BATON ROUGE (The Center Square) — A constitutional amendment to devote a quarter of all nonrecurring state revenues to the unfunded liabilities of state retirement systems has cleared the House.
Members of the lower chamber voted 70-21 last week to approve House Bill 29, sponsored by Rep. Richard Nelson, R-Mandeville, to enshrine a provision in the state constitution that would require lawmakers to devote 25% of all nonrecurring revenues to the unfunded accrued liability of the state’s four public retirement systems.
The Louisiana constitution currently requires 10% of surplus dollars go toward paying down retirement debt. Because HB 29 is a constitutional amendment, the bill must pass both chambers of the Legislature with a two-thirds majority, and gain approval from a majority of voters.
In June 2020, the unfunded accrued liability of the state’s largest retirement systems – the Teachers’ Retirement System of Louisiana (TRSL) and the Louisiana School Employees’ Retirement System (LSERS) – stood at $11.1 billion. Over the course of fiscal year 2020, schools and other state and local government employers paid $1.1 bill to TRSL and $63.3 million to LSERS toward the unfunded accrued liability.
The Louisiana Legislative Auditor issued a report in October that showed schools participating in the retirement systems collectively had $852.8 million less to spend on retirement educational expenses like teacher salaries, class materials, and facilities due to the debt.
The unfunded accrued liability accounted for an average of 10% of schools’ total revenues and 23.9% of their Minimum Foundation Program state funding. That translates into 11.8% of participating schools’ total expenditures, compared to the 4.1% non-participating schools paid toward retirement.
Nelson pointed out that Louisiana is required to pay down about $6 billion in debt through previous legislation, while total unfunded accrued liability stands at about $17 billion. Since the state started mandated payments toward the $6 billion portion in 1988, “we’ve spent $23.2 billion in interest.”
“Some of the opponents last week came up and said you know what this will tie our hands as politicians and we won’t be able to kick this can down the road if we pass your bill and that’s absolutely the point,” he said. “The problem is we spent $23.2 billion in interest over the last 20, 30 years when we could have paid that down, saved that money, and used it for other things.”
“We just had a record-breaking $2 billion surplus and guess how much money this legislature spent toward” the debt? Nelson said. “Exactly the amount required by the constitution and not a penny more.”
“This is the only way we’re going to establish that minimum payment to make future legislators actually address this responsibility,” he said.
Rep. Alan Seabough, R-Shreveport, countered that by mandating the payments lawmakers would be unable to weigh other obligations that are also important before allocating surplus funds.
“We have a $14 billion backlog of road projects that need to be completed,” he said. “We get to appropriate that money. If this passes, our hands are tied and we can’t put that money towards roads or bridges or any other project that we want to put it toward.”
“Right now, instead of mandating that we put it toward the (unfunded accrued liability) we can,” he said. “If it’s a good idea, bring the bill, bring the amendment and we can put it towards it, but don’t tie our hands.”
Rep. Robbie Carter, D-Amite, echoed Seabough’s perspective.
“This is tying the legislature’s hands way, way, way too much,” he said. “We don’t know what we’re foreseeing in the future and I would think that by putting this … in the constitution we are tying our hands in case there is something tragic that may happen.”
HB 29 now moves to the Senate for consideration.
