Wednesday, December 15, 2010
Gov. Chris Gregoire is getting serious about trimming back spending, and not just for the next two years.
The governor announced Monday, just days after lawmakers successfully met in an emergency session to plug holes in the current budget, a long-term plan to save $11 billion over the next 25 years.
It's a bold plan that carries political risk for Gregoire. It's not going to be embraced by her fellow Democrats or current and retired state employees.
Yet, it's the type of action that must be taken for the long-term fiscal health of Washington state.
Gregoire proposed eliminating cost-of-living increases for government workers and teachers in Plan 1 pensions closed to new members in 1977. The Legislature in 1995 approved the the cost-of-living increases for Plan 1 pensions, but reserved the right to amend or repeal the benefit in the future.
In addition, she proposed eliminating provisions in open pensions that allow workers to retire and collect benefits before age 65. That option would only be eliminated for new enrollees in the pension system.
The Seattle Times reported that taking both steps would cut in half the $7 billion deficit in the Plan 1 pensions. In the shorter term, this would trim state contributions to the pensions by $368 million in the next two-year budget. Local governments, which are also swimming in red ink, would save $353 million.
Gov. Gregoire also wants to close a loophole that allows state employees who retire to return to work in state colleges or universities while still receiving their monthly pension. Bravo to this move. The practice is outrageous, particularly in these austere times.
A Seattle Times investigation earlier this year found at least 40 university or community-college employees retired and were rehired within weeks, often returning to the same job without the position ever being advertised. This allowed them to double dip by collecting both a salary and a pension.
The other piece of Gregoire's proposal puts a cap on the state's contribution to higher-education pensions at 6 percent, with the allowance for individual institutions to contribute more.
"The proposals I've developed will make a significant difference in the budget shortfall we face today," Gregoire said in a statement. "Just as importantly, they will free the state to make better use of its resources for years to come."
While these cuts seem reasonable under the dire circumstances, they will be painful for those who will be having cash taken from their pockets. The state workers and teachers who have retired or will retire have calculated cost-of-living increases into their plans. Their ire over the plan will be understandable.
But the billions in savings from the proposed changes will help keep the state and the pension plans solvent so state retires can continue receiving pensions.
Gregoire might not get all she's asking for, but she's showing real leadership in making the effort.