At a conference in Texas for city managers a few years ago, a man stood up and asked the crowd to look around.
Notice how many in the room have gray hair, he said. When you get home, do the same with your city’s employees, especially department heads, he told the hundreds of city managers in attendance.
The point was that many employees would be retiring soon, and cities needed to be prepared, said Elizabeth Kellar, president and chief executive officer of the Center for State and Local Government Excellence.
“This is a big story,” she said of public sector retirements. “It’s been flying under the radar screen because of the economic crisis.”
People will soon take notice.
Nationally, 50 percent of state and local government workers will reach retirement age in the next five years, according to Kellar’s organization, which is based in Washington, D.C., and specializes in research on state and local government topics.
Similar numbers are found in Iowa.
About half of the state government workforce, excluding the Board of Regents institutions, is age 50 or older. That’s approximately 10,000 employees who are eligible to join AARP.
In Iowa City, nearly 40 percent of city employees will be eligible within five years to collect their full public retirement. Cedar Rapids Human Resources Director Conni Huber believes her city is in about the same position.
With half the state and local government workforce across the U.S. potentially turning over in the next several years, that’s the loss of a lot of experience and institutional knowledge. But it also could lead to an overall decrease in the number of employees and make it easier to change retirement plans in ways more beneficial to governments.
Iowa state government retirees already are not being replaced at an adequate rate and that’s a problem, said Danny Homan, president of the American Federation of State, County and Municipal Employees Iowa Council 61.
“We’ve cut and cut and cut and cut to where there’s no more fat. It’s all bone,” he said.
Driven by boomers
The retirement trend is driven by baby boomers. Though it is also occurring in the private sector, and has been dubbed the “Silver Tsunami,” the wave of retirements among government workers may have special significance.
They oversee public services and taxpayer money. They also are paid with that money.
Julie Sina retired in March after serving as the Cedar Rapids parks and recreation director since 2006 as part of a 34-year career.
As she prepared to retire, Sina made sure her co-workers had access to files and were kept informed of major projects, like the downtown amphitheater and a lodge at Ushers Ferry Historic Village.
“So when I went out the door, I wasn’t the only one with the information,” she said.
Sina was replaced by an internal candidate. Huber, the city’s human resources director, said developing talent so that can happen is a city goal, although Cedar Rapids does not have a formal succession plan.
Iowa City recently completed a succession plan to help fill key positions when they open. City Manager Tom Markus, who is nearing retirement himself, said there is something to be said for losing experienced people, but he thinks a new generation will bring increased skills in technology, social media and the ability to multitask.
“From a public interest standpoint, we have a lot of people coming up who will prove to be outstanding leaders,” he said.
The loss of experienced employees takes on added significance at the city level when one considers that many elected officials in Iowa towns serve part-time and rely on professional staff, said Alan Kemp, executive director of the Iowa League of Cities. More and more small towns are hiring city administrators to deal with increasingly complicated regulations, he said.
“Well, if you’ve got all these retirements, it could make it more challenging for elected city officials,” Kemp said.
The Center for State and Local Government Excellence polls human resource executives annually on what are the most important issues in their organizations. This year, staff development was first and managing workloads was third, both of which the center’s Kellar said relate to retirement.
The percentage of organizations nationwide reporting layoffs and hiring freezes dropped this year compared with 2012, according to the center.
Many officials acknowledge, however, that the retirement trend makes reducing staff easier because a position can be eliminated without laying someone off.
Whenever a state government job opens in Iowa, departments are asked to review whether it needs to be filled and, if so, what kind of skill sets are needed, said David Roederer, director of the Iowa Department of Management.
“In any organization, it’s good to have a manageable number of turnover or otherwise everybody kind of gets set in their ways and everybody just kind of keeps doing the same thing over and over and over,” he said.
The number of state employees, excluding the regents institutions, on July 1 each of the past three years has dropped, from 19,398 in 2011 to 18,223 this year, according to the Iowa Department of Administrative Services.
Roederer believes that because of technology, up to 15 percent fewer employees will be needed in the future.
The current staffing levels have been a point of contention for the employees’ union. AFSCME’s Homan has hit Republican Gov. Terry Branstad’s administration particularly hard on staffing concerns at Iowa’s prisons.
“So what you’re seeing is public service employees being asked to do more and more and more with less and less and less,” he said. “And at some point in time, that’s not going to work anymore.”
The wave of retirements also could affect retirement plans. Many states are seeking changes that would lessen benefits for public employees.
For example, in Pennsylvania, where there is a $47 billion unfunded liability in public pension funds, a law that took effect in 2011 increased the retirement age and the amount of time required to be fully vested in the retirement plan for new employees.
Republican Gov. Tom Corbett is pushing for a bill that would switch employees to a 401(k)-style plan, which workers nationwide view less favorably than the defined benefit plans they often have now, but it would save the state money. It would apply to current employees, but not on what they’ve already earned, and new employees starting in 2015, said Kelly Powell Logan, secretary of the governor’s Office of Administration.
“So a higher turnover rate helps getting people into the new system,” she said.
There has been no movement like that in Iowa, which is not facing a pension crisis. But Roederer said the administration is always interested in reviewing retirement plans.