The General Assembly just passed a significant package of reforms for each of the five public pension systems in Ohio. While each bill was somewhat different, in general, the changes included:
- Modifying cost of living adjustments,;
- Increasing the number of years looked at for determining the highest average salary,;
- Increasing the age for retirement, ;
- Increasing the employee share of pension payments.
Unfortunately, while those changes may get the pension systems into actuarial soundness, they do nothing to address fundamental issues of fairness between public and private sector workers nor do they offer workers the kind of flexibility that is increasingly being demanded in the global economy of the 21st Century.
As the larger pension reform debate subsides for the moment, a couple of points to ponder:
- Should retirees bear any of the risk for their retirement or should the state, and the taxpayer, bear all the risk?;
- Is it fair that public sector employees get a “guaranteed pension” and significantly higher benefits while private sector workers must rely on Social Security and defined contribution plans (401ks, etc.)?;
- Do we want a system that lacks portability and serves mainly to benefit only those workers that work a full 30 years and retire within the state system?;
- Does this system match the modern workforce?
What Walter Russell Meade calls the “blue social model”–a bureaucratic, industrial, unionized, planned economy–is crumbling. The private economy has largely moved away from this model. The public sector, however, is still clinging to it and pensions are just one example.
Real pension reform would begin to address some of these issues before the next crisis hits rather than simply tweaking benefits to meet a 30-year window.
For more on the inequity and lack of flexibility the current pension system offers public workers, check out our Hanging by a Thread report and my recent testimony in the House.