Proposal to cut pension adjustments questioned

State lawmakers opened deliberations Wednesday on a bill to cut cost-of-living allowances for 1 million members of Ohio’s largest pension system.

House Bill 413 by Rep. Gary Scherer, R-Circleville, would implement recommendations in October by the Ohio Public Employee Retirement System designed to shore up the $72 billion fund and maintain future benefits.

Testifying before the House Aging and Long Term Care Committee, Scherer said, “This legislation is intended to strengthen the financial status of the Ohio Public Employee Retirement System. Although financially strong today, OPERS continues to explore ways to ensure that the retirement system is able to weather economic downturns that are an inevitable part of the life cycle of long-term institutional investors like OPERS.”

Critics have questioned the need for cuts given the pension system’s stable financial condition.

“Why now? Are there any specific indicators currently that cause you or others in support of this bill to think now is the time to do this as compared to five years ago or five years from now?” asked committee member Rep. Richard Brown, D-Canal Winchester.

Scherer said, “I’m putting this on the tee ... I’m very anxious to listening to the pros and cons.”

The plan would reduce cost-of-living adjustments to match the Consumer Price Index, subject to a 2.25 percent cap, to save about $4 billion.

Rep Kirk Schuring, R-Canton, told fellow committee members that the retirement system’s financial forecast may be overly optimistic and the fund could be in trouble if returns come in lower than expected.

“To suggest that this is premature and not needed loses the fact that we’re trying to do something proactively that will make sure all current members and current retirees will be protected for the entire length of their retirement,” he said. “We’re trying to get out ahead of this.”

The fund has provided annual cost-of-living adjustments since 1970. The benefit amount has changed several times but is now fixed at 3 percent for those who retired before January 2013. Those who retired after that date have their annual increases matched to the Consumer Price Index, not to exceed 3 percent, beginning in 2019.