It was scary enough for public employees and retirees when the New Mexico Public Employees Retirement Association pension had an unfunded liability of $4.9 billion. Then it lost money — 0.4 percent on about $12 billion — in what most consider an up market.
The loss arguably can be attributed in part to PERA’s unrealistic investment expectations. When you build your budget on making a return of 7.75 percent in this economy, you are left investing in riskier propositions.
And relying on that rate of return can be attributed to PERA not having enough of an income-generating nest egg and new contributions to cover the benefits it’s paying out over time. Hence that multibillion-dollar unfunded liability. Which just got worse.
The 2013 Legislature will consider PERA’s proposal to deal with (at least the $4.9 billion) unfunded liability by 2029. The plan scales back benefits, boosts contributions and imposes stricter retirement eligibility on recent and new hires.
But especially considering the more dire circumstances of the pension fund, it is important that lawmakers also put a minimum retirement age on the table. That they consider making changes that affect workers hired before 2010. And that they stop predicating solvency on a pie-in-the-sky return on investment and instead consider a change that could deliver real solvency: moving from a defined benefit plan to one based on defined contributions like the private sector and many public entities have.
While they are at it, lawmakers also should revisit the proposal to make taxpayers (many of whom can only dream about a pension) shell out even more than the 16.59 percent they are already committed to putting into someone else’s nest egg for PERA’s general plan.
It is expected that opponents to these changes will argue for the status quo as a promise made. But the latest report on PERA’s return shows that’s a promise that will not be kept. It is up to the Legislature to make adjustments so it can be.
This editorial first appeared in the Albuquerque Journal. It was written by members of the editorial board and is unsigned as it represents the opinion of the newspaper rather than the writers.