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State Budget Crisis
Mon December 13, 2010
Pension reform proposals shock some retirees
About 90,000 Washington state retirees have been getting annual cost of living increases during the great recession. Now Governor Chris Gregoire says it’s time to halt to those automatic raises. The proposal is already generating an angry response.
Washington’s pension system is underfunded to the tune of $7 billion. The state owes $4 billion of that, and local governments owe the rest.
With the state budget in crisis, Governor Gregoire says now is the time to rein-in pension costs. Her first target: eliminating automatic annual raises in the state’s two oldest retirement plans – as opposed to the newer plans for more recent employees.
“I am a long-term public servant, I am a member of Plan 1 so I know the sacrifice that’s being asked. My husband is as well. And he understands the sacrifice that’s being asked,” the governor told reporters at a Monday briefing.
But Ed Gonion is not so understanding.
"Well I’m shocked by it,” says Gonion, who runs the Washington State School Retirees Association. He says the annual raises – enacted in 1995 - are not the problem. Instead he points to years of under-funding by state lawmakers.
“So really it appears the governor’s proposal is we’re going to blame the victim. And then when the plan is in real trouble and the state owes the money back then say, ‘Gee we’ve got to cut benefits to balance the plan.’,” says Gonion.
The average annual raise is $600 for a retiree who worked 30 years. According to a recent State Treasurer’s report, the average Plan 1 pensioner gets $21,000 per year in retirement. But there are more than 100 state retirees earning more than $100,000 annually.
Gregoire says by eliminating the automatic increase, she can immediate cut Washington’s $7 billion pension problem by more than half. Any change like this would require legislative approval.
Other Pension Reforms Planned
The governor is also proposing other pension reforms. She wants to end incentives for state employees to retire early and still get a full pension. In addition, she would clamp down on double-dipping. That is the practice of retiring from state service and then hiring back on – especially at a university – in order to collect both a pension and a salary.