Local lawmakers say action must be taken to ensure the solvency of retirement benefits for state employees.
The state’s defined retirement benefit plan for state employees currently faces $6.1 billion of unfunded liabilities. Wayne Propst — executive director with the Public Employees Retirement Association — said Thursday, this year the state expects to pay out $1.2 billion in retirement benefits to 41,000 retired state employees, but the state is forecast only to collect a little more than $600 million to meet those obligations.
Consistency needs to close the gap between the amount in benefits it promises and is required to pay employees and how much it has to pay current and future retirees, state Sen. Stuart Ingle, R-Portales, told the Roswell Daily Record.
“We’ve got to figure out how to get those things closer together and then actually make our funds be a little more long-lasting,” said Ingle, who is also a member of the Legislature’s Investment and Pensions Oversight Committee.
Though other states pay more in wages to its public employees, he said, New Mexico offers some of the most generous state pension plans in the nation, something it relies on to keep and retain employees in state government jobs.
“Other states pay more in wages, but nobody compares to what we pay in our retirement programs,” Ingle said.
Failure to readjust the retirement plans, though, could negatively affect the state’s credit rating and New Mexico’s ratings from various retirement organizations will continue to worsen, thereby making it tougher for the state to invest and borrow money.
That, in turn, will affect which benefits the state can provide to future employees.
To tackle the problem, Gov. Michelle Lujan Grisham in February signed an executive order establishing a task force to issue recommendations on how to tackle the state’s unfunded liabilities within a reasonable timeframe.
Propst said among the recommendations released in August by the task force to shore up the state’s retirement program, were proposed increases that active state employees and the agencies they work for would have to provide an overhaul of how Cost of Living Adjustments or COLAs are formulated.
Currently, all retired state employees receive a 2% COLA each year and is one of the most expensive components of the overall benefit paid to retirees, Propst said.
Instead of paying an automatic 2% COLA, the state would shift to what is known as a Profit Sharing COLA, that would rely on investment earnings from an existing diversified fund, which currently has $15.7 million.
Future and current retirees would receive a COLA of up to 3% based on the profit share model and tied to investment performance, and a minimum COLA of 0.5% when investment performance is poor.
A COLA of 2.5% would be guaranteed under the recommendation for all retirees with pensions of less than $25,000 who have worked 25 years or received disability retirement, according to the recommendations.
The recommendations would also increase the amount by 2% that active state employees and the agencies they work for must contribute to their retirements.
New Mexico State Police and Adult Correctional officers would be exempt from proposed contribution increases as would active state employees with incomes of $25,000 or less, according to the recommendations.
Any changes must be approved by the New Mexico Legislature and signed into law by the governor, said state Rep. Phelps Anderson, R-Roswell, who also sits on the Investments and Pensions Oversight Committee.
Anderson said Thursday that the governor must decide which parts if any part of the recommendation she wants to advance by January 2020 when the Legislature convenes for its 30-day legislative session. That change must then be passed by both chambers of the Legislature and then signed into law by the governor.
Breaking news reporter Alex Ross can be reached at 575-622-7710, ext. 301, or at firstname.lastname@example.org.