The solvency measure, passed earlier by the Legislature, is intended to restore the Educational Retirement Board pension plan to be 100 percent funded by 2043.
Changes affect nearly 61,000 active state teachers and educators who contribute to the pension plan and about 37,000 retirees receiving benefits.
The approved ERB fix taking effect July 1 will:
♦ Increase taxpayer contributions to 13.15 percent of all employee wages starting in July, up from 10.9 percent. Taxpayer contributions increase again next year to 13.9 percent. The taxpayer increase matches the level set by the Legislature in 2005 but was delayed because of lean budget years.
♦ Increase employees’ contributions to 10.1 percent, up from 9.4 percent. Employee contributions increase again next year to 10.7 percent. Employees earning less than $20,000 per year will contribute 7.9 percent of their wages.
♦ Reduce current retirees’ annual cost-of-living benefit raises to 1.8 percent per year — a 10 percent cut— for educators with 25 years of services and 1.6 percent per year — a 20 percent cut — for all others.
♦ Change rules for new hires by setting a minimum retirement age of 55 and delaying cost-of-living benefit increases until age 67.
The governor said the changes are an important step toward shoring up the estimated $6.2 billion unfunded liability of the educators’ pension plan that is now about 60 percent funded.
“This proposal represents systemic reform to the state’s educator pension system,” Martinez said. “Our negotiations with the Legislature resulted in several concessions and improvements to bolster the system’s long-term solvency and moved us toward our ultimate goal of saving more than $6 billion over the next three decades.”
Martinez said she would continue to work with lawmakers to ensure the educators’ pension plan remains on track to solvency.
The intended fix for the educators pension system comes after years of meetings with teachers, retirees and state leaders to identify the best solution, said Jan Goodwin, executive director of the Educational Retirement Board.
“Everyone worked together through thick and thin, adapted to any changes that were put before them, and they stuck together and got something that worked for the governor,” Goodwin said Friday after the legislation was signed into law.
“What a huge feeling of relief,” she said.
But the signing of the legislation also came after the pension plan fix drew fire from both liberal and conservative quarters.
Some progressive Democrats argued the plan was unfair to retired teachers, who are facing decreased cost-of-living raises not being cut from other public employees.
“The Legislature and the executive, they just have no regard for teachers by doing that,” said Rep. Mimi Stewart, a Democratic Albuquerque educator who voiced opposition. “… Why are we holding the ERB fund at a higher standard?”
If the fund were to reach 90 percent funded status, it would trigger a restoration of slightly higher cost-of-living raises.
Other critics had said the plan didn’t go far enough to reach solvency.
Educational Retirement Board member Bradley Day in a Journal op-ed called the fix “inadequate” and said the pension benefits were too generous for the contributions employees paid.
Most educators covered by the ERB must work for at least 25 years to be eligible for full retirement benefits, though there is no current minimum retirement age. Benefits are calculated through a formula that includes an employee’s final average salary and number of years worked.
Other legislation designed to improve funding for the state’s other large public pension system, the Public Employees Retirement Association, still is being reviewed by the governor, Martinez spokesman Enrique Knell said.
At a glance
Cost to taxpayers: Increase contributions 2.25 percent
Cost to employees: Increase contributions 0.7 percent
Cost to retirees: Cut cost-of-living raises 10 percent to 20 percent
Effective date: July 1
— This article appeared on page A1 of the Albuquerque Journal