Our View — Age-old question ignored

The Free Press

January 25, 2007 12:37 am

— The procrastinator’s motto to forego action now when you can wait until the last minute should carry a little more urgency for baby boomers in Minnesota. The last minute is upon us.
The number of workers turning 62 in Minnesota will increase 30 percent next year, a figure described as a “huge jump” by Minnesota State Demographer Tom Gillaspy. That will create an even greater shift in the number of people paying for benefits such as health care and retirement to the number of people receiving those benefits. Fewer will be paying while more and more will be receiving.
This is a fiscal consequence that will not be sustainable without huge changes in either taxes or benefits.
The consequences loom large. Already, some of the demographic shifts appear to be affecting the state’s three largest public employee retirement plans. A report by the Legislative Auditor states that a $4 billion deficit is hidden in the way the state measures the funds, not accounting for a trend in increasing retirees benefits even when investments of the funds have down years. The funds affected include the Teachers Retirement Association, the Public Employees Retirement Plan and the Minnesota State Retirement System.
The number of people hitting the retirement system in the next five to 10 years will put pressure on the funds creating the deficit situation, according to the audit. The state’s rapidly aging population will make the situation worse. Auditors already are recommending that the Legislature cut the annual increases in retiree benefits, some of which hit 9 percent per year.
Some three dozen legislators are taking these demographic trends seriously. They have formed a bipartisan group, the 2020 caucus, to consider solutions to the negative consequences of the demographic changes.
Another problem, much of the growth in the workforce that will help pay these costs will be foreign born immigrants. Gillaspy and State Economist Tom Stinson say that’s a crucial fact to understand because there currently remains an education gap for those immigrants in Minnesota schools.
It will be more important than ever to make sure they get a good education, so they can enter the workforce and create economic activity that will help pay for future costs of programs baby boomers participate in.
Sen. Geoff Michel, R-Edina, a member of the 2020 caucus, summed up the cost of not considering solutions to the demographic program now.
“If we don’t put some reforms in place now, we’ll either tax the next generation to death or cut benefits.”