Every year the swallows return to Capistrano and every year some members of the New Mexico Legislature complain about not receiving a salary. New Mexico is the only state in the nation whose legislators do not receive a salary. Instead, they receive a stipend based on the cost of living in Santa Fe. We are months away from the next regular legislative session, but the grousing has already begun.
Whenever legislators complain about not receiving a salary, they never mention their very generous pension benefits. This article will show you how generous those benefits are.
The primary statutes controlling N.M. legislators’ retirement plan are contained in NMSA 10-11-43.1 through 10-11-43.5. The pension amount is determined by multiplying the per diem rate for Santa Fe times 11 percent, times 60, times years of service. The federal per diem for Santa Fe is currently $194 per day. From 2012 until 2018, legislators only contributed $600 per year to the plan. Since 2018, contributions have increased to $1,000 per year. Most significantly, after a legislator has served for 10 years, he can retire and immediately begin receiving a pension regardless of his age. Let me show you how expensive this can be for taxpayers.
Here is the hypothetical. A male is elected to the Legislature in 2012 and retires 10 years later in 2021 when he is 39 years old. He immediately starts drawing a pension. He has a life expectancy of 35.94 more years to live. We multiply the per diem of $194 times 11% for $21.34. We next multiply $21.34 by 60 for a total of $1,280.40. We next multiply $1,280.40 times the 10 years of service for a total yearly pension of $12,804. We next multiply the $12,804 by the life expectancy of 35.94 years for a grand total of $460,175.76. And how much did the legislator pay into his fund to get this princely sum? A total of $7,200 ($600 x 7 + $1,000 x 3). Remember that this is a low-ball number as the retired legislator is also entitled to cost-of-living increases on the pension. Ouch.
When we compare the N.M. Legislature’s retirement plan to other states, ours appears to be an outlier. No other state has a retire-at-any-age-after-10-years plan. The vast majority of other states require that the retiree be at least 55 or older. Nevada provides for retirement before 60 but with reduced benefits. Texas provides for retirement at 50 with at least 12 years of service. New Mexico is also the only state where retirement amounts are not based on salary or wages. As of several years ago, it was also overfunded at 151%.
In the future, whenever you hear a story about the suffering of woebegone N.M. legislators because they don’t receive a salary, you should also expect the story to discuss their very generous pension benefits after 10 years of service.