SANTA FE, N.M. — Union-led opposition to a proposed solvency fix scuttled the effort to shore up New Mexico’s financially troubled teacher retirement fund in the final days of the Legislature’s 30-day session.
Lawmakers concerned about the growing debts of the state’s public pension plans — the Educational Retirement Board and the Public Employees Retirement Association — say the failure to pass legislation this year could mean tougher medicine in years to come.
“I do believe by kicking the ball on down the road that the remedy is going to be much more painful in the future,” Sen. John Arthur Smith, D-Deming, said minutes after the Legislature adjourned Thursday.
The legislation endorsed by the ERB, which covers roughly 97,000 working and retired teachers, school workers and higher education employees, passed the Senate 30-12 but stalled in the House of Representatives.
In its final form, the legislation — the most far-reaching of several pension solvency measures — would have required teachers and other education workers to pay more of their paychecks into their retirement funds. It would also have imposed a minimum retirement age for future educators, but would not have cut benefits.
Ellen Bernstein, president of the Albuquerque Teachers Federation, one of the unions that opposed the measure, said making employees pay more into their pensions would violate a “social contract.”
“We’re just as worried about long-term solvency as the Legislature is,” Bernstein said Friday. “But these are employees that have taken home less pay to their families during the last three years.”
The Legislature increased employee retirement contributions by a total of 3.25 percent in recent years to balance the state budget. However, at least some of that decreased take-home pay is slated to be restored, starting July 1. The state will increase its contribution to offset that. It currently kicks in 9.15 percent of each employee’s salary, while employees pay 11.15 percent.
After this year’s gridlock, Bernstein said, union leaders would be willing to sit down at the bargaining table to hammer out a solvency fix before the Legislature convenes in 2013.
While most teacher unions opposed this year’s proposed fix, the American Federation of State, County and Municipal Employees (AFSCME) union, which has a smaller number of members covered by the ERB, supported the legislation.
Gov. Susana Martinez has said she would consider calling lawmakers to Santa Fe for a special session focused on pension solvency. On Thursday, however, the Republican governor said there must be an agreement in place before she would take that step.
“I’m not going to call the Legislature into a special session until I’m convinced that those that are connected to the special interest groups are willing to stand up and really have honest discussions about pension reform,” Martinez told reporters. “At this point, that’s not possible.”
As of mid-2011, the ERB had an unfunded liability of about $5.9 billion, the difference between the benefits due to be paid out and the assets on hand. The pension fund currently has a balance of about $9 billion in assets.
The ERB also has a funded ratio of just 63 percent, meaning it has 63 cents in the bank for every $1 of retirement benefits owed to its members.
Meanwhile, PERA had an unfunded liability of about $4.9 billion as of last year. That fund, which covers rank-and-file state workers, legislators and judges, is considered to be on slightly more stable fiscal footing than the teacher retirement fund. Much to some legislators’ dislike, however, the PERA board did not endorse a solvency proposal before this year’s session.
Smith, the influential chairman of the Senate Finance Committee, has been advocating for pension solvency legislation for more than 10 years.
He said Thursday that New Mexico’s failure to adopt such legislation could force the state to turn to a “Rhode Island fix.”
Rhode Island lawmakers recently slashed retirement benefits for workers, including teachers, in that state by eliminating annual cost-of-living increases until the pension system’s funding status improves.
Other top-ranking New Mexico lawmakers also suggested the measure that stalled this year in the Legislature, which would have met the ERB’s stated goal of being at least 80 percent funded by 2030, might have been a best-case approach.
“It may be a different story next time,” said Senate GOP Leader Stuart Ingle of Portales.