Will lawmakers tackle the problem before it's too late?
In the past decade, Alabama’s public retirement system liabilities have overtaken its assets at an alarming rate. According to research done by the Alabama Policy Institute, the Retirement Systems of Alabama currently has only 66 cents of every dollar it owes current and future retirees. This unfunded liability—totaling more than $15 billion—would require every household in Alabama to contribute $8,274 to fully fund the system.
In 2003, according to API, the unfunded liability was fairly manageable at $2.1 billion, but it ballooned by more than $13 billion over the next 10 years. That equates to an increase of more than $1.3 billion per year, $109 million each month or nearly $4 million per day that elected officials didn’t fix.
API recommends that a resolution involve three key components: cost-saving measures, funding the current pension balance and structural changes to make future pension costs more predictable and adequately funded. API’s top proposals include moving to a cash balance pension plan, bringing judicial pensions more in line with other state employees and eliminating piggyback agency participation.
While no bills on this topic have been prefiled for the 2016 legislative session beginning in February, Alabama legislators will be meeting in interim committees over the next few months to study the RSA, consolidation of state agencies and reduction of state expenditures. NFIB/Alabama will be closely monitoring movement on pension reform in 2016.
