ALBUQUERQUE, N.M. — The big pension systems for public workers and educators were propped up during this year’s legislative session, but it’s back to square one for the small, struggling judicial and magistrate retirement systems after the governor vetoed their solvency plans.
The two funds are in dire shape, with the magistrate retirement fund — the less secure of the duo — headed for bankruptcy in 14 years.
Gov. Susana Martinez objected that the fix, Senate Bill 25, wasn’t serious enough reform and relied too heavily on increased contributions from the state.
Unlike other retirement plans administered by the Public Employees Retirement Association, the judges’ and magistrates’ systems pay out more to retirees than they take in from their working members and taxpayer contributions.
As of last June, the magistrate plan had 42 members contributing and 85 retirees drawing benefits; the judges’ plan had 118 working members and 127 retirees.
“With the funds being so small, every problem is quite magnified,” said Arthur Pepin, director of the Administrative Office of the Courts, which worked to pass the bill.
Their funded ratios — the ratio of their current assets to their liabilities — are 53 percent for the magistrates’ plan and 51 percent for the judges’ plan.
Together, their unfunded liability — the gap between the assets on hand and future benefits owed — is nearly $100 million.
That’s a drop in the bucket compared with the $6 billion in unfunded liability faced by the Public Employees Retirement Association, with its more than 86,000 active and retired government workers.
“But it’s a huge number” for the two small funds, Pepin said.
Lawmakers this year passed separate bills to bolster PERA and the Educational Retirement Board — the 97,000-member pension plan for teachers and other education workers — and the governor signed them.
Like other retirement systems, the magistrates’ and judges’ plans were hit hard by the significant economic downturn starting in 2008, when investments tanked. But generous benefits that had been added to the plans in better times continued. Retirees got 3 percent annual cost-of-living increases, even as salaries — on which employee contributions are based — stayed flat while the state struggled to balance its budget.
Suspending cost-of-living increases for two years, then resuming them at 2 percent — with future suspensions possible — were key elements of Senate Bill 25. Also in the mix: increased employer and employee contributions, and changes to age and service requirements. The bill also initially allocated $15 million to the funds, which was removed before it cleared the Legislature.
The plans “would have seen significant benefit reductions,” more so than those in the PERA solvency fix, according to PERA Executive Director Wayne Propst.
But although that would have been enough to fully fund the judges’ plan in 30 years, the changes only would have given the magistrates’ plan an additional 15 years, until 2042, before it was insolvent.
Propst said vetoed Senate Bill 25 is a “good starting point” for further discussions on solvency for the two plans.
— This article appeared on page C1 of the Albuquerque Journal