Now at the plate for Louisiana policy-makers, it’s retirement system reforms. Supporters argue they are needed to put shore up a shaky and unsustainable financial situation, while opponents claim they unfairly target the compensation of the state employees involved. The latest data show the reform case has greater validity, and points to change needed beyond the current batter.
The changes for most current employees would increase paycheck deductions for retirement pensions from eight to 11 percent in order to finance the growing unfunded accrued liability of the Louisiana State Employees Retirement System, extend out the regular retirement age to 67, and use a five-year rather than three-year average to compute pension benefits. In large part, opponents express qualms in that they assert state employees are relatively underpaid to what they should be, and that if any future deficit would arise in the ability to pay pensions, it is the responsibility of the state, i.e. taxpayers, to come up with the “promised” remuneration rather than employees contributing more to their own retirement savings. To some degree, the arguments are related; because state employees are “undercompensated,” therefore it is the duty of the public to make up any shortfall.
However, the data point to the opposite conclusion. While no comprehensive study has looked at Louisiana specifically, the most recent work from 2009 by U.S. Bureau of Labor Statistics economists, Congressional Budget Office staffers, and researchers in academic settings shows that in measuring total compensation in comparing jobs of similar duties, all of federal, state, and local government employees are overcompensated compared to the private sector. In the federal instance, a retirement package judged 3.5 times higher than that of the typical private sector worker doing the same tasks led to a 16 percent premium in total compensation. Without even factoring in retirement benefits, salary and current benefits of state and local government employees nationwide are 10 and 21 percent higher, respectively, than private sector employees doing similar work. This confirms differentials observed in other studies and data of years past, and it would be highly unlikely that Louisiana’s data were skewed much lower.