Provides for determination of employer contributions. (6/30/15) (OR NO IMPACT APV)
Impact
Should SB 14 be enacted, employers would no longer be required to bear the cost of amortizing historical administrative expenses over time. Instead, contributions would include current administrative expenses on an annual basis, impacting the financial dynamics of LASERS, TRSL, LSERS, and STPOL. This reform is expected to simplify contributions for employers and could potentially lower the total administrative costs per year, as past loans from 1990 to 2015 would gradually be liquidated by FY 2045. Proponents argue that this will enhance transparency and accuracy in budgeting for retirement systems.
Summary
Senate Bill 14 proposes significant changes to how employer contributions to the state retirement systems are calculated, specifically altering the treatment of administrative expenses. Currently, these expenses are amortized over 30 years and treated as actuarial losses, leading to financial burdens for employers. SB 14 aims to end this 'loan' process and integrate these administrative costs into the calculation of employer contribution rates starting with future fiscal years. This change intends to reflect more accurately the amount employers need to contribute for administrative expenses and eliminate the ongoing accumulation of 'loans' from past years.
Sentiment
The sentiment surrounding SB 14 appears mixed. Proponents, particularly from the business community, support the bill for its potential to reduce unnecessary financial burdens created by the complicated amortization of administrative expenses. Conversely, critics raise concerns about the wisdom of immediately integrating past expenses into current calculations, fearing it may lead to increased financial obligations in the short term while failing to address underlying fiscal sustainability issues. The discussion is significantly polarized between those advocating for immediate reform and those warning against a potential fiscal cliff.
Contention
Notably, the contention revolves around fiscal accountability and the administrative soundness of the proposed changes. Critics express skepticism about whether annual inclusion of administrative expenses will ultimately serve to stabilize costs for retirement systems or merely shift financial burdens from one period to another. They argue that without careful management, this could exacerbate fiscal pressures on state funds. The debate also highlights broader discussions about how best to maintain a sustainable retirement system while also keeping costs manageable for employers.