Pensions: The Invisible Debt
Gov. Bobby Jindal has announced pension reform will be part of his 2012 agenda.
The pension debt, called the unfunded accrued liability (UAL), is the accumulation of all obligations that must be paid by 2029. Louisiana is one of few states that amortized the debt, which they did with a payment increasing annually. The state does not appropriate the UAL payment directly from the Treasury, rather the agencies of government pay the cost from their budgets. As the required payment increases, the pressure on the agencies to make the payment and fulfill its responsibilities builds.
Using LSU as an example, this year, LSU employees will pay about 8% of their salary to their retirement and LSU will match with about 6%. However, LSU will pay an additional 20.5% of every employee’s salary toward the UAL. LSU’s total retirement invoice will amount to more than $51 million (more than $500 million for the state). And, regardless of what LSU does to expedite the payment, the University will have to pay the 20.5% (or more) until 2029.
The increasing UAL payments are not record as cuts, but are considered one of the costs of doing business, just like a utility bill or office supplies. LSU, other educational institutions, and governmental entities must carve larger shares from their budget, reducing their ability to provide the service they are tasked to execute.