Commentary: Retired school employees face pension erosion, but SB 14 would help
The COVID-19 pandemic forced a sudden change in nearly everyone’s life, and government — at both the state and federal level — responded to meet the needs of citizens. Increased unemployment insurance, stimulus checks, funded virus testing and free vaccine events are four examples.
While the pandemic was a sudden change, Delaware public school retirees have been experiencing a slow-moving change that began the day they retired and continues today. Inflation continues to eat away at our pensions. Unlike many other states, increases in Delaware pensions for former teachers, principals and other employees are not automatic. Any increase must be approved by the legislature and the governor.
There has not been a permanent increase in six years. During that short time, pensions have lost 8.4% of their purchasing power. The average pensioner is 71 years old, retired 11 years ago and has lost 14% of his or her pension value.
Senate Bill 14 (SB 14), introduced by Sen. Bruce Ennis, D-Smyrna, and co-sponsored by 19 additional legislators, includes a postretirement increase that addresses the erosion of pension benefits for the longest-serving retirees and establishes a pension-adjustment policy that is financially sustainable in future fiscal years.
If the state grants active employees a pay increase, that increased cost goes on forever. But pension increases are funded differently. The increased future cost is determined and the cost completely paid for in a few years. In the past, the legislature granted pension adjustments on a percentage basis and funded the increased cost over a five-year period.
SB 14 seeks to change this procedure by having the state place a fixed amount into a postretirement increase fund. At present, the state pays about 12% in payroll costs to fund the pensions of employees who will retire in the future; SB 14 would increase the percentage. These additional dollars would fund pension adjustments every other year. However, these pension adjustments would be well below the rate of inflation.
SB 14 provides additional help for older pensioners who have endured the loss of purchasing power for many years. For example, the 4,860 state pension plan recipients who retired before the year 2000 have lost at least 32% of their pensions to inflation. Those pensioners who retired more than 20 years ago will be granted a percentage increase double that of more recent pensioners.
The average state funded pension is $24,504. A fair question to ask is, "Why should Delaware school retirees get any pension increase, since many private sector pensions are fixed for life?" We believe the answer lies in the historically lower wages that the public sector was, and is, able to provide. Since pension amounts are based on the pensioners' wages, lower wages result in lower pensions. SB 14 would provide a pension adjustment process to help offset this inherent difference.
Public school pensioners recognize that pension increases cost the state money. Most of the pension monies are spent right here in Delaware. Ninety-one percent of retirees live in Delaware or nearby in Maryland or Pennsylvania.
Public school retirees, particularly our most elderly pensioners, face an uncertain future, burdened with inherently lower pensions, an increasing cost of living and increasing health care costs. For these reasons, we are seeking the passage of SB 14, so that former school employees can live out their retirement in dignity.
Wayne Emsley is a retired Delaware high school science teacher and administrator. He is executive director of the Delaware Retired School Personnel Association. More information can be found at drspa.org.
