The Buckeye Institute presented testimony before the Ohio House Public Insurance and Pensions Committee in support of House Bill 473, which seeks to reform how public employee compensation is managed in the state. The bill aims to address what the organization describes as an opaque practice where taxpayers fund both employer and employee contributions to public retirement plans.
Greg R. Lawson, a research fellow at The Buckeye Institute, explained that “compensation is the single largest line item for local governments and a leading cause of ever-rising property taxes” in Ohio. He noted that Ohio’s current system allows for a “pension pick-up loophole,” meaning taxpayers cover both sides of retirement contributions for public employees. This arrangement, he argued, puts public sector workers ahead of private-sector employees, who must contribute to their own retirement funds to receive employer matching.
Lawson said this practice leads to fiscal challenges: “[d]ouble-dipping on the taxpayers’ dime” can either divert resources from other essential services or require higher property taxes. He added that such arrangements are “just the sort of opaque and expensive public perk that has fueled taxpayer frustration.”
He further told lawmakers that if compensation changes are necessary for government employees, they should happen openly. “Compensation changes for government employees ‘should occur transparently, through open negotiations that allow taxpayers to see the true cost of public employment, rather than through the hidden costs of pension subsidies.’”
During his prepared remarks, Lawson described how these pension pick-up arrangements increase long-term liabilities for local governments as salaries and payrolls grow over time. He stated that proponents might argue ending these plans would require salary adjustments but insisted any such changes should be handled with transparency.
Lawson referenced Representative Thomas’s views on the issue: “As Representative Thomas has rightly observed, pension pick-up plans distort the labor market for public employees by hiding the true costs of labor in jurisdictions that use pension pick-ups to defer employee compensation that taxpayers must ultimately pay.”
In closing his testimony, Lawson characterized House Bill 473 as a necessary measure: “House Bill 473 is a prudent reform that will help local governments live within their means and make public employee compensation more transparent for taxpayers. As Ohio faces new fiscal realities, aligning public compensation systems with sustainable, transparent practices is essential.”
He concluded by thanking committee members and offering to answer any questions.
