Utah Legislature: Retirement system in dire need of overhaul, says Sen. Dan Liljenquist

SALT LAKE CITY — A state senator is trying to galvanize support for a series of legislative reforms to the Utah State Retirement System, saying the underfunded system is in dire need of change if it is to be fiscally sound in the years to come.

But critics say the reforms are coming too fast and too furious for a system that — while ailing now — shouldn't be precluded from rebounding.

"I think we need to be a little more measured in what we are doing rather than going about this mass restructuring of a retirement system that is not broken," said Jim Judd, president of Utah Chapter of the ALF-CIO.

"To me it is like if you have a good car, it's had a few difficulties, but rather than having those repairs made you trade in this midsize car for a Yugo," Judd said.

Sen. Dan Liljenquist, R-Bountiful, said if fixes aren't made to the retirement machinery right now — midsize car or compact — it will implode beyond repairs.

"The framework for change has to be put in place this year," he said Tuesday during a meeting with the Deseret News editorial board. He stressed his proposed changes would not affect public employees or retirees in the system now. Some fixes to "double-dipping" would kick in later this year and contribution changes for new hires would affect only those who come on July 1, 2011, or afterward.

Propelled by the Wall Street mayhem of 2008, Utah's usually Teflon retirement fund was hit with a $6.5 billion shortfall.

With a targeted "smooth" rate of return set at 7.75 percent, the fund instead had a rate of return on its investments that came in at negative 22.3 percent in 2008, something director Robert V. Newman characterized as "unprecedented" in the history of the fund.

While 2009 brought a substantially higher return — 13 percent — it did little to close the gap, Liljenquist said, and the losses of 2008 will continue to be felt at $400 million a year for more than two decades.

Liljenquist's reforms, some of which include boosting the retirement age for public safety employees and others, would also require new hires to divert 8 percent of their salary into a pension plan. Those dollars — except for firefighters — have been paid by their government employers.

While Judd said he can understand lawmakers' desire to tinker with retirement ages, in some arenas it is just not practical.

"It is unrealistic to expect anyone to sustain a 35-year career in public safety," he said. "The average hiring age for firefighters is 29. I don't think anyone would like to see a 62-year-old climbing up a ladder to rescue their family."

Liljenquist has actually proposed bumping public safety retirements from 20 years to a minimum of 25 years.

His measures are scheduled to get a full debate before the Senate on Thursday, the same day the Pew Center on States is slated to release a report probing reforms various states have taken to tackle pension shortfalls. It also looks at the state-by-state price tag of promised retirement benefits and what funds have been set aside to pay those costs.

e-mail: amyjoi@desnews.com