Don't blow $1 billion hole in future budgets

Gov. Christine Gregoire's proposal to phase out "gainsharing" for state and local government employees, House Bill 1771, is a good compromise between the interests of public employees and taxpayers. The bill, sponsored by Rep. Helen Sommers, D-Seattle, should be passed without further delay.

In traditional pensions, the retired employee gets a certain amount per month. It is supposed to be paid out of the pension fund, which is invested in stocks and bonds, but the amount per month doesn't depend on how large the fund is. It depends on how many years the employee worked, and what his earnings were. Under gainsharing, if the pension funds go up in value a lot, employees are promised a higher benefit. This increase cannot be taken away if the funds go down.

Gainsharing does not exist anywhere in the private sector that we know of, and did not exist in the public sector here until 1998, when advocates claimed it would cost taxpayers nothing. The Legislature believed this marketing scam and included gainsharing in the Plan 1 and Plan 3 pension funds.

It turns out that gainsharing is not free. It requires taxpayers to contribute hundreds of millions of dollars extra to pension funds. Because public pensions are already generous, Gregoire has proposed that gainsharing end after the benefit increase of Jan. 1, 2008. Her proposal offers a benefit substitute for some employees.

The alternative, House Bill 2391, offered by Reps. Bill Fromhold, D-Vancouver, and Steve Conway, D-Tacoma, ends gainsharing but has an increase in benefits for all member of two plans, current and future, who retire between 55 and 65 years old. It raises benefits for many people who never had gainsharing, and over 25 years it costs state and local government $1 billion more than the governor's proposal.

Supporters argue this is a fat year, which it is. But the fatness of one year has no bearing on a plan that commits taxpayers into the indefinite future.

The governor should insist on her plan, and, if necessary, veto the effort to blast a $1 billion hole in it.