The pinch on public retirement | Arkansas Blog

The pinch on public retirement

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Public retirement systems are much in the news.

U.S. Rep. Tim Griffin wants to end public pensions for federal employees (not counting the military).

The Arkansas Teacher Retirement System now needs 66 years to fund its liabilities, a devastating gap.

The New York Times reports that crackdowns on public retirement in some other states are forcing many public employees to get out with their retirement now in fear of what may happen next.

Reform is necessary. The expectation by Arkansas retirement systems of a continued average annual return of 8 percent a year might be justified by the entire sweep of investment history, but not so much by the last dozen or more years. (Gauge: Walmart is selling for about $10 per share less than it sold 12 years ago.) A 4 percent COLA for retirees also was wildly rich in light of investment returns. And the current 3.25 percent is far from shabby, with CDs paying under 1 percent. Your average investor would kill for a guaranteed 3.25 percent return these days.

With the clarity of hindsight, it seems obvious Arkansas shouldn't have reduced the length of service required for maximum benefits for retired teachers. It probably should rethink the DROP plans, too. It was in theory an enticement for people not to leave the profession. In today's job market, where else is anyone to go? Adjustments now, though painful, would beat elimination of public pensions, the goal of people like Tim Griffin. It's not going to be an easy time.

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