SANTA FE — A union-backed plan to shore up New Mexico’s retirement system for teachers and other education workers gained the backing of an interim legislative panel Wednesday, but trouble spots on the horizon could threaten the plan’s fate when the Legislature meets next year.
For starters, a spokesman for Gov. Susana Martinez said she is uneasy about a key piece of the plan brought forward by the Educational Retirement Board — an increase in taxpayer-funded contributions to the plan of roughly $72 million per year.
“Governor Martinez would be very concerned by any proposal that asks taxpayers to increase their contributions,” Martinez spokesman Greg Blair said Wednesday. “However, there is lots of room for compromise on this issue, and the governor is very willing to work with the Legislature to craft a solution that ensures solvency without increasing the burden on New Mexico taxpayers.”
Like other pension funds, the Educational Retirement Board, which covers more than 98,000 educators and retirees, is facing a future solvency crunch brought on by market-driven investment losses and other factors.
The plan endorsed in September by ERB members calls for current employees to funnel more of their paychecks toward their retirements starting in July 2013, in addition to the increased taxpayer-funded contributions.
Employees making $40,000 annually, for example, would end up paying $520 per year more into their retirement fund than they are paying now, ERB Executive Director Jan Goodwin said. Those employees currently pay $3,760 per year to help pay for their retirements.
The proposal also would impose a new minimum retirement age of 55 and defer the start date of certain retirement benefits, but those changes would only apply to future workers.
The proposal was backed unanimously Wednesday by members of the Legislature’s interim Investments and Pensions Oversight Committee, who also added an amendment that the higher rates would not apply to workers making less than $20,000 annually.
“It was strong bipartisan support, and that’s what you want with a bill,” Goodwin said after the committee’s vote.
She also noted the higher taxpayer-funded rates — which would rise to 13.9 percent of an employee’s salary under the ERB proposal — were actually approved by the Legislature in 2005 but have not been fully funded.
Pension reform has been a tough sell during recent legislative sessions.
During the 2012 session, an ERB solvency proposal that, among other things, would have trimmed the annual cost-of-living increases that retirees receive stalled in the Legislature after being opposed by some unions.
Backers of the current plan altered their approach this time around. About 15 labor unions and retiree groups met over the summer and helped craft the proposal now being considered.
Rep. Mimi Stewart, D-Albuquerque, lauded the unions for coming to the table to help craft the proposed pension solvency fix.
“They have said, ‘We will pay more to maintain a good retirement system,’ ” Stewart said Wednesday.
However, ERB board member Brad Day, who was appointed by Martinez, said the plan is unlikely to guarantee the retirement system’s future solvency.
He said he and other board members who oppose the plan are working on an alternative proposal, which would also be presented to lawmakers during the coming legislative session and would likely feature more drastic benefit cuts.
“Right now, the taxpayers are taking it on the chin,” Day told the Journal.
Most teachers covered by ERB currently have to work at least 25 years to be eligible for full retirement benefits, though the formula depends on such factors as when they started work and their age at retirement.
The ERB, one of two large public retirement systems in New Mexico, has an unfunded liability of $5.9 billion, which is the difference between the benefits due to be paid out and the assets on hand. That figure is expected to go up when a new actuarial report is released next week. The pension fund had a total balance of about $9.8 billion as of Sept. 30.
The funded ratio of ERB is just 63 percent, meaning it has 63 cents in invested assets for every $1 in retirement benefits it owes to members.