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Senate panel approves move to shore up state pension fund

SANTA FE – After several days of behind-the-scenes negotiations, scaled-back legislation aimed at shoring up New Mexico’s public retirement system got the backing of a key Senate committee late Tuesday.

The revisions to the bill appeared to be in response to concerns raised by Gov. Susana Martinez about using increased state contributions, via more taxpayer dollars, to help ensure the Public Employees Retirement Association stays afloat into the future.

PERA Executive Director Wayne Propst said the 9-0 vote by the Senate Finance Committee would give the proposed solvency fix momentum as it heads to the Senate floor, but cautioned more changes to the bill might not be welcomed.

At a glance
Here are some key parts of the pension solvency legislation approved Tuesday by a Senate committee:
⋄  Trim annual cost-of-living adjustment from 3 percent to 2 percent
⋄  Increase public funding into retirement fund by 0.4 percent
⋄  Increase how much employees pay into retirement fund by 1.5 percentage point
⋄  Change pension calculation formula to reduce retirement payouts to future workers

“We’ve listened to a lot of people, and we would be very skeptical of proposals that would further reduce the funded ratio.” Propst told the Journal.

Specifically, the tweaks made Tuesday to Senate Bill 27 reduced how much more money the state would have to pay into the retirement fund – from an additional 1.5 percent of each worker’s salary down to an additional 0.4 percent – on behalf of each state worker and altered the retirement eligibility guidelines for future law enforcement officers.

A provision that calls for the roughly 55,000 state employees, law enforcement officials and judges covered by PERA to pay 1.5 percentage point more into their retirement accounts was not changed Tuesday. That prompted some union leaders to describe the reduction to the state contribution portion of the bill as unfair.

In addition to more money flowing into the retirement fund, the PERA plan also calls for retirement benefits to be scaled back for retirees, future employees and retired workers covered by the retirement system. If enacted, the changes would affect more than 31,000 retirees, as well as the active workers.

Martinez, the state’s first-term Republican governor, has vowed to oppose all tax increases during her four-year term, and the Governor’s Office has voiced concern about spending more public dollars on pension solvency.

A Martinez spokesman reiterated those concerns Tuesday but did not say whether the governor would sign the legislation.

“Gov. Martinez has always said that pension solvency must be achieved through meaningful pension reform, not just a taxpayer bailout that provides one of the most generous pension plans in the country without addressing the underlying issues,” Martinez spokesman Enrique Knell said.

Like other national pension funds, PERA has seen its fiscal condition worsen in recent years, in part due to market-driven investment losses.

The retirement system, which includes more than 30 plans, has a 65 percent funded ratio. In dollar amounts, that means it owes about $6.2 billion more in future benefits than it currently has in assets.

The legislation being considered would bring PERA’s funded ratio to about 90 percent by 2042, Propst said.

While all members of the Senate Finance Committee voted in favor of the “compromise” approach Tuesday, committee Chairman John Arthur Smith, D-Deming, warned more drastic action might be needed in the future.

“I hope and pray this does move us in a different direction, but I have serious apprehensions,” Smith said.
— This article appeared on page A4 of the Albuquerque Journal

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