Nationally recognized experts and practitioners gathered in
Center President and CEO
Kellar shared data from the Center's annual survey of state and local government human resource professionals (http://slge.org/publication-types/surveys/research-topic/workforce) that measures workforce trends. The 2013 survey, which will be released next month, was conducted with the
- Pay freezes still top the list of workforce changes, with 33 percent of governments reporting them in 2013 compared with 51 percent in 2012.
- Eighteen percent of respondents reported layoffs, down from 28 percent last year.
- Staff development is the top human resources issue this year.
She noted that 44 states have made significant changes in their pension plans between 2009 and 2012 and that governments in 2013 still report a high rate of change to retirement and health plan benefits: 44 percent of survey respondents said their government made changes to retirement benefits this year, most commonly increasing employee contributions.
Speakers reminded the audience that cutting retirement benefits is not costless and that pension plans must be carefully designed to provide retirement security. And while the rate of retirements from local and state governments is growing, so, too, is the list of skilled positions that are difficult to fill.
"You have a situation where we're coming out of a period of pay and hiring freezes and governments need to hire workers, especially those with specific skill sets," said Center Vice President of Research
"You have to be so careful to point out the heterogeneity of the outcomes," she said, "because there's an array of differences in the funded status, how well they're managed, and the nature of benefits. We do have a lot of plans that are fairly well funded now, but we also have a lot that are poorly funded and they are going to be in trouble almost no matter what happens."
She said that her estimates for 2011 (the most recent figures available) show that, even with the effects of the financial crisis, public pension plans are 75 percent funded. She emphasized that pension costs in 2010 were only 4.6 percent of state and local government budgets.
Her outlook is optimistic overall. "I don't think of it as an area where we're going to see failure after failure after failure. If anything, I'm hopeful that we're working our way through it."
She agreed with moderator
"Clearly there's a one-way direction in these last 15 years that is continuing today," said Clark, "increasing retirement ages, increasing vesting, and a variety of other things that make these plans less generous."
He said there is a fundamental question about whether DB plans are right for every employee. Many states are saying "no," but he cautioned that such changes have larger ramifications both for governments' ability to hire and retain skilled employees and for taxpayers.
"We all believe that these plans affect worker decisions – attracting, retaining, motivating, and ultimately retiring workers. We all believe that the costs affect our tax rates. How do we put those together and think about that in an integrated system?"
The upshot? "Individuals, public employees, are going to look at the future and say, 'I've got to take more and more responsibility for my own retirement income. I'd better think about how I'm going to do that."
Munnell added that as more governments introduce defined contribution (DC) plans or DB/DC hybrid plans, they must use the lessons learned in the private sector. "The evidence is pretty clear at this point that people do not accumulate very much in these plans," she said. "They make [investment] mistakes, they don't join, and they take out their money when they change jobs."
It is critical that such plans in the public sector be well designed, since many public sector workers do not have
"It's really about, how do we break promises to people?" he said. "A liability is nothing more than a promise. So when we reduce liabilities we're talking about how can we break a promise? How can we do that legally under contract theory? And we rarely have discussions about the moral aspects of this. Because we don't reach into people's bank accounts and take money out. But for some reason it's deemed acceptable to take people's pension benefits — which they, in many cases in the public sector, paid for – at least paid for in part – but in all cases have earned by virtue of service."
In a lively question and answer period,
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