PUBLIC RETIREES STRUGGLE TO SURVIVE ON BENEFITS WORTH HALF OF THEIR ORIGINAL VALUE
by Lindsey Ward
Imagine that your annual income level is just enough to provide a roof over your head and the fundamental necessities of life — no frills or extravagances, but just the very basics.
Now imagine that your income level remains unchanged for the next 20 years.
Inflation steadily rises over those two decades along with the prices of food, prescription drugs, heating fuel, gas for your car, and every other consumer good under the sun.
Suddenly you discover that the buying power of your annual income is 50% of what it was when you started, and you are too elderly and infirm to join the workforce.
That unpleasant scenario is the grim daily reality for thousands of state and local government retirees across Alabama.
The Legislature last awarded a cost-of-living benefit increase to the state government retirees who dedicated their careers to public service back in 2006, when President George W. Bush was in the White House and the iPhone did not yet exist.
During the same period and through both Democrat and Republican presidential administrations, federal government retirees routinely received regular benefit increases designed to keep pace with inflation.
Admittedly, the Legislature did not pre-fund the retiree increases awarded in 2006 and before and chose, instead, to place the burden of paying for them on the Retirement Systems of Alabama.
So when the group in charge of government accounting standards changed its rules in 2012 and required the future costs of those increases to be counted as liabilities, it adversely affected the finances of RSA and immediately reduced the funded level of the state’s pension system, which prompted the Legislature to stop awarding increases.
That is why the ARSEA/APEAL recently developed a plan that will allow the Legislature to resume cost-of-living increases without harming the RSA’s bottom line.
Originally founded in 1980 as the Alabama Retired State Employees Association and the Alabama Public Employees Action League, the two organizations combined and rebranded as ARSEA/APEAL, which has a combined roster of roughly 15,000 dues-paying members.
Our “pay-as-you-go” bill does not inflate the unfunded liabilities of the RSA because it requires the Legislature to provide annual funding for increases upfront during the budget process.
Under our plan, the cost of an increase will decrease in each budget year as retirees pass away and fewer and fewer receive the benefit. It is among the only budget items whose funding requirements will always go down from year to year, not up, until it eventually reaches zero.
There is no requirement to award an increase in the legislation — authorizing one would remain at the full control and discretion of the Legislature — and in times when state dollars are tight and funding is not available, the measure allows increases to be paused until revenues improve.
Because Alabama does not have home rule, city and county governments participating in RSA cannot provide increases to their retirees without legislative approval, so a provision in our bill allows them the option of awarding identical cost-of-living boosts.
It is a conservative, fiscally-responsible, and affordable plan that allows elderly retirees to maintain an income that affords them the basics without having to make difficult choices between buying food or filling their prescriptions or putting gas in their cars.
The RSA estimates the annual cost of providing a 1% cost-of-living increase to state government retirees is roughly $5.5 million out of the $23 billion General Fund budget. This amount would be paid out of each state agency’s payroll, just like the retirement rate is paid to RSA now.
Its cost equates to approximately 0.02 percent of the total budget each year. The amounts needed to provide increases for local government retirees, which are funded solely through city and county revenues and do not affect the state budget, are substantially less.
ARSEA/APEAL’s measure introduced this session does not authorize an immediate increase but simply creates the mechanism and process that will allow benefit increases to be funded if the Legislature decides to follow that route in future years.
Consider the fact that a state retiree who retired at age 65 in 2006 is now almost 85-years-old and still surviving on the exact same monthly benefit, but its buying power is now cut in half thanks to inflation.
Our plan allows the Legislature to finally take action and offer struggling retirees a helping hand and a measure of hope while, at the same time, maintaining its conservative budgeting practices.
Lindsey Ward is the executive director of ARSEA/APEAL, a Montgomery-based association with a 45-year track record of advocating for state and local government retirees in Alabama.
