No cost-of-living boost or 13th check for Indiana retirees

Despite billions in state reserves, fixed income retirees who are part of the Indiana public pension program won’t be getting a bonus benefit from the Legislature this year.

The Retired Indiana Public Employees Association (RIPEA) blasted the General Assembly for omitting the cost-of-living adjustment (COLA) or 13th check from the state’s two-year budget process, noting that one or the other has been included almost every year in recent decades.

“Since 1985, retirees have received some level of pension adjustment every year through a 13th check or COLA to support the ever-heightening cost of living they face,” said Jessica Love, RIPEA’s executive director. “And now, in 2023, when inflation is the highest it’s been since the 13th check started in 1991, legislators approved a budget that leaves out public employees altogether? These retirees deserve better.”

House lawmakers placed the blame squarely on the Senate, saying that House Bill 1028, which obligated $37.8 million one year followed by $38.2 million the next to supplement retiree pay, passed their chamber unanimously but never got a hearing in the Senate.

“Many of these people are old retirees and when they retired, their income wasn’t that great or they never worked that many years… The 13th check was definitely the way to go but the Senate didn’t want to act on it,” said bill author Rep. Bob Cherry, R-Greenfield. “Our Senate brethren are going to have to answer for that because our phones are going to be ringing off the lines and all we can say is, ‘We tried; the Senate didn’t do it.’”

COLA versus 13th check

Pensions offer flat amounts over the course of one’s retirement but, due to inflation, rarely keep up with the costs of living. Other types of government payouts for the elderly are annually adjusted, including Social Security, which saw a 8.7% adjustment last year following a record-breaking 9.1% inflation peak in June.

Pensions to roughly 97,000 Indiana retirees are determined by years of service spent working for state government, from teachers and law enforcement to gaming agents and conservation officers.

Cherry and other advocates argued that legislators had the money to fund either a 13th check or a COLA, especially following ongoing inflation and an unexpected $1.5 billion windfall last month.

Additionally, lawmakers left $2.7 billion in reserves accounts with the caveat that anything over $3 billion must go to paying unfunded debt.

But notwithstanding that revenue, the monies don’t even have to come from the budget, Cherry and Love observed, because the state has dedicated funds for this purpose that already have money.

“So, funds designed for this very purpose will now just sit there – untouched – while some retirees’ lives will truly shatter over the loss of the 13th check. And they won’t shatter just because they won’t receive the $150 to $450 that retirees could have gotten, which is significant in and of itself for many,” Love said. “They’ll shatter because, with each approval of a 13th check or a COLA, state government showed it cared, at least a little bit, until now.”

While both the COLA and 13th check seek to augment retiree pensions, they do so in different ways. The 13th check is an additional, one-time check on top of the year’s other monthly payments while the COLA is a percentage increase for all payments moving forward.

Cherry noted that roughly two-thirds of those pension earners get $200 or less. Under a 1% COLA, they would get an additional $2 monthly, or $24 over the next year. A 13th check, on the other hand, would net them an additional $200.

The argument against a COLA, 13th Check

Senate President Pro Tem Rodric Bray observed that having to find ways to support retirees every two years wasn’t as efficient as having a long-term plan.

“I have said before, I’d like to try and see us get out of the 13th check business and move to a COLA,” Bray, R-Martinsville, said.

Bray noted that budget negotiations at one point offered a COLA of 0.4%, something everyone agreed wasn’t sufficient. Instead, Bray said the issue of a COLA or 13th check will need further analysis.

“We have charged this to go to a study committee to figure out how we can do that in an ongoing way to provide a COLA at least every other year, every budget year, to provide some benefit or cost of living allowance to the folks who are receiving those pensions,” Bray said.

The budget itself tasks the Indiana Public Retirement System with compiling a report by November 1 analyzing several scenarios, including ways to fund a 0.5% COLA annually.

The research must also include the fiscal impact to state and local government as well as the possibility of creating a supplemental allowance reserve account for post-retirement benefits for certain state police retirement funds.

Cherry agreed that a long-term solution needed to be found but bemoaned the lost opportunity this budget cycle. He vowed a 13th check would be one of the first bills he filed in 2024, a non-budget year that typically doesn’t advance many state expenditures.

“It’s got to be fixed and what we need to do is have a base adjustment – then maybe a 1% COLA would work,” Cherry said. “But giving a 1% COLA with inflation at 6, 7 or 8%… everything you turn around and touch costs more. It’s not the way to treat our retirees.”

The Indiana Capital Chronicle is an independent, not-for-profit news organization that covers state government, policy and elections.