Social security in the 105th Congress.

• Author: Harris, Jennifer D.

As Congress heads into its 105th legislative session, one hot issue is the future financial solvency of the Social Security system. While Congress and President Clinton will be focusing on balancing the budget before tackling such issues as Social Security, Medicaid, or Medicare, these programs inevitably will be part of any comprehensive balanced budget discussions. These three entitlement programs alone represented 30 percent of the federal budget in FY1995 and are expected to grow with the aging of the population.

Social Security serves as a primary source of income for a large proportion of retirees in the United States, and the system has been expanded over several years to include state and local governments. In 1951, state governments could participate in a Section 218 agreement whereby current employees would participate in Social Security. Subsequent Section 218 agreements also could be used to opt out of Social Security coverage for any group. In 1983, public employers were required to continue coverage under Social Security for any employees that had previously been covered (i.e., Section 218 agreements could no longer be used to opt out of coverage with respect to any covered group). Finally, in 1991, all state or local government employees not covered by a public retirement system or under a Section 218 agreement became subject to mandatory Social Security participation (with a few exceptions). As of 1995, more than 30 percent of full-time public-sector employees are not covered by Social Security. These employees are provided a pension plan, and oftentimes supplemental coverage, outside of the system.

Recent reports indicate that Social Security will be bankrupt as early as 2030. Reforms under consideration affect all state and local governments - both those currently participating and those that are not but may face mandatory participation in the future. This article discusses the reforms currently being proposed and notes concerns state and local governments will have if Social Security is made mandatory.

Three Social Security Reforms

The Advisory Council on Social Security, created every four years by the Secretary of the U.S. Department of Health and Human Services, in the past has recommended one course of actions affecting the Social Security system, which usually is adopted by Congress. The current 13-member council could not agree on one long-term, broad proposal for reform and, for the first time in the council's history, proposed three options for reform. The council's issuance of three proposals in its report on January 6, 1997, will make the ensuing debate more heated and political.

The council members did come to consensus on a number of issues. Beyond general issues such as the importance of retirement savings and equity across generations, the members concurred that average...