Article published Aug 16, 2006, Tuscaloosa news
Bronner says Alabama must act on pension fund

By April Wortham
Staff Writer


TUSCALOOSA | Alabamians are going to have to make some tough decisions about the state’s health-care fund in the coming months, said David Bronner, chief executive of Retirement Systems of Alabama.

Bronner, who oversees the $29 billion pension fund that provides benefits to more than 295,000 active and retired public employees, spoke Tuesday to members of the Rotary Club of Tuscaloosa.

He said health-care costs for state employees and retirees are rising “exponentially." The Legislature put $1 billion toward the RSA’s health-care fund this year and has approved $1.15 billion for the coming fiscal year. Bronner said he would ask lawmakers for $1.25 billion for the 2008 budget.

But that money does nothing toward satisfying nearly $20 billion in what Bronner called “unfunded liability," the amount the state will have to pay to provide the same level of benefits at the current premium for retirees and active employees who will retire over the next 30 years.

Beginning next year, the Governmental Accounting Standards Board will require states to report any unfunded liabilities for future health insurance benefits as well as how they plan to meet those costs.

Unless Alabama can show it is making an effort to pay down its health insurance liability, it could result in unfavorable bond ratings that would cost the state more to borrow money for projects such as school construction.

Bronner said the state needs to put back an additional $1 billion per year over the next 30 years to ensure that health benefits for its employees are funded. Figuring out where that money will come from could provide some drama in the upcoming legislative session.

“There’s no extra billion dollars in Montgomery." he said. “But you’ve got to start doing something, so you’re going to have a lot of gnashing of teeth. A lot of people are going to be mad."

Bronner said he is not suggesting that taxpayers pick up the tab for paying down the state’s health insurance liability.

Much like it did in the 1970s with its retirement fund, he suggests that the state set up a trust fund that both taxpayers and members would contribute toward, the latter in the form of higher premiums.

“Because otherwise you end up doing exactly what we did for the airline business and the steel business, and that is you wipe out the pension funds and you wipe out the health care. And then all the people are left out there with nothing," he said.

Bronner earned a doctorate and a law degree from the University of Alabama, where he taught in the Graduate School of Business and Education and served as assistant dean and lecturer in the School of Law before joining the RSA in 1973.

High-profile investments have been the hallmark of Bronner’s tenure at the RSA, including office buildings, luxury hotels and conference centers, newspapers and radio stations. He also is responsible for the Robert Trent Jones Golf Trail.

Bronner said Tuesday that he expects an announcement to come within the next 60 days regarding an investment by the aerospace industry in central Alabama.

He declined to give further details.

Reach April Wortham at april. wortham@tuscaloosanews.com or 205-722-0213.