The Public Employee 'Silver Tsunami' Looms for Governments
The long-anticipated wave of government worker retirements was delayed by the recession. But now, some agencies report signs it's starting to begin.
The Connecticut Department of Correction is confronting a situation all too familiar these days in state and local government. By June, 40 percent of its correctional officers will be eligible to retire. All segments of the department’s workforce of course—from high-ranking managers to maintenance staff—are aging. Many of them took jobs back in the early 1990s when several prison facilities opened to accommodate a growing incarcerated population. Now these employees are reaching the 20 years of service needed for retirement.
The department hasn’t been hit with an onslaught of departures just yet. But state officials know that it’s only a matter of time before retirements ratchet up. “We’re afraid that when the economy really looks like it’s back, we’re going to see a lot of people leave,” says Cheryl Cepelak, the department’s deputy commissioner of administration. Normally, about 15 percent of all Connecticut executive branch employees who are eligible to retire do so in a given year.
For a long time, there have been warnings of a “silver tsunami” among public employees—a sudden wave of baby boomer retirements that could potentially cripple the workforce. So far, the wave hasn’t hit with full force in most jurisdictions. Governing compiled retirement figures from a sample of 10 larger state pension systems with available data. Retirements for six systems were on pace to exceed last year’s totals, but only the Employees’ Retirement System of Georgia had registered more than a 10 percent year-over-year increase from 2012. Most others had recorded roughly the same tally of retirements as last year.
With the large number of employees becoming retirement-eligible, however, the current situation won’t last long. Many state and local governments expect retirement paperwork to begin piling up soon, and some report signs that the tide is already rising. Public administration experts express concern that governments are ill prepared. If they aren’t ready, agencies risk permanently losing decades of expertise, eroding their ability to serve the public for years to come.
In Connecticut, retirements are already escalating in some agencies. “We’re seeing a very strong ramping up of people leaving, and that’s pretty concerning to everybody,” says Martin Anderson, the state’s deputy commissioner of administrative services. Of particular worry for Anderson and other state human resources officials is the potential brain drain set to occur when longtime employees in leadership positions depart. More than a third of employees classified as managers in Connecticut state government are already eligible to retire.
As a whole, public employees tend to be older than those in the private sector. A review of data compiled for the Labor Department’s 2012 Current Population Survey shows seven of the 20 industry classifications with the oldest workers consist primarily of public employees. Postal service workers stand out with the oldest median age of 52 years—matched only by those working in funeral homes, crematories and cemeteries. Other public employment categories with the oldest median ages include libraries (49.4 years), public finance (48.9 years), and public administration executive offices and legislative bodies (48.7 years). The national median age last year among all industries, public and private, was 42.3 years.
While one can’t predict precisely when the wave of retirements will strike, data does provide clues as to which agencies will be hit first. In many jurisdictions, public safety personnel are among the first to leave, mostly because of lower retirement age requirements. The California Public Employees’ Retirement System (CalPERS), for example, reports that its state highway patrol members retired at an average age of 53 last fiscal year, while local police and fire employees retired at 54. By comparison, the average age of retirement for all CalPERS members was 60 years, a figure that hasn’t budged since fiscal 2006-2007.
The Pennsylvania Office of Administration employs a retirement projection tool to analyze cross-sections of its workforce and evaluate historical trends. The latest figures indicate about 22 percent of education department employees are eligible to retire, but in just four years, that number will jump to 47 percent of the current workforce. As in Connecticut, Pennsylvania’s state corrections department expects to fill its ranks soon with many new workers, as 42 percent will be eligible to retire within four years.
Similarly, information technology departments in some jurisdictions are gearing up for high turnover. The Cook County (Ill.) Human Resources Bureau reports 40 percent of county technology staff will be retirement-eligible by 2017. Many of the systems these employees support will soon be outdated, so the county has stepped up its recruitment efforts as it plans technology upgrades.
At the opposite end of the spectrum, senior-level public managers tend to hang onto their jobs longer. A survey conducted by the International City/County Management Association (ICMA) found that 63.3 percent of city and county managers and other appointed chief local officials were older than 50. Complicating this situation further is the fact that baby boomers around the same age often make up a department’s entire management staff, creating the possibility of many decimating departures within a relatively short time.
In general, though, the prospect in most agencies is for a steady flow of retirements over a longer period, rather than a tsunami occurring all at once. It’s worth noting that the baby boomer generation spans nearly two decades, with the youngest still under 50. Governments also go through uneven hiring cycles, offering varying benefits packages and setting different ages for retirement eligibility—all factors contributing to when they’ll expect more departures.
“The assumption that the 8,000 to 10,000 people who turn 65 every day are going to announce they’re out of here is just not the case,” says Neil Reichenberg, executive director of the International Public Management Association for Human Resources.
Alicia Munnell, director for the Center for Retirement Research at Boston College, says she expects most boomers employed in state and local governments to retire within five to 10 years, with the first noticeable spikes set to take place in the next three years.
One factor that has delayed the retirement wave is the recession and still sluggish economic recovery. A large percentage of baby boomers put their retirement plans on hold. But they are now five years older than they were when the recession started, and some are deciding that the time for retirement has finally come.
Nearly 38 percent of public-sector human resources professionals reported that eligible employees were postponing retirement in a survey earlier this year by the Center for State and Local Government Excellence. That was down from 46 percent in 2012.
