Kick the Can
When you see the words "fresh" and "collar" together you probably think of laundry detergent, not pensions. But the state House has just passed their idea of pension reform for the two statewide systems SERS (state employees) and PSERS (teachers) that involve a fresh start for unfunded liabilities and collars-or maximum percentage amounts that the state or school districts have to contribute will grow year over year.
What does that mean? It means that there would be annual caps on how high employers would have to put in to the pension system in coming years. For PSERS the employer contribution rate (both the state and school districts pay in) would rise from 5.64% in FY11 to 21.20% in FY15 instead of the current trajectory of 8.22% to 33.60% over that same time frame. For SERS (only the state pays in) the employer rate would increase from 5% in FY11 to 20.50% in FY15 as opposed to the current planned increase of 5.64% to 27.72% over the same time period. The year over year incremental growth rates beginning in FY11 would be 1%, 3%, 3.5%, and then 4.5% from FY14 on. Savings on the state’s share from the changes range from $211 million in FY11 to $1.2 billion in FY15.
In other words, get immediate, short term relief for nagging pension pain by spreading it over a longer time frame.