The Ohio Legislature passed bills meant to ensure that the state’s five public-pension systems can pay all their obligations within 30 years as required by law.
The modifications include increasing employee contributions, raising retirement ages and revising cost-of-living adjustments for the systems’ 1.83 million retirees and members, the bills’ sponsors said.
“These measures, as painful as they might be, will stabilize the systems and preserve valuable retirement benefits,” Representative Kirk Schuring, chairman of the House Health and Aging Subcommittee on Retirement and Pensions, said in testimony before the votes today in Columbus.
Ohio had 66.3 percent of what it needed to pay future retiree obligations as of 2010, which ranked 15th worst among U.S. states, data compiled by Bloomberg show.
The legislation passed unanimously, with the exception of a lone vote against the bill for the State Teachers Retirement System of Ohio.
The Senate, which passed the bills in May, voted unanimously this afternoon to concur with the House changes on all the bills and to send them to Governor John Kasich for his signature. The measures would take effect Jan. 7.
“The lingering economic downturn and several years of inaction by the legislature have put additional strain on our pension systems,” Republican Senate President Tom Niehaus, a co-sponsor of bills with Senate Democratic Leader Eric Kearney, said in Aug. 8 testimony before the House committee. “The changes contained in these plans are not popular, but they are necessary.”
The funds are the Ohio Police and Fire Pension Fund, School Employees Retirement System of Ohio, State Teachers Retirement System of Ohio, Ohio Public Employees Retirement System and Ohio Highway Patrol Retirement System.
The Ohio Public Employees Retirement System is the largest state pension fund and 12th largest in the U.S. It has net assets of $74 billion and a 2010 funded status of 76.1 percent, with its unfunded liabilities expected to be paid within 29 years, according to the system’s 2011 annual report.
Twenty-nine states changed their pensions in 2011, and eight states have acted in 2012, according to the National Conference of State Legislatures.
William Batchelder, Ohio’s Republican House speaker, said he expects the House to hold hearings this year on other changes needed for long-term viability of the state funds.
He said that Ohio passed the bills after Illinois lawmakers failed to act on a cost-cutting overhaul of the nation’s worst-funded pension during a one-day session called Aug. 17 by Democratic Governor Pat Quinn.
“As people read the paper, watch the TV, they see these funds that are just blowing up, and that will not happen in Ohio,” Batchelder told reporters after the vote.