Pension bill has downsides

A bill that would push the youngest age at which teachers can collect a pension from age 60 to 62 faces no organized opposition.
This lack of opposition is a testament not to SB 388’s wisdom, but to its clever drafting. It only affects employees hired after 2012, so traditional advocates of teachers and other public workers are making no protest. They can report to their members that the bill cuts none of their pensions.
The benefit of the bill to taxpayers is significant. The reductions it makes in retirement benefits would save the state about $5 billion over 31 years.
The Legislature should weigh that benefit, however, against the negatives.
The same skills, education and work ethic that make for a good public employee also make that employee valuable in the private sector. The state generally pays lower wages than the private sector for comparable responsibilities, and it uses a rigid pay structure that gives employees little financial motivation.
Nonetheless, the public sector manages to attract many competent and self-motivated workers.
Why do such teachers and other public employees sacrifice private-sector pay for public employment?
One reason is that, historically, they receive better benefits. One of the most important benefits is the possibility of an early retirement.
By pushing the retirement age back two years, the state is whittling away at one of the primary advantages of public employment. This will tend to either decrease the quality of people who choose to enter the public sector, or force schools and other public entities to increase wages to be competitive.
The bill also will decrease the state’s ability to attract teachers who have the ability to choose between different states. Alabama does not hesitate in making major investments in private companies to ensure it doesn’t lose out in interstate competitions. Investing in human capital, however, is less popular.
Quantifying the benefits of the pension bill is easy. The mere fact that the disadvantages are hard to quantify does not mean they do not exist.

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1 Comment

Filed under Alabama politics, education

One response to “Pension bill has downsides

  1. Jay Croft

    Social Security kicks in at age 62, so the state pension is simply following this rule.

    Most teachers start young–straight out of college–and if they leave the field, it is long before they reach 60. So, the shift in retirement benefits to age 62 is often a moot point.

    At present, state employees can retire after 20 years of service. This means that an 18 year old file clerk can “retire” at 38. This is ridiculous.

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