Brad Day does not seem to like public pension plans much, as demonstrated in his Feb. 3 disorganized attack in the Journal.
He mixes and matches critiques of the PERA, the ERB, the Retiree Health Care Authority and Social Security.
A favorite approach of those who want to do in these programs is to use inflammatory language to scare the public. Thus, Texas Gov. Rick Perry deems Social Security a “Ponzi scheme.” That would make Social Security the world’s longest-lived Ponzi scheme: self-funded and faithfully paying benefits as promised since the 1930s!
Day similarly deems all the New Mexico pension programs to be “insolvent.” Readers would be hard pressed to know the truth that the ERB, the state’s retirement plan for public and charter school teachers and college educators, currently has more than $9 billion in assets that are invested.
Or to know that over the past three fiscal years, the ERB took in $2.1 billion in employee and employer contributions and investment income and distributed $2.1 billion in benefits to retirees and refunds to departing employees (www.nmerb.org, annual report).
Or to know that over the same three years, employees contributed, via payroll deductions, $710 million to the ERB fund. Teachers are not getting a free ride.
Day complains about the percentage of employment income that New Mexico’s retired teachers and educators can expect to receive in comparison to private sector workers. He neglects to tell you that a schoolteacher in New Mexico who retires after 25 years of service has been contributing a significant portion of her salary to the retirement fund every month of every year during that quarter century.
The current employee contribution is 9.4 percent of total pay. The employer’s (state’s) contribution is 10.9 percent – an amount that represents forgone income to the employee.
The 9.4 percent ERB employee contribution is actually higher than the typical 7 percent that private-sector employees contribute to their 401(k) plans.
The ERB plan is not insolvent. It does have a significant unfunded future liability that moderate adjustments in employee and employer contribution amounts, years of service required and cost-of-living calculations can remedy.
Some of these changes have already been implemented and others are under consideration by the Legislature.
Since Day is a member of the ERB Board and a chartered financial consultant, we expect better.
