Sensible solutions for state pensions

Good op-ed below.  Debunks unnecessary (and frankly anti-public employee) bombast.
 
Our public employee retirement systems are not going bankrupt today or tomorrow or in the immediate future. We have plenty of time to address unfunded liabilities if our legislature would abandon pension-envy politics and hysterical, too predictably partisan, rhetoric. 
 
One small way the next legislature could help reduce unfunded liabilities over time would be to pass HB 632 (Taylor), a bill the Senate regrettably buried last session.  See editorial below for summary. 
 
Or click here to read the bill - http://data.opi.mt.gov/bills/2011/billpdf/HB0632.pdf
 
HB 632 was a good government, good business bill.
 
MEA-MFT supported HB 632 last session, and we will support it again . . . along with a package of even more aggressive proposals that will in fact responsibly address unfunded liabilities and maintain public employee pensions far, far beyond these insufferable Tea Party days.  We can do no less. - Eric Feaver
 


Sensible solutions for state pensions

Russell E. Wrigg - Your Turn column - Helena Independent Record

Thursday, January 19, 2012

 

Recently there have been articles about the financial state of the public employee retirement systems focusing on the fact that some of the systems are considered “actuarially unsound.”

The systems affected are the Public Employee Retirement System (PERS) which covers both state and local employees, the Teachers Retirement System, the Sheriff’s Retirement System, and the Game Wardens and Peace Officers Retirement Systems.

 

The term “actuarially unsound” does not mean that the systems are in any danger of not being able to pay benefits. What it means is that if every single person in a retirement system retired on the same day, the systems would not be able to pay those pensions within a 30-year time frame. Obviously, that is not going to happen.

 

The primary reason for the current status of the retirement systems is the downturn in the stock markets in 2008 and 2009 and loss of investment portfolio values. Returns on the investment values significantly improved in 2010 and 2011 and the last legislature enacted changes that will improve the situation. While significant improvement has been made, there is still a long way to go.

 

However, there is no need to panic or create a knee-jerk reaction to the current situation. Some would like to utilize the current situation to radically change the pensions promised by state and local government units or to eliminate the current systems. Such action violates both the Montana and U.S. Constitution. Retirement systems are based on the principal of long-term investments over the employment life of employees and their retirement years. Potential solutions should be addressed from a long-term perspective.

 

In the 1980s, there was a limited “unfunded liability” of PERS. Because of good investment returns, that unfunded liability was not only eliminated by 2000, a surplus of over $500 million existed. It is certainly conceivable that future investment returns will significantly reduce or eliminate the current unfunded liability of the systems. However, we should not stand idly by and assume that’s going to happen. We should gradually move towards solving the problem.

 

In the 2011 legislative session, Rep. Janna Taylor of Dayton sponsored a bill (HB 632) that the Association of Montana Retired Public Employees (AMRPE) had requested. It dedicated a portion of future coal-tax incomes to offset the impacted retirement systems. Currently, 50 percent of the coal severance tax goes into the permanent coal severance tax trust, and the other 50 percent is distributed among a number of programs.

 

House Bill 632 would have redirected future nontrust revenues that exceed 2013 revenue to the impacted retirement systems. Programs that currently rely on coal-tax money would be held harmless by receiving their 2013 level of funding plus an inflation factor in future years. It is conservatively estimated that the bill would have resulted in approximately $15 million being placed into the affected retirement funds each year following 2013.

 

As coal prices increase and production from new developments come on line, such as the Signal Peak mine in Roundup and the Otter Creek mine in southeastern Montana, coal tax revenues also are likely to increase. Once the retirement systems are actuarially sound, the dedicated tax revenues would then be redirected into the state general fund or other programs.

 

The bill passed the House, but failed in the Senate. AMRPE intends to request that House Bill 632 be again introduced in the 2013 session. While not a perfect solution, this proposal and the changes made by the 2011 Legislature would significantly reduce the“unfunded liability” of the retirement systems, making them healthy again, without radical changes to those pensions already promised public employees.

 

Russell E. Wrigg is President of the Association of Montana Retired Public Employees (AMRPE) in Helena.
 

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