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| Briefing Book |
| White House Conference |
National Conference of State LegislaturesThe Forum for American Ideas
444 North Capitol Street NW, Suite 515
Statement Mr. President, The National Conference of State Legislatures commends you for beginning the arduous task of considering the alternatives available to reform Social Security. NCSL strongly urges your administration and the Congress to preserve the financial integrity of the Social Security system. The nation's state legislatures stand ready to assist in reform efforts. The various proposals to reform Social Security would have both direct and indirect effects on state governments and their budgets. These policies should not be deliberated in a vacuum. Any proposals to reform or restructure Social Security should be examined for their potential impact on state and local governments. Costs to state and local governments associated with these proposals must also be estimated. State legislatures must be included in all reform discussions. Among the reform proposals that would have direct impacts on states and their budgets are plans to mandate Social Security coverage for new state and local employees. While we agree that Social Security is a valuable program that provides benefits to the vast majority of Americans, state and local government retirement systems provide comparable and in many cases superior benefits to those provided by Social Security as well as flexibility to specific classifications of employees who are ill-suited to participate in Social Security. It is not fair to resolve the Social Security solvency problem at the expense of public employees who have saved, planned and bargained for their retirement in good faith and in partnership with their employers, state and local governments. State legislatures share other concerns as well. Should the federal government chose to shift the income support aspects of Social Security to the states, the effect on state budgets would be dramatic. We are concerned that domestic discretionary programs and block grants would almost certainly be vulnerable in any search for additional federal money to beef up the Social Security trust fund. Finally, we are unclear about the consequences of privatization of Social Security on state budgets. In order to examine these and other concerns, NCSL has established a taskforce on Social Security Reform comprised of legislators with expertise in state retirement systems, pensions, aging, public finance, health and white-collar crime. We are in the process of expanding NCSL's policy on Social Security to address additional state concerns about reform. It is critical that our nation adequately cares for the current aging population while planning for the retirement of baby boomers like me. State legislatures stand ready to work with you on the important challenge of reforming Social Security and integrating this with the concerns of the elderly including long term care.
In 1997, of a total U.S. workforce of approximately 151.9 million workers, about 145.3 million workers and an estimated 97 percent of all jobs in the United States are covered under Social Security and therefore subject to payroll taxes that finance Social Security benefits. Of the three percent of workers not covered by Social Security 5.5 million of them are state and local government employees covered by a state and local government retirement plan that provides a retirement benefit that by law must meet minimum contribution and benefit level standards. Roughly 25% of the total state and local workforce does not participate in Social Security and instead participates only in a state and local government retirement plan.
The National Conference of State Legislatures opposes mandatory coverage of new state and local employees because it would be unfair to public employees and would have disastrous effects on state retirement systems and state budgets. Employees with the highest level of retirement and health benefits would be the most devastated. The California State Teachers' Retirement System for example provides a total benefit of 20.5%, eight percent from employee contributions, and 11.5% from the employer. Similarly, the Massachusetts Teachers' Contributory Retirement System provides a combined benefit of 23%, of which the employer contribution is 14.5%. The Ohio Teachers Retirement System provides the highest benefit of 23.3% combined, 14% provided by the employer. It is highly unlikely that plans providing the highest level of benefit to their employees would be in a position to continue this level if forced to pay 6.2% into the Social Security Trust Fund. Teachers, firefighters, police officers and other state and local employees who had no hand in creating the Social Security solvency problem would be forced to shoulder a massive burden in correcting it. Mandatory coverage would shift the insolvency problem to the states. The first year costs to public sector employers and employees of coverage for new hires would be over $1.5 billion dollars in addition to the costs to employees to continue to participate in state and local sponsored retirement systems and the costs to state and local governments as employers to maintain these systems. Annual cost to employers and employees for covering employees not currently covered would be over $17 billion per year. Mandatory coverage is too high a price to pay for two years of additional Social Security solvency.
For more information contact Gerri Madrid, Senior Policy Specialist or Sheri Steisel, Senior Committee Director.
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