We have been talking about SB 5085 for the last couple of weeks. Basically, it is another merger attempt. The bill would take PERS 1, TRS 1 and LEOFF 1 and merge them into a new pension system called Legacy. The proposed legislation also creates a COLA for PERS and TRS. That COLA would have a 3% cap. Otherwise, no changes to other benefits would occur. LEOFF 1 benefits would be unaffected.
The legislators would have us believe that this helps everyone, and they go on to claim that in the event of a serious financial setback the new legislation would further bind the state to ensure the pension would continue to be paid. The fact is that should such a thing happen to LEOFF 1 the state is still bound to continue to fund pensions.
Nothing in the bill provides any benefit enhancement for LEOFF 1. In fact, the legislation seriously harms LEOFF 1. Currently LEOFF 1 has a $2 BILLION surplus. That is the trust holds in excess of liabilities over $2 BILLION. Conversely PERS 1 has a $2.1 BILLION deficit and TRS 1 has a $1 BILLON deficit. After the merger the Legacy system would have a $1 BILLON deficit. So, the state would go from two pension plans in deficit to three with LEOFF 1 holding the short end of the stick having gone from a $2 BILLON surplus to a $1 BILLON deficit.
| Dollars in Millions | |||||
| PERS 1 | TRS 1 | LEOFF 1 | Legacy | ||
| Accrued Liability | $10,701 | $7,807 | $4,269 | $22,777 | |
| Valuation of Assets | $8,561 | $6,732 | $6,365 | $21,658 | |
| Unfunded Liability | $2,140 | $1,075 | -$2,096 | $1,119 |
No other benefit changes are proposed for LEOFF 1. This merger would benefit the IRS exclusive benefit rule and a similar Washington Administrative. Both of these rules require that any money in the pension system can only be used to enhance the benefits of the pension system members. The State tries to sidestep this by saying the new system would have to have IRS approval, but they fail to address the fact that they violate the IRS rule by moving the money an using it for other purposes that do not enhance the benefits.
This bill, if passed, will ultimately be thrown out as illegal and unconstitutional.
What are we doing about this?
The bill was pre-filed before the session even started. It had only one sponsor and no bill information documents. At that point it did not look serious except for the fact that the sole sponsor was the chair of the Senate Ways and Means Committee. We suspected it may have been filed to placate some interest group and would die in committee. There were, however, some alarming characteristics, i.e. the sole sponsor is a very powerful legislator and the Teacher’s Union is large and powerful.
Once the legislature started the bill was formally introduced and after several days a sponsor was added. Then the bill was scheduled for a hearing on Thursday the 23rd at 4 PM. By this time we had been spreading the alarm and have joined with other organizations to oppose the bill. We will testify against the bill as will the Retired Fire Fighters, the LEOFF 1 Coalition, WACOPS and the Washington Council of Firefighters. On Wednesday morning we heard that a large number of individuals have signed up to speak for the legislation. So, we really have not solid idea as to what will happen at the hearing. We had too short of a notice to produce a large turnout of opposition speakers. From the start it appears obvious that the promotion of this bill was managed to reduce opposition and be quickly pushed forward.
While we will have several people testify we will be up against what appears to be a well planned effort to force the bill forward. However, there are other committees it will have to visit and.as yet no companion house bill has appeared.
On the legal front we have reviewed the bill with our attorneys and remain convinced the bill is flawed and will fail if it ever gets to court. The bill is not much different that the other merger attempts that have been tried over the past 25 years. They all failed because they all have a similar flaw—they are illegal and violate past court decisions and various statutory authorities.
We will update this after the hearing.
Documents you should read:
Original Bill
Senate Bill Report
Call the Legislative Hotline to oppose SB 5085
1-800-562-6000
