Public employee pensions protected
The 2013 Montana legislative session was do-or-die time for saving Montana’s public employee pension systems and making them actuarially sound.
Working with Governor Steve Bullock and other allies, we did it. There are kinks to be worked out, but the Public Employees Retirement System (PERS) and Teachers Retirement System (TRS) are now off the endangered species list.
Background: Due mostly to the market crash of 2008-09, Montana’s public employee pension systems needed a financial shot in the arm to get them back on sound actuarial footing.
Because past legislatures had kicked the pension can down the road, it was all the more crucial to pass a fix this session.
MEA-MFT helped build a new coalition called Montana’s Promise that included the Council of Professional Firefighters, AFSCME, AFL-CIO, SEIU, and MEA-MFT. Together, we worked closely with Governor Bullock’s office to develop bills to amortize and protect public employee pensions.
We faced an opposing team of majority party legislators who wanted to gut Montana’s existing pension systems. Foremost among them was Senator Dave Lewis (R-Helena). “Senator Lewis had a personal mission to unravel the pension systems that have worked well for decades,” said Diane Fladmo, MEA-MFT’s research director and lead lobbyist on pension bills.
Lewis and others were hell-bent on dumping Montana’s existing defined benefit (DB) pension plans and switching to defined contribution (DC) plans.
Defined Benefit plans guarantee public employees and educators a fixed monthly amount after they retire. DC plans, on the other hand, are like 401 (k) plans: They are driven by the market, making them highly volatile.
Switching to DC plans would cost Montana taxpayers millions more and leave retirees without the security provided by the existing DB plans. (It’s no small irony that Sen. Lewis himself is a retired Montana state employee who enjoys his own DB pension.)
Bottom line: Pensions saved. Though the deck was stacked mightily against us given the make-up of the legislature, MEA-MFT and our allies got the governor’s pension bills to the goal line:
HB 377 (Woods, D-Bozeman) addresses the actuarial soundness of TRS.
HB 454 (McChesney, D-Miles City) addresses the actuarial soundness of PERS.
Both bills retain the existing defined benefit (DB) pension systems for PERS and TRS.
The two bills ask both employees and their employers (local and state government) to pay a little more into the pensions — 2% for employers and 1% for employees — at least until the pension funds are on sounder financial footing.
The legislature’s Special Joint Committee on Pensions (chaired by Sen. Lewis) saddled both bills with amendments that reduce guaranteed annual benefit adjustments (GABA) for future and current retirees. All efforts to remove those amendments failed on party-line votes.
“Some folks thought we should oppose the bills because of the GABA amendments, but these bills absolutely had to pass,” Feaver said. “Without HB 377 and HB 454, there would be no vehicle to protect pensions for current and future retirees enrolled in PERS and TRS. We made it clear we would challenge the amendments in court.”
MEA-MFT is working right now on legal action to restore GABA for all enrollees in PERS and TRS. Our case: The GABA in place prior to the 2013 Legislature was a contractual right, and MEA-MFT will defend that right. The legal action will be filed in October 2013.
Meantime, we have reason to celebrate. “With PERS and TRS protected, people who work in state and county government and public schools will have a source of income when they retire until the day they die. So will their beneficiaries,” Feaver said. “It’s not the risky venture into the marketplace world that a defined contribution (DC) plan presents. For that, we declare victory.”
A lot of help from our friends: Many people helped with this amazing pension victory: Our thanks to Governor Steve Bullock and his staff, who stayed the course for public and school employees; our Montana’s Promise partners; staff from PERS and TRS, who spent countless hours explaining an extremely complex topic to legislators and others; the two bill sponsors, Rep. Tom Woods (D-Bozeman) and Rep. Bill McChesney (D-Miles City), who both did a heroic job of presenting the bills on the floor and in committees; and the Republican legislators who broke ranks with their leadership to vote with us.
Bad pension bills killed: MEA-MFT and our allies stopped several bills intended to cripple PERS and TRS by turning them into DC systems.
We killed HB 338 (Regier, R-Kalispell), a bill to end all public employee pensions and force all new public employees (state, county, city, and school) into one huge, volatile, DC plan. HB 338 would have suspended GABA for all current and future retirees. For this, every current and future public employee would have paid more.
We also stopped SB 406 (Dee Brown, R-Hungry Horse), a legislative referendum to turn TRS and PERS into defined contribution plans.
We did this together! These victories came about because of MEA-MFT members and leaders working together, contacting legislators, staying informed and involved.