Wednesday, June 24, 2015

Trojan Horse Amendment Gives Arkansas Legislators A Pension Boost

by David Ferguson, Conduit for Action:  Issue No. 3, approved last November, may go down in history as the most deceptive amendment ever made to the Arkansas constitution. The amendment was proposed by Representative Warwick Sabin (D) of Little Rock and Senator Jon Woods (R) of Springdale, as House Joint Resolution 1009. Sabin and Woods have been criticized by conservatives and liberals alike.

To the public, the ballot title of the amendment promised ethics reform, but the “reform” protected big lobbyists and continued the practice of big lobbyists opening the feed trough to legislators.  The amendment was a Trojan horse to pass changes that were unlikely to have been approved on their own.

Criticism of Sabin and Woods and of their Issue No. 3 has focused on three subjects:
  • Term limits. The “ethics” proposal was used as a Trojan horse to weaken term limits. Wood’s long title ends with:  “ESTABLISHING TERM LIMITS FOR MEMBERS OF THE GENERAL ASSEMBLY”. Who could be against that?  But the truth was that the proposal weakened term limits that had already been established. It increased the years a state legislator may serve and more than doubled the time a legislator may remain in the House or Senate without having to seek a different office.
  • Salary Commission. A “Citizen’s Commission” was established to set legislative salaries and salaries of other officers. Previously legislator salary adjustments were limited to a cost of living adjustment. Two surprises to the public have been: (1) The self-serving method for appointing the Citizens Commission. The appointments are made by the very officials who want higher salaries; and (2) the wide latitude given to the commission to set salaries. No limits applied to the initial increases, and up to 15% changes are allowed in subsequent years. This change allowed legislators to get a 148% salary increase in 2015.
  • Ethics exceptions. The ethics portion of the amendment promised to restrict the practice of legislators receiving food and drink from lobbyists, however, it did not get legislators out of the lobbyist feed trough as many voters thought. While it imposes some restrictions, the feed trough is still open because of an exception for group events. During the legislative session free food and drink was available daily. The big lobbyists became more powerful and more influential because it is they who can afford to wine and dine groups of legislators.
If that was not enough, there are other surprises in the deceptive amendment. Here is one that has drawn little or no attention. Under Issue No. 3, legislators will receive a higher pension and more legislators will qualify for pensions.

Issue No. 3 and pensions.

How does Issue No. 3 increase legislative retirement? The primary factors for retirement under the Arkansas Public Employee’s Retirement System are: length of service, the person’s average salary for three years, and a multiplier. Issue No. 3 enhanced legislative retirement by increasing both the length of service allowed and increasing legislative salaries.

Legislative salary as a factor in pensions

woods_jTo understand the impact of the salary change you need to look no further than cosponsor Senator Jon Woods. On February 2, 2015, Senator Woods filed his Statement of Financial Interest for 2014. His form shows only one source of income of more than $12,500. This was his legislative salary. (Link to Sen. Woods’ filing)  For 2014 his legislative salary was $15,869.  As a result of his amendment to the constitution his legislative salary increased to $39,400.  Therefore, his amendment resulted in his primary source of income increasing by 148%.

The new salary of $39,000 is just a starting point.  Under Issue No. 3 salaries may be changed by as much as 15% per year.
Length of Service as a factor in pensions

Legislators vest in the Arkansas Public Employee’s Retirement System after being in office for 10 years. If a legislator serves for less than 10 years the legislator receives ZERO retirement benefits, unless he or she can combine that legislative service with other state service.

Under the old term limits restriction many legislators never qualified for a retirement benefit since most needed to be elected as both a state Representative and a state Senator to gain the ten years of service.[i] The new longer term limits makes it possible to meet and exceed the 10-year requirement while serving in only one house of the legislature.
The new term limits under Issue No. 3 allows a person to serve in the legislature for 16 years and you do not have to run for both House and Senate offices to accumulate the 16 years.(Since two-year terms do not count in the Senate against term limits, it is now possible for some state Senators to serve as much as 22 years in the Senate before being termed out.)

Not only will more legislators qualify for legislative retirement, the longer service will enhance their retirement benefits.
Retirement comparison example

How does Issue No. 3 affect retirement? Here is a conservative example.  For this example let’s assume the legislator only has 10 years of service and was first elected after 2005 which means the legislator will contribute 5% of his or her salary toward retirement. At a final average salary of $15,869 you might expect a monthly retirement of about $216 per month.  At $39,400 it increases to $536.

These rough estimates are for comparison purpose only.  Actual retirement could be much higher.  First, this example is based on the minimum of 10 years. Under the new term limits a legislator could serve 16 years (or in the case of only Senate service as much as 18 to 22 years).Second, the 2015 legislative salary of $39,400 is just a starting place.  Legislative salaries may be changed by as much as 15% each year.

If you would like to do your own estimates, here is a link to the Arkansas Public Employees Retirement System’s benefit calculator.

Legislative retirement won’t make you rich, but it is a nice perk. For someone, like cosponsor Senator Woods, whose primary source of income in 2014 was a legislative salary of $15,869 the retirement enhancement is significant.

Summary

Voters saw Issue No. 3 as ethics reform. What they got was:
  • Legislators continuing to receive free food and drink from lobbyists;
  • Weaker term-limits;
  • Higher legislative salaries; and
  • Higher legislative retirement and the ability of more legislators to qualify for retirement.
[i] Because 2-year terms in the Senate did not count for term limits, a few senators were able to serve 10 or 12 years in the Senate and vest in the retirement system.

Tags: Arkansas, Legislative pension boost, Trojan horse amendment, 2014 election, Amendment 3, the facts, Conduit for Commerce, David Ferguson To share or post to your site, click on "Post Link". This site is an Outreach of the ARRA News Service.

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