Wednesday, February 25, 2009

Early Retirement Proposal Gets Reality Check

The recent MEA proposal to encourage teachers to retire early has been analyzed by the House Fiscal Agency. The report's conclusion shows the net ANNUAL cost to be between $501.7 million and $657.9 million - these costs are driven by the need to fund the added pension benefits AND amortize the unfunded accrued actuarial liabilities (UAAL).

The only flaw in the report is the understatement of the true cost given the impact of the reported $9.2 BILLION pension fund investment loss. The pension report "hides" this data by utilizing a "smoothing" analysis to mitigate market fluctuations - the fact is that the market has deteriorated since the pension audit and the "smoothing" is only hiding the magnitude of the actual problem. You can get the report here (caution, this will open the .pdf file).

No comments: