Shots Fired Across the Bow

Can the legislature stand up to Paul Hubbert and the Alabama Educational Association? Can they stand up to Mac Macarthur and the Alabama State Employees’ Association? Their main source of power is political influence and if some of the ideas published in today’s Birmingham Newsever come to fruition, it could mean the end of that political influence has come as well.

Alabama could raise $130 million a year if it taxed all pensions, according to the Legislative Fiscal Office.

Most states with income taxes do tax public employees’ pensions, partially or fully, according to a 2000 survey by the Wisconsin Legislative Council.

The state could save $204 million a year by stopping payment of cost-of-living pension increases given over the years to teachers and other state retirees. Such increases are not guaranteed by law.

Alabama cannot lower the pension amount promised a person upon retirement, but legally it could stop paying cost-of-living pension increases awarded since that person retired.

Alabama could save $52.64 million a year by requiring public employees to contribute 1 percent more of their salaries toward retirement.

Most of Alabama’s teachers and state agency employees contribute 5 percent of their pay, which is in line with other public pension plans, according to a survey by the National Association of State Retirement Administrators.

The state could save from $45.6 million to $79.2 million a year by adopting rules some states use for when people can qualify for a normal pension.

Before the mid-1970s, a teacher or state worker in Alabama had to be at least 60 to get a normal pension, with no penalty for early retirement. Lawmakers in 1975 changed the requirement to 30 years’ service, regardless of age. They changed it to 25 years’ service, regardless of age, in 1988.

Members of Riley’s commission asked Reynolds to figure the savings if Alabama switched to a rule-of-80 or rule-of-90 system.

Under such systems, a person can qualify for a normal pension if his or her age plus years of service equals a target number; 80 and 85 are common.

Mind you, none of these are proposals, they are simply ideas that were presented to a commission appointed by the Governor to come up with cost-saving ideas.

My family would be hurt doubly if any of these changes went into effect, but I am the first to acknowledge that everything should be on the table. What the Governor’s Commission needs to remember as well is that many cost-of-living increases were deferred in exchange for keeping benefits where they are. If salaries are brought into line with the regional or national average, then I have no problem with bringing every thing else into line as well. This would not save as much money in the short term, but would put the state on much firmer financial ground for the long haul.

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