Utah Legislature: Legislation would stop 'double dipping'

SALT LAKE CITY — Think of it as toxic cleanup, Sen. Dan Liljenquist says of his proposed solution to the $6.5 billion shortfall in the state's retirement system.

"I kind of look at this as a chemical spill because this is a disaster that's already happened," the Bountiful Republican said. "The first thing you do is contain it."

The shortfall is a result of investment losses in the 2008 economic crisis that saw the value of the retirement system plummet to $15.9 billion.

A recent legislative audit warned the total shortfall could grow by as much as $900 million over the next decade because of "double-dipping" by rehired retirees.

Liljenquist wants to stop state and local government employees covered by the retirement system from collecting both a paycheck and a pension.

His bill, SB43, is intended to encourage employees to stay on the job longer to eventually earn higher pensions. It would not affect those retirees who have already been rehired.

But retired employees rehired after July 1, 2010, would have their pensions suspended. Instead, they would earn additional service credits toward a higher pension check when they finally leave government service.

"We're trying to make a policy decision," said Liljenquist, chairman of the Senate Retirement and Independent Entities Committee. "This needs to be a retirement system, not a supplemental income system."

A November report by the Legislative Auditor General's Office found that allowing rehired retirees to continue receiving pension benefits already had a $401 million financial impact in just the past eight years alone.

The audit showed that after the law was changed in 1995, more than 4,300 public employees — mostly in education — have decided to return to government work after retiring. The number of rehires is growing faster than the number of retirees.

While the fiscal note on Liljenquist's bill is just over $600,000 for the next two years, he said the savings will continue to grow as more workers postpone taking their pensions.

He is also sponsoring another bill, yet to be numbered Thursday, that would affect public employees hired after July 1, 2011, slicing government's contributions to their pensions roughly in half.

"If things get better, we can always add back," Liljenquist said, noting it will take 25 years for the system to catch up from the loss if both bills are passed.