Copyright © 2020 Albuquerque Journal
SANTA FE – The state Senate passed a broad proposal Wednesday aimed at turning around New Mexico’s chronically underfunded retirement system for police, firefighters and other public employees.
The proposal, backed by Gov. Michelle Lujan Grisham, now heads to the House.
The legislation would require government agencies and their employees to pay more into the pension system, and it would substantially revise how retirees’ annual cost-of-living adjustments are calculated.
Supporters said the changes, while difficult, are necessary to ensure the Public Employees Retirement Association is healthy enough to withstand an economic downturn.
“We need to act now,” said Sen. George Muñoz, a Gallup Democrat and sponsor of the bill. “We could lose these funds completely.”
Senate Bill 72 was passed 25-15 after an hour of debate. The vote didn’t fall along party lines, with a mix of Republicans and Democrats on both sides of the debate.
Democratic Sen. John Sapien of Corrales assailed the bill’s changes to the system of annual cost-of-living adjustments. It would ultimately leave retirees’ with smaller annual raises than they get now, he said, even after retirees had agreed to other painful changes to the retirement system seven years ago.
“We’re asking them to give again with promises of profit-sharing that are not going to come to fruition,” Sapien said.
The legislation would freeze many retirees’ cost-of-living adjustments for two years and then move to a “profit-sharing” model – with annual raises fluctuating from 0.5% to 3%, depending on investment returns and the financial health of the pension fund. Most retirees now get a 2% raise each year.
The bill has been a priority of Lujan Grisham. It’s largely based on recommendations from a task force she appointed.
“We have made promises to New Mexico’s current and future retirees,” Lujan Grisham said in a written statement, “and these changes will ensure those promises are kept. A stable and solvent PERA matters to all New Mexico taxpayers.”
The complex proposal includes an injection of $76 million to help improve the financial health of the pension funds.
The proposal was amended on the Senate floor Wednesday to leave in place a cap on how much employees can receive in retirement. State workers can now retire at 90% of their final average salaries, a limit that will remain in the law even if the bill is passed.
A previous version of the legislation had called for lifting the cap – which would have allowed people to retire with pensions exceeding their annual salaries, if they worked long enough. But senators on Tuesday opted to stick with the current 90% cap.
To reach the governor’s desk, the bill must be passed by the House by next Thursday.