Bad Bill Of The Week: Increasing The Taxpayer's Burden For Unfunded State Pension Liability | Eastern North Carolina Now

    Publisher's note: This post, by Brian Balfour, was originally published in the Bad Bill of the Week section(s) of Civitas's online edition.

    According to the most recent report available, North Carolina's main pension fund for retired state employees is strapped with a $3.7 billion unfunded liability. This growing liability means taxpayers must pony up an increasing amount of funds to cover the costs of promised benefits to retirees. In FY 2013, taxpayers were paying $1.1 billion to cover state retiree pension benefits.

    And this week's Bad Bill of the Week would make that problem even worse.

    House Bill 1192, Return to Five Year Vesting, is sponsored by Reps. Jeff Collins (R-Nash) and Stephen Ross (R-Alamance) and also has the support of State Treasurer Janet Cowell. The bill would shorten the number of years required for state employees to become eligible for pension benefits, thus increasing the liability of taxpayers to support these retirees.

    North Carolina's state pension plan is a "defined-benefit" plan – meaning that retirees are promised a set amount of benefits upon retirement. In the case of the state's main pension plan, Teachers' and State Employees' Retirement System (TSERS), that benefit comes in the form of a monthly payment for the rest of their lives.

    The payment due to retirees is calculated using a formula involving the retiree's average pay and length of service.

    Under current law, state employees become vested in their pension benefits (i.e. eligible for the monthly checks) after five years of service; they receive full benefits at age 65 or partial benefits at age 60.

    A notable exception to this rule, however, is for employees hired on or after August 1, 2011. They must attain 10 years of service before becoming eligible for pension payments. This change was made in 2011 in recognition of the state pension fund's worsening unfunded liability.

    HB 1192, however, would eliminate this exception and once again make all employees eligible for pension benefits after only five years of service.

    North Carolina taxpayers are already paying more than a billion dollars a year for state retirees not to work. Piling the state pension's unfunded liability higher will place an even greater burden on taxpayers. Because it reverses even a minimum measure to rein in North Carolina's growing unfunded pension crisis, HB 1192 is this week's Bad Bill of the Week.