Next state budget to spend $117M more on pensions

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Indiana lawmakers plan to set aside more money in the next two-year budget to help deal with unfunded pension liabilities, but experts warn the amount needed to pay retirees will only grow in the next 15 years.

The amount set aside for public workers' pensions would increase from $835 million this year to $952 million in the second year of the $28 billion budget that has cleared the House and is pending before the Senate, the Evansville Courier & Press reported Friday.

The proposed 14 percent increase is due in part to the state taking responsibility for local police and firefighter pensions in the property tax overhaul approved three years ago and increasing payments due as part of old pension plans that are being phased out.

Pension for public school teachers hired before 1996 were guaranteed, but no money was deducted from their paychecks or set aside by their schools.

"The hens have come to roost on the benefit increases that were handed out in the good years," said Steve Russo, executive director of Indiana's pension funds.

Russo predicted payouts to teachers hired before 1996 will peak in 2027 at more than $1.2 billion per year. Some of that money will come from a dedicated fund into which the state sends tens of millions of Hoosier Lottery revenue every year, but most will come from Indiana's general fund.

Unfunded pension liabilities now account for 5 percent of Indiana's budget, an amount expected to grow until the number of those retirees who are dying outpaces the number who are retiring and being added to the program.

"It's going to keep getting worse," said Rep. Jeff Espich, a Uniondale Republican who chairs the budget-writing House Ways and Means Committee.

Until deaths cause the pension costs to decline, there's nothing the state can do "unless you default on your obligation to those teachers," Espich said.

"Until all those people get out of the system," he said, "we haven't got to our biggest problem."

The Public Employees' Retirement Fund makes up much of the rest of the state's unfunded liabilities.

Indiana is now on a "pay as you go" plan, which means state, municipal and public safety workers pay a portion of their salaries, and the agencies that employ them also pay.

"It's an obligated part of their benefit package," Espich said.

All of those payments are tax dollars, but the state's philosophy has been that setting them aside now will help avert a fiscal crisis later.

As a result, the Public Employees' Retirement Fund is 85 percent actuarially funded, compared with 33 percent for the pre-1996 teachers' plan, Russo said.


  • Teachers hired before 1996 did contribute to their pensions.
    I taught for many years(1958-2004). I still have a few old pay check stubs that show 3% of my gross pay was charged for retirement and I think the school corporation matched that amount. It could be the article should have read that teachers hired after 1996 did not contribute. I seem to recall that some time ago you were given an option to continue to contribute 3% of your pay and it would affect your tax obligation or not contribute and increase your taxable pension. Again some of this is from memory. My paycheck stubs are not. Example: Gross this pay $1615 retirement withheld $48.45.

  • Everyone can do it
    Everyone has the Cred.'s to operate a school, eh, what do you really have that could take care of kids.... I have seen too many fail.. lack of Social Workers, and Nurses.. etc.. be held acccountable to Public Law... YOU CANT DO IT... SAME kids, different building... :) WE try :)
  • Why
    Umm. I get it what now, less than I am vested for... why should good people keep teaching... let those that THINK that they are worth more do it. They will figure it out....why would I as a young teacher teach? I would not.... nuff said. Too bad I am already set in my way. I am on my way to be ADM. .... Why not? Everyone else can be ?

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