Copyright © 2020 Albuquerque Journal
SANTA FE – A proposal backed by Gov. Michelle Lujan Grisham to overhaul New Mexico’s retirement system for firefighters and other government employees passed its first legislative test Thursday.
The proposal, Senate Bill 72, cleared the Senate Public Affairs Committee 5-2 and now heads to the Finance Committee, potentially its last stop before reaching the full Senate.
The proposal is aimed at shoring up the finances of the Public Employees Retirement Association and ensuring the fund is strong enough to withstand an economic downturn.
It drew intense opposition in Thursday’s hearing from retirees – who turned out to oppose a provision that would change how their annual cost-of-living adjustment is calculated.
Supporters of the proposal – including a number of firefighters – said the changes are difficult but necessary to ensure the long-term health of the pension fund.
Sen. George Muñoz, a Gallup Democrat and sponsor of the bill, said the legislation would put the retirement system on track to full funding. The current system, he said, isn’t sustainable.
“It’s like taking out a mortgage and never making a payment,” Muñoz said of the finances now.
The debate didn’t fall along party lines. Two Democrats and three Republicans voted in favor of the legislation, while two Democrats – Antoinette Sedillo Lopez of Albuquerque and Liz Stefanics of Cerrillos – voted against it.
Stefanics said she was concerned about a provision requiring state and local governments to pay more into the retirement system. Small communities, she said, might face difficult staffing choices because of the increased cost.
“We have some cities and counties that are near bankruptcy,” she said.
Senate Minority Leader Stuart Ingle, R-Portales, said it’s time to act.
“If we don’t fix this now,” he said, “it’s not fixable. The amount of liability will continue to get bigger and bigger. If we’re going to keep this (retirement system) going, we’re all going to have to make some sacrifices.”
Under the bill, PERA would move to a “profit-sharing” model for the annual cost-of-living adjustments that most retirees now receive. Rather than an automatic 2% increase in their pensions each year, the actual amount for most retirees would fluctuate – from 0.5% to 3% – depending on investment returns.
Employers and employees would also have to pay more into the system, among other changes.
The proposal focuses on members of PERA. It wouldn’t affect employees covered by the Educational Retirement Board.