To: Rep. McKell, M.,
Subject: Rep. Cunningham's HB86, HB47, HB50 & HB117
As you know, Rep. Rich Cunningham is trying to reinstate the practice of Double Dipping among public employees in Utah with HB86, HB47, HB50, & HB117 (the same issue we sparred over last session). I know he is a close friend of yours, but here are are few things that I thought you should know about why we ended the practice of Double Dipping to begin with in 2010. In short, it is really bad policy to turn what is supposed to be a retirement system into a supplemental income system - and the people who get hurt the worst are new employees. Please let me know if you have any questions. I plan on testifying against these bills in the House Rev & Tax committee on Wednesday evening.
- Double Dipping" is a big issue in public sector pension systems around the country - “Double Dipping” is when a public employee “retires”, immediately returns to full time work as a public employee, and collects both a paycheck and a taxpayer guaranteed pension check.
- In 2000, the Utah legislature relaxed post-retirement, reemployment rules to make it easier to Double Dip; at the time, the Utah Retirement Systems did not anticipate how expensive this policy shift would be.
- Double Dipping is extremely expensive - Here is a link to a 2009 report from the Legislative Auditor General that shows that Utah’s relaxed Double Dipping rules were expected to cost the State of Utah close to $900 Million over ten years so that a few thousand public employees could Double Dip - http://le.utah.gov/audit/09_17rpt.pdf - Page 10 of the report shows why Double Dipping is so expensive
- In 2010, I ran SB 43 to end the practice of Double Dipping in Utah, with the goal of returning the public employee pension system to a retirement system, rather than a supplemental income system for the select few.
- SB 43 requires that “retired” public employees stop receiving their pension payments if they return to full time work with a public entity within one year of retirement.
- This one change effectively ended the practice of Double Dipping overnight (Utah Retirement Systems has verified this fact with the Retirement and Independent Entities committee multiple times)
- SB 43 is on track to save Utah taxpayers $900 million dollars over the first ten years alone, and hundreds of millions more in years to come
- Cunningham is trying to reduce the Double Dipping prohibition window from 1 year to 60 days; this will immediately add $223 Million in additional pension debt to the our already strapped pension system; here is the link to the report provided by Utah Retirement Systems to the interim committee studying Cunningham’s bills - http://le.utah.gov/interim/2015/pdf/00005090.pdf
- Note: the fiscal notes to Cunningham’s bills are a little funky; his bills will immediately add hundreds of millions of debt to the pension system, but the way the pension contribution rates lag the system’s performance, it will not require an immediate appropriation; this has emboldened Cunningham to try and sneak these things through
- Cunningham is also taking a “let’s chip away at this thing” approach by allowing the practice of Double Dipping for rural schools and Title 1 schools; he is doing this deliberately, knowing that if he can get it for one group, then he has a precedent and a fairness argument to make in favor of cops; That is exactly how we got into the original mess - Double Dipping first started with the Police Chiefs, and then it spread from there
- Right now, the Police Chiefs are the ones who are pushing the hardest for Double Dipping to be reinstated; they stand to make hundreds of thousands of dollars in additional income by doing it; the Police Chiefs are trying to argue that they need Double Dipping to attract new officers to the profession, but this is a bunch of baloney. Allowing Double Dipping again will not add one person to the labor pool, but it will cause public employees to swap jobs with other employees in other jurisdictions as they seek to take full advantage of the Double Dipping system; the Police Chiefs know this, but are using the cop shortage to argue for this change
- Note: the biggest single reason that Police Chiefs can’t find qualified applicants for their police officer jobs is that wages for police officers are way, way too low; Wages are too low because over 40% of a police officer’s pay goes to pay for pension costs; allowing Double Dipping again will only increase required pension contribution rates, thereby further crushing wages
- Also note: One of the reasons Ogden City has a 48% of salary contribution rate to cover public safety workers’ pensions costs is because their old police chief used Double Dipping more aggressively than any other municipality in the state; allowing this to happen again will only increase their contribution rates further
- Here are the key points:
- Adding $223 Million in pension liabilities to a system already billions of dollars under water; this is not a fiscally conservative thing to do
- Double Dipping is not fair to younger workers. This is a very expensive giveaway to a handful of employees at the expense of the new employees who won’t get raises and benefits increases they would have ordinarily received
- Taxpayers should not be left holding the bag so that a few thousand people can get hundreds of millions more out of the system than they ordinarily would
- Finally, if the legislature thinks it is good policy to reinstate Double Dipping, then at least they should pay for the costs immediately and up front, instead of adding unfunded liabilities to a system that is already billions in the hole AND will likely be billions more in the hole after this latest market downturn
Anyway, I hope you will vote against all of these bills. Please let me know if you have any questions. Call me anytime.