There is no question that steps need to be taken to limit the rate of increase of personnel costs for municipal corporations. Increasing personnel costs impacts the ability of agencies to provide valued public services.
We should keep in mind that the PERS contribution paid by governmental agencies is only one of the drivers of personnel costs. Even as we are moving forward to reduce the pensions of retired employees, several local government agencies have increased wages for current employees.
The net result of this policy is that we are reducing income for seniors to provide better wages for current and future employees.
I did a quick calculation to look at the impact of Senate Bill 822. The reform may seem modest, but the reductions are compounded over time. I estimate that the annual income of a retiree age 60 who receives a $3,300 monthly pension today would be reduced by $2,700 annually at age 80. It’s pretty safe to assume that the annual inflation rate will average much higher than the 1.5 percent cost of living cap over those 20 years, further eroding the buying power of the pension.
That 80-year-old is going to have a tough time paying his or her bills around 2034.
Balancing today’s municipal budgets by breaking faith with employees that are already retired is poor public policy. Let’s put the focus of the discussion where it belongs, limiting the rate of increase of total personnel costs to a level that is sustainable.