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Lawmakers take aim on state employee cost of living adjustments

Thu, 24 Jan 2013 05:40:53 CST
By: IPR

As state lawmakers look to rein in pension costs, some have proposed suspending cost of living adjustments for retirees. An analysis finds that would have an big impact on public employees. While they're called COLA's, or cost of living adjustments, the flat 3 percent increases given each year have nothing to do with any consumer index. But they allow retirees buying power to keep pace over the years. David Merriman, Associate Director of the Institute for Government and Public Affairs at the University of Illinois, did an analysis on the benefit:

   
"One of the things that is a little bit surprising is 3 percent doesn't sound like much, but it adds up very quickly."
How quickly? Merriman says doing away with the so called COLA could mean a 17-30 percent cut to the long term value of a pension, based on various factors involving different retirees.   While Merriman says the annual increase is an important part of the retirement package, it's also costly. That's why lawmakers have targeted it during their pension negotiations. He says his analysis is meant to put a value on the benefit, but not to take sides. He says with pensions underfunded by nearly 100 billion dollars, it's likely everyone will have to give something to solve the problem.

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