The Senate Insurance, Commerce and Labor Committee passed pension reform bills for four of the state's retirement systems Tuesday -- making a flurry of last minute changes described mostly as technical -- and started the ball rolling on legislation for changes at the fifth system. The full Senate could vote at its Wednesday session on SB340, SB341, SB342 and SB343, which respectively address changes to benefits from the Ohio Police & Fire Pension Fund, School Employees Retirement System, State Teachers Retirement System and Ohio Public Employees Retirement System.
The Highway Patrol Retirement System (HPRS) missed the initial wave of bill introductions as it worked on gathering stakeholder support, but Senate President Tom Niehaus (R-New Richmond) and Minority Leader Eric Kearney (D-Cincinnati) introduced SB345 at Tuesday's House session to address that system's proposal to ensure long-term solvency. HPRS Executive Director Mark Atkeson described the changes the HPRS board is seeking, including updates made last month to a plan initially devised in 2009. Those new changes include a variable cost-of-living adjustment (COLA), which could range between nothing and 3 percent, based on actuarial calculations of what's necessary to sustain the system. In addition, the employee contribution rate could fluctuate between the current 10 percent and as high as 14 percent, also based on actuarial calculations. The earlier plan had proposed simply to drop the cost-of-living adjustment from 3 percent to 2 percent and bump employee contributions from 10 percent to 11 percent. "Granting this latitude to the board allows corrections to be made more quickly and responsively to actuarial projections. Increasing employee contributions and decreasing COLA are actions the board would take only if required by actuarial necessity. By addressing employee contributions and COLA, the burden is borne by all members of our system," Atkeson said. "It is doubtful the negative limits of the proposed range will ever have to be adopted. However, these ranges ensure the board has the ability to react even under extreme circumstances," Atkeson said.
Unchanged from the 2009 plan are a change to calculate final average salary based on five years instead of three, as well as an increase from age 53 to age 60 for members to be eligible for cost-of-living increases. The system's plan also included decreases in the percentage of employer contributions set aside for health care, but those changes aren't in SB345 because retiree health care is a discretionary benefit that retirement system boards can change without legislative approval.
Committee members heard limited opposition to some of the bills Tuesday from representatives of local government officials and a Northeast Ohio firefighter group. Scott Maynor, a Lyndhurst fire lieutenant and vice president of the Northern Ohio Firefighters Association, which represents firefighters in five counties, said the organization recognizes the need for significant pension reform and largely supports the OP&F plan in SB340. But he said the organization does not support additional bill language granting the OP&F board discretion to make further changes to contribution rates and retirement eligibility requirements without legislative approval. "We believe that it should be the responsibility of the Legislature to increase member and employer contributions. These two components should remain tied together, and the authority to alter them should lie with the people who are accountable to the taxpayer," Mayner said.
He also said lawmakers should use the opportunity of pension reform to equalize contribution rates between firefighters and police officers, the current disparity of which he said is not based on actuarial calculations.
Representatives of the Ohio Municipal League, Ohio Township Association and Ohio Association of Elections Officials said they generally endorse the larger OPERS plan in SB343, but they object to one provision, a phased increase in the minimum salary required to earn a full month's service credit from $250 to $1,000. Matthew DeTemple, executive director of OTA, said that change would leave trustees and fiscal officers in the vast majority of Ohio's 1,308 townships -- specifically those with annual budgets of less than $3.5 million -- unable to earn a full year's credit for a full year's work. Similarly, Aaron Ockerman, executive director of OAEO, said board of elections members in 75 of Ohio's 88 counties would be in a similar situation based on the change. Tim Biggam, representing the Ohio Municipal League, said village elected officials would likewise be hurt by the change. The three men said that, because the officials they represent either have salaries set in statute or are subject to the general prohibition on mid-term salary increases, they lack the means to get their salaries up to the proposed threshold. Biggam and DeTemple said they could support a compromise minimum salary level of $500. Biggam also suggested the notion of allowing officials to make individual contributions toward the minimum salary requirement to bridge the gap. DeTemple said OTA could support an exemption for elected officials from the new threshold, or a more limited exemption specifically for elected or appointed officials whose salaries are set in state law.
The County Commissioners Association of Ohio submitted written testimony requesting a change in cost-of-living adjustment eligibility requirements, saying it could cause a rush to the door by seasoned employees. The associations also asked to increase from $500 to $1,000 the annual compensation threshold for when a poll worker would be required to pay into OPERS.
Testifying against the STRS solvency plan Thursday was Douglas Oliver of Toledo, who said he's soon to be a beneficiary of STRS retirement benefits. Oliver said the STRS system is regressive because members who rise to much higher levels of pay in their last few years are being subsidized by other members. He also said the entire defined-benefit structure encourages teachers to stay in the profession even if they are no longer enthusiastic about it, meaning less effective teachers in the classroom.
Bruce Johnson, president of the Inter-University Council, testified in support of the bills addressing SERS, STRS and OPERS, some of whose members are employees of the 14 public universities the council represents. He particularly noted the plans' proposals to ensure solvency did not include employer contribution increases, which he said will help universities keep down costs. Kathleen McCutcheon, chief human resources officer for Ohio State University, testified in support of the STRS and OPERS proposals.
Sen. Kevin Bacon (R-Minerva Park), chairman of the committee, described several amendments to the various pension bills accepted Tuesday. Bacon said most were technical or clarifying in nature. Among the more substantive changes was an amendment to the STRS plan in SB342 that grants the board the ability to reduce employees' contributions rates below 14 percent if the STRS board's actuary determines it wouldn't "materially impair the fiscal integrity of the retirement system."
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