McKenzie Right About Pensions
State Sen. Andy McKenzie fought a losing battle this week — but he’s right, even though the vast majority of his fellow lawmakers voted against him.
McKenzie, R-Ohio County, was one of just two state senators to vote against a bill that would give as many as 19,100 West Virginia teachers breaks on their retirement benefits. Joining McKenzie was state Sen. Vic Sprouse, R-Kanawha County.
Thirty-one senators voted in favor of the bill, which would give educators enrolled in the Teachers Defined Contribution pension plan the option to transfer to the older Teachers Retirement System.
In some form, the measure will become law. Again, nearly all senators want that, and a similar majority in the House of Delegates have voted in favor of a different bill that would allow the transfers. All that remains to be dealt with is reconciling the House and Senate versions of the bill. Gov. Joe Manchin is expected to sign the final version into law.
But McKenzie, who undoubtedly knew that his protest would amount to no more than a symbolic one, made the point that the transfer goes against a trend in both public and private-sector retirement programs. Defined benefit systems such as the TRS promise enrollees certain levels of pension checks, regardless of how much is put into the systems and how well their investments perform. That is why the TRS still has an unfunded liability of somewhere around $3 billion, despite the fact that taxpayers have chipped in hundreds of millions of dollars to pay down the deficit.
Programs such as the TDC, on the other hand, pay out pension checks at levels possible only in relation to amounts paid into the systems and how well their investments perform.
The TDC was established in 1991 because state leaders then wanted to ensure that West Virginia taxpayers would not be saddled with new unfunded liabilities.
Investments of many TDC participants have not done as well as they had hoped. That’s why they want to transfer to the TRS.
McKenzie told his fellow lawmakers that what they are doing is “taking a flawed system and putting it back into a flawed system.” He’s right. And, because the change will commit Mountain State taxpayers to certain levels of pension payments for educators who switch from the TDC into the TRS, McKenzie also may be correct that this year’s action “just pushes (the problem) off onto the next generation.”
We commend McKenzie for making that point — and for refusing to cast a vote that goes against what he knows to be right. It is unfortunate that so many of his fellow lawmakers — perhaps because this is an election year — are ignoring the validity of McKenzie’s arguments.
There is no question that McKenzie is right. The only uncertainty is just how the change will affect taxpayers. Most legislators insist that actuarial studies indicate that the change will not build up new unfunded liabilities for the TRS — but beyond any doubt, there is a substantial element of risk. All that remains to be seen is the magnitude of that risk, and how badly it will come back to haunt taxpayers.