Public Employees Rush to Retire
2011-03-27 - 07:12:28 - Current News
Public employees are retiring at a quickening pace around the U.S., providing a mixed blessing for state and local governments seeking to save money. View Full Image Jeffrey Phelps for The Wall Street Journal Fearing policies that could erode their pension benefits, teachers Mary and Len Herricks, of Oshkosh, Wis., are retiring sooner than planned. . Illinois and California top the list of the worst states to retire to, according to Marketwatch's Robert Powell explains the factors that landed these states and others on this dubious list. .The retirements mean employers can shelve some planned layoffs. And some of the departing workers, generally more senior and higher paid, are being replaced by lower-paid employees with less-generous retirement benefits, government officials say. But the loss of veterans threatens to erode the quality of public services that make communities attractive, they say. The exodus of public employees is an unintended consequence of states' financial struggles. Some workers have been required to take unpaid furlough days, and many fear they'll lose benefits at the center of political battles. In Wisconsin, where lawmakers voted in mid-March to end workers' collective bargaining for future employment contracts, 3,362 people have applied to retire this year, a 73% jump from last year. And 10,975 people since the beginning of the year have taken the first step toward retirement?flooding the Wisconsin Department of Employee Trust Funds with requests for estimates of their potential benefits. That's up 134%. Experience WSJ professional Editors' Deep Dive: Public Pension WatchCHICAGO TRIBUNE Educators Worry Over Future The Modesto Bee Pension Fund to Tap Reserves The Columbus Dispatch Pension Funds Under More Strain Access thousands of business sources not available on the free web. Learn More Among Wisconsin public employees filing for retirement are Mary and Len Herricks, both teachers in Oshkosh. They put in their papers in mid-March after lawmakers voted to rein in most public-employee collective-bargaining rights. "Not only am I losing salary and benefits and facing a bigger work load, but now they are taking away my rights," says Ms. Herricks, a 56-year-old elementary school teacher. A teacher for 35 years who earns in the high 60s, Ms Herricks can now retire and collect nearly her former salary. "Retirement was supposed to be something happy. I'm so sad." About 100 teachers are eligible for retirement In Oshkosh, and Superintendant Donald Viegut anticipates a jump from last year. "Hopefully, it won't make the community a less attractive place to live." The budget cuts driving the retirements, government officials say, are necessary. Many states have record budget gaps due to decreases in tax collections and pension obligations they can't meet. They have responded with layoffs and furloughs, and lately have been pushing to reduce the amount of money they promise to future retirees. The moves are motivating many public employees to retire sooner than expected, as public employees take the opposite approach of many workers who have put off retirement to recoup personal wealth lost during the recession. Public-worker retirements had already been rising due to the aging of baby boomers and other factors, but they have accelerated amid cutbacks by government employers. In New Jersey, four big pension funds saw a record 20,327 retirements in 2010 versus 12,720 the year before amid the prospect of less-generous benefits. In Colorado, 5,529 members of the state's public employees' retirement association, PERA, retired last year. The 20% rise was partly due to a merger that added new members, but some were driven by diminishing compensation, fund officials say. Colorado was among nine states that reported cutting salaries last year and 13 that cut benefits, according to a survey by the National Association of State Budget Officers. The state also increased the portion that employees contribute to their benefits. In California, Guy Harris recently retired at 50 years old because he feared he would otherwise lose benefits he says he has counted on since joining the state transportation department 27 years ago as a civil engineer. "It wouldn't surprise me if they change the rules and say you can't retire before 55," he says. "I didn't want to get stuck." He was earning about $9,000 per month and will collect about a third of that as a retiree. Plus, he has been hired back as a consultant, and is working on his own walnut farm. His employer, the California State Transportation Department, was going to cut jobs, an agency representative said. But then came the sudden retirements?1,450 people in the last two years, up from 394 in 2008. California was among 16 states last year that had employee furloughs, according to the state budget officers' survey. That cut paychecks by about 15%, says Edd Fong, a spokesman for Calpers, the state's largest public pension fund, shrinking the gap between what people earn working and what they earn retiring. He says that helps explain why 33,000 members retired last year, up from 24,000 in 2008. If vested workers retire over age 55, they collect 2% for every year of service. So, someone who has worked three decades collects 60% of their old paycheck. That would normally leave a 40% gap. But the furlough narrows that difference, notes Mr. Fong. The pension money, meanwhile, isn't subject to certain employment taxes. In Wisconsin, many employees have been racing to retire in time to lock in the benefits of their contracts before they expire. Schools are bracing for a stampede before their contracts end in June. Already in Green Bay, 140 teachers and 15 administrators have applied for retirement, compared with 41 last year, says spokeswoman Amanda Brooker. When the Herricks retire from Oshkosh, they each will receive health insurance until age 65, pension checks and a payment worth $600 per year of service. "I wouldn't want to risk losing those things," says Mr. Herricks, a high school agriculture teacher who is retiring after 37 years. Given that pensions are off-limits to certain taxes, Mr. Herricks says they will bring home close to what they did before. They also plan to substitute teach. Still, the move is bittersweet. "I never thought my career would end like this," Mr. Herricks says. "This was the hardest decision I've ever had to make in my life." Write to Ianthe Jeanne Dugan at Corrections & Amplifications Mary Herricks, an Oshkosh, Wis., teacher, earned $68,423 in salary for the 2009-2010 school year. A previous version of this article incorrectly said she earns in the high 50s. In addition, the article fails to note that her husband, Len Herricks, is president of the Oshkosh teachers union.