SANTA FE — Democratic and Republican lawmakers alike gave mostly positive reviews Friday to a solvency plan that would scale back the retirement benefits for current retirees, future workers and more than 64,000 government employees covered by the New Mexico Public Employees Retirement Association.
Though the proposal to shore up the cash-strapped pension fund will probably get a rockier reception during next year’s 60-day legislative session, lawmakers from both sides of the aisle said Friday they hope to build support before the start of the 2013 session.
“I commend the (PERA) board for showing the courage to come forward with this, because I know your recommendations aren’t supported by everyone,” said House Minority Whip Donald Bratton, R-Hobbs.
The solvency fix, which would erase the pension fund’s $4.9 billion — and growing — unfunded liability by 2031, was endorsed by the PERA board in June.
One of the state’s two big public retirement systems, PERA collects contributions and provides benefits for state and municipal workers, law enforcement and legislators, among others. The pension fund has 64,195 active members and covers 29,496 retirees.
PERA Executive Director Wayne Propst said draft legislation for the solvency plan should be ready by October. It will then be presented to the interim Investments and Pensions Oversight Committee, whose members got their first look at the proposal Friday but did not vote.
Propst, who landed the job at PERA this summer, said he was pleased with legislators’ initial reception of the proposal.
“They see this as serious and credible,” Propst told the Journal. “I think it was a very good start.”
Although minor changes to retirement benefits and eligibility have been made in recent years, proposals for sweeping changes aimed at addressing pension solvency have been largely unsuccessful.
Most recently, a proposed fix of the state’s other public retirement system, the Educational Retirement Board, failed to gain legislative approval during this year’s 30-day session.
Rep. Mimi Stewart, D-Albuquerque, said it is important for legislators to sign off on a pension reform plan before next year’s session.
“I really hope we don’t tweak this to death, but you know how we are,” said Stewart, who described the PERA proposal as a good plan.
While most members of the legislative committee supported the larger goal, several concerns were raised that could be a preview of disputes to come in 2013.
Rep. William “Bill” Rehm, R-Albuquerque, suggested that PERA retirement plans covering volunteer firefighters and State Police officers should not be changed, because those plans are among the best-funded of PERA’s various plans.
Diego Arencón, president of the Albuquerque firefighters’ union, predicted that the changes could prompt a number of firefighters to seek other jobs.
The plan approved by the PERA board calls for the following changes:
⋄ An increase in the amounts of money that both employees and their government employers, with taxpayer dollars, pay into the retirement fund.
⋄ A drop in the annual cost-of-living adjustment increase that retired workers get from 3 percent to 2 percent. This would apply to current and future retires and would take effect in June 2013.
⋄ Future retirees under age 65 would have to wait for seven years after retirement, instead of the current two years, to begin receiving the annual cost-of-living increases. However, workers would be able to earn a larger pension than is currently allowed by staying on the job longer.
⋄ Reduced benefits, stricter retirement eligibility and other changes that would apply only to future workers and those hired after June 2010. This would create a new tier of PERA members.
Like other pension plans nationwide, PERA has seen its unfunded liability — or the difference between assets on hand and future benefits owed — increase sharply in recent years, due largely to investment-driven losses and workers retiring earlier and living longer.
The pension plan’s assets-to-liabilities ratio is about 70 percent. The ratio was about 93 percent as recently as 2008, according to PERA.