Duncan, Ken - State Treasurer of Louisiana

State Treasurer of Louisiana
Statement of Ken Duncan
Currently, almost one quarter million state and local employees in Louisiana contribute to public retirement systems and do not pay the old age portion of Social Security employment taxes. These retirement systems provide employees with constitutionally guaranteed lifetime retirement benefits based on a variety of service and age combinations. Retirement eligibility can be as early as with lo-20 years of service. The retirement systems also provide in-service disability and survivor benefits. Disability benefits are available when the person can no longer perform their current job.
These benefits are superior to those provided by Social Security. Excluding Public Safety personnel, the current normal cost of these public retirement systems is 14-16% of the covered payroll. The cost of the old age portion of Social Security is 12.4% of the covered payroll. The public employers/employees in Louisiana cannot afford to pay an additional 12.4% without increasing taxes or reducing expenditures from some other budgeted area. Thus any "new hires" would have to be covered by a new tier or plan, while maintaining the old plans for the "old hires." The benefits in addition to Social Security, which could be funded by 1.6-3.6% of the payroll, are very limited. The current level of benefits are superior to that which would be provided by Social Security and augmented by the remaining 1.6-3.6% of payroll.
The soundness of Social Security for the future is a very important issue for the nation. However, a participation mandate for governmental workers does not provide long term fiscal benefits to Social Security or equal/greater benefits to governmental employees. It would result in a permanent and serious reduction in the compensation package for firefighters, police officers, teachers and other governmental employees in Louisiana and nationwide. A mandate just does not make sense.

ARGUMENTS IN OPPOSITION OF MANDATING SOCIAL SECURITY COVERAGE FOR STATE AND LOCAL GOVERNMENTS AND THEIR NEW HIRES

1. Requiring public employees to be covered by Social Security would increase payroll taxes. The additional 12.40% cost for new hires (6.20% employer plus 6.20% for the new hire) would create a financial burden for Louisiana public employees and employers.
2. Social Security needs a long-term solution, not a quick fix. Coverage of newly hired public employees would increase revenues to the Social Security fund for several years. However, Social Security does not have a short-term problem. Social Security has a long-term funding problem because excess short term revenues are not being saved and invested to pay the accruing liabilities attributable to those revenues. If the cost of providing benefits exceeds the funding necessary to provide these benefits adding more people to the system will make matters worse, not better.
3. The Federal Government confirmed eight years ago that coverage outside Social Security was appropriate. The 1990 federal law requiring all state and local employees be covered under a plan comparable to Social Security confirmed that coverage under the Retirement Systems should be the only option for these workers.
4. Public pension plans are much more soundly funded than Social Security and provide better benefits for the dollars contributed. Public Pension plans are able to invest in securities providing a higher return than the bonds held by Social Security.
5. State and local employees do not believe they need Social Security coverage. These employee groups have been outside Social Security since the 1930's in some cases.
6. Pension portability for public employees has improved. Most public pension plans have provisions for purchase of out-of-state service or the transfer of instate service.
7. Public employees are not receiving any unfair benefits from Social Security. Public employees in non-Social Security states do not receive a free ride. Some of them do receive Social Security benefits from other employment that was covered by Social Security, but then incur a reduction in their Social Security benefit.
8. There would be a loss of the element of control by the state retirement systems to the federal government. The federal government controls the benefits and costs of the Social Security program. For example, benefits can and have changed, which have adversely impacted those eligible to receive as well as those receiving Social Security benefits.
9. Retirement benefits are an important element of the compensation package for Fire and Police Officers. The physically demanding nature of their duties dictates that public safety officers not work beyond a certain age The normal retirement criteria for Fire and Police Officers is any age with twenty-five years of service. To require public safety officers to work until age sixty-five would be a detriment to the safety of he public and the officers. The inherently dangerous nature of their work requires a comprehensive death and disability plan for public safety officers. Social Security does not provide the level of benefits need by public safety officers.
10. Unconstitutionality. A mandate from the federal government that covers all State and local workers under Social Security probably violates the Tenth Amendment to the U.S. Constitution.