Pensions and health benefits remain crucial influences on employee retirement choices, particularly when lawmakers publicly debate cuts. Even if pension law changes don’t affect veteran employees, the mere threat of reductions may push some workers out the door.
“Folks get nervous there will be fundamental changes to their retirement benefits or medical benefits,” Connecticut’s Anderson says, “so there’s an incentive to leave now and lock in what you have.” Jim Honchar, a deputy secretary in the Pennsylvania Office of Administration, says employees who began working in state government later in their careers and have yet to accumulate many years of service will be most likely to look elsewhere if there are significant cuts to pensions.
In some places, there is a cyclical quality to public employee retirements that can be traced to collective bargaining agreements or policy changes. The Employees’ Retirement System of Georgia announced in August 2012 that it would end a 3 percent tax offset, effectively reducing pension payments for those who retired after June 1, 2013. State records suggest this caused many employees to head for the exits, with 2,060 retiring in the first half of this year to get in before the cutoff, compared to 1,355 during the first six months of 2012.
Honchar says he expects most of Pennsylvania’s retirement-eligible employees to stay on for at least a few more years because the state’s contract with American Federation of State, County and Municipal Employees (AFSCME) is backloaded in terms of pay raises. Once the contract nears expiration, the office expects a corresponding spike in retirements.
The large number of impending retirements is also generating a reevaluation of the jobs themselves. Kelly Powell Logan, the state’s secretary of administration, says that as her office plans for a future with a substantially different workforce, it is assessing whether some core functions of government are better suited for the private sector. State government plans to move away from owning and operating data centers, for example. “We’re certainly seeing a demographic change,” she says. “If we continue to plan and make sure we’re hiring for the right positions, it’s not an insurmountable challenge.”
Libraries offer a prime example of the link between retirement and the changing nature of government work. Sarabeth Kalajian, director of the Sarasota County (Fla.) Library System, says she views the silver tsunami as an opportunity to prepare her workforce for the future. “The role of public libraries in serving the community is changing,” she says. Libraries will require more tech skills, such as Web design and social media. About 39 percent of Sarasota’s library system employees will be retirement-eligible within five years.
Heidi Voorhees, president of the local government consulting firm Voorhees Associates, says local governments are already experiencing a labor shortage in public finance, IT and public works. “You have a demographic hole in the middle,” she says. “Folks in their late 30s and 40s are in high demand, and there aren’t enough of them to meet the demand.”
To close the gap, governments frequently promote much younger employees to fill slots vacated by senior staff. Voorhees says they hit the ground running with the help of one-on-one mentoring arrangements typically lasting a few months. That’s where baby boomers come in. If they don’t want to call it quits just yet, there frequently are ample opportunities for boomers to train younger workers set to take their place. “A lot of them want to continue working in some capacity,” Voorhees says. “It’s a perfect match.”
Many retirees end up returning to agencies part time or temporarily. Rules can complicate matters in some states, where retirees can’t work for former employers if they’re drawing a pension. Others, like Illinois, set limits for how many hours these public employees-turned-contractors can work for the government.
To future-proof its workforce, Pennsylvania offers up-and-comers a range of professional development programs. Sarasota County similarly administers a yearlong program to groom its leaders. The county also says it’s filling more roles on an interim basis, allowing departments to better train managers. The public safety communications manager, for example, will retire next year, so the county hired an employee to train for the position for eight months.
But this level of preparation appears to be the exception rather than the norm across governments. Voorhees says most are not prepared for pending retirements, due in part to prior reductions in professional development budgets.
The one certainty is that boomers won’t be working forever. When they do finally leave, governments must be ready.
State Retirement System Data
Governing compiled retirement data from a sample of 10 of the larger state pension systems. To compute year-over-year percentage change, each system’s retirements for months with available data for 2013 were compared with corresponding 2012 monthly totals (not the annual figures shown below). Counts represent calendar year totals.
|Retirement System||2008||2009||2010||2011||2012||2013 (partial)||Year-over-year pace|
|California Public Employees' Retirement System||23,845||27,964||33,037||30,397||30,136||23,736||0%|
|Employees' Retirement System of Georgia||2,119||2,308||2,442||2,650||2,659||2,333||+27%|
|Employees Retirement System of Texas||4,894||4,740||5,090||6,320||6,277||5,522||+8.5%|
|Michigan State Employees Retirement System (Defined-benefit plan)||2,013||2,139||3,671||4,773||1,615||1,268||-1%|
|New Jersey Public Employees Retirement System||8,587||7,329||10,649||11,701||8,936||8,987||+2%|
|North Carolina Teachers' and State Employees' Retirement System||8,562||8,902||10,946||11,354||11,822||10,422||> +1%|
|Pennsylvania State Employees' Retirement System||4,145||4,035||4,995||6,508||4,775||4,056||+9%|
|State Retirement System of Illinois||2,294||2,228||2,632||3,198||4,658||2,385||-43%|
|Wisconsin Retirement System||8,814||8,094||8,580||15,618||9,677||8,423||+1%|
NOTE: Georgia and New York system totals are current through August; California, Texas, Michigan and Pennsylvania systems totals are current through September; Figures for all other systems are current through October. SRS of Illinois numbers do not include retirees who are deceased. SOURCE: State retirement systems