t believe that we can severly abrogate those promises, especially when those who are already retired have no recourse. Likewise with the retirement benefit, at least for those who have been vested in the program. The pension system’s problems have been 30 years in the making and we cannot resolve those problems in a year. I believe it will take at least 15-20 years to come back to full funding. Our goal must be to change the trajectory to move toward solvency, but it must be a gradual restoration.
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Contact: ken.s+sunacom.com (replace "+" with "@") |