Gov. Robert Bentley is proposing a plan to offer early retirement to state workers. If 500 workers opted for the plan, he said, the state would save $18 to $26 million by trimming the size of state government. Some 4, 500 would be eligible.
“The program will be a benefit for employees who choose to participate and a benefit to taxpayers as well, ” Bentley said in a prepared statement. “This program will save taxpayer dollars in both the short term and the long term. The result will be a less costly, more efficient state government.”
Participants in the program, which requires approval by the Legislature, could opt to have the state pay health insurance costs or take a cash payment of $15, 000 — half now and half in 2014.
Senate President Pro Tem Del Marsh will sponsor the legislation — which does not cover teachers but only other state employees — in the Senate, and Mac McCutcheon will sponsor it in the House.
But wait, says David Bronner, CEO of the Retirement Systems of Alabama.
Writing in the RSA newsletter, Bronner says, “While this retirement incentive plan may result in an initial reduction in personnel costs, it does not address the corresponding increases in both retirement and insurance costs.” Moreover, such a plan may encourage talented workers to retire early, he wrote.
“What may be initial savings to the state will result in an increase in the unfunded liability of the RSA, as well as a significant cost increase to the teachers’ and state employees’ health insurance plans, ” wrote Bronner, adding that it could be used to “justify another attack on benefits paid to public employees.”
“Sometimes what appears to be a cost savings is just a cost shifting, ” Bronner wrote, urging state legislators to carefully review the proposal and its consequences before taking action.