Copyright © 2019 Albuquerque Journal
SANTA FE – A complex proposal to overhaul New Mexico’s retirement system for public employees will face a delicate balance in next year’s legislative session.
The recommendations – crafted by a task force established by Gov. Michelle Lujan Grisham – would require government employees and the agencies they work for to pay more into the system, reduce the cost-of-living adjustments available to retirees over a three-year period and call for a $76 million infusion of cash approved by lawmakers.
The goal, supporters say, is to share the financial pain as New Mexico works to eliminate $6 billion in unfunded pension liabilities.
But the balancing act, of course, could also face threats from all sides, and the reviews are mixed.
An association of retired employees has continued to assail the plan as unnecessary. The Public Employees Retirement Association board has endorsed the proposal.
Some organizations support parts of the plan and oppose other parts.
William Fulginiti, executive director of the New Mexico Municipal League, said cities throughout the state are concerned about being asked to pay more into the retirement system. They aren’t opposed to the other major recommendations, he said.
The task force proposal calls for employees and their employers to chip in an extra 2% of the employees’ salary, with the increased contributions phased in over four years.
But Fulginiti said the city employee portion of the retirement system isn’t as underfunded as some of the other employee groups. Furthermore, he said, the increases could cost Albuquerque, the largest city in the state, an extra $10 million a year.
“This is very expensive,” Fulginiti said. “We’re having difficulty on the equity issue.”
Public employee unions will also be a major voice in the debate.
Alberto Ortega, an Albuquerque fire captain and the legislative director for the New Mexico Professional Firefighters Association, said his group wholeheartedly supports the recommendations.
“The solvency of the pension fund, not only now but for future generations of firefighters and public employees, is paramount,” he said.
The American Federation of State, County and Municipal Employees is still weighing whether to endorse the recommendations but sounded open to them.
Josh Anderson, political action coordinator for AFSCME Council 18, said the task force recommendations generally match the principle of “shared sacrifice” favored by the union.
“AFSCME takes the solvency of our pension plans very seriously, and we’ve always advocated that any changes are a shared sacrifice,” Anderson said. “The recommendation of the task force meets those objectives.”
Lujan Grisham, a Democrat who took office Jan. 1, established the pension solvency task force this year after an earlier legislative proposal stalled.
New Mexico has struggled for years with underfunded pension systems – one for educators and one for other employees. The task force recommendations focus on the Public Employees Retirement Association, which handles pensions for firefighters, police and civilian government workers.
Pension liabilities have contributed to a downgrade in the state’s bond rating and triggered intense debate at the Roundhouse.
The task force estimates that its recommendation would push PERA’s funded ratio from about 70% now to about 100% funding in 2043, based on the median projection by actuaries. The plan’s unfunded liabilities would immediately fall about $700 million if the recommendations were enacted, the group said.
A retired employees association slammed the recommendations in a recent letter to Lujan Grisham. They say the changes aren’t necessary.
“There is no immediate crisis,” Joel Pafford, president of Retired Public Employees of New Mexico, said in the letter. “In fact, there is a strong case that fully prefunding pension funds is a bad idea and a waste of money.”
The PERA board, meanwhile, has endorsed the recommendations, arguing that their enactment would provide a “sustainable defined benefit” program for employees.
The libertarian-leaning Rio Grande Foundation also examined the recommendations and said that, if adopted, “PERA would no doubt be better funded and have more assets to spare than under the status quo.”
But the foundation said the state should consider other changes to its retirement system, too.