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Governor to propose plan he says will ‘fix’ state pension liabilities

By   /   April 10, 2012  /   5 Comments

By PHIL DRAKE | Montana Watchdog

HELENA – Gov. Brian Schweitzer on Tuesday said he would propose legislation that would “fix” Montana’s unfunded pension liabilities, saying it could be achieved without tax increases and give the system a surplus by 2021.

During a news conference at the capitol, the governor said he was working on legislation to be introduced in the 2013 session that would address problems with the Teachers’ Retirement (TRS) and the Public Employees Retirement (PERS) systems. He said much of the problem facing the current systems, which will have an estimated combined shortfall of $3.4 billion over the next 30 years, was caused by the Legislature when it passed House Bill 294 in 2001. He said the bill doubled the guaranteed annual benefit adjustment for pensioners.

“We started digging a hole,” Schweitzer told a small crowd of reporters, staff and union representatives gathered in the governor’s reception room.

The governor said he had a constitutional and statutory obligation to make the pension system whole.

He proposed a “fix” for the TRS that involved $25 million from the state land guarantee account from natural resource development, a $14.7 million one-time only contribution from the employer and a 1 percent increased employee contribution and benefit change.

For the PERS, he proposed an $18.1 million state contribution and more local government contribution, a 1 percent increase employer and employee contribution.

Officials said the employee contributions would increase under the plan to 7.9 percent for the PERS and 8.15 percent for the TRS.

Schweitzer said he would use revenues to pay off liabilities and dip into record revenues from state lands raised through sales of natural resources such as coal, oil and timber sales.

House Speaker Mike Milburn, R-Cascade, had few details about the governor’s proposal.

He said he was open to suggestions as long as “he includes the Legislature in this and not end-run us like he has on other proposals.”

Eric Feaver, president of the state’s largest public employee union, the MEA-MFT, said at this point, he thought his 18,000-member union would support the plan.

Schweitzer’s term ends in January just as the 2013 legislative session kicks into gear. Already, some legislative committees and individual lawmakers are looking at reforms to the pension system and the legislative division has set up a website regarding pensions at: http://leg.mt.gov/css/fiscal/Pensions.asp.

The governor, however, said he has not discussed his proposal with state lawmakers, but planned to soon.  He also said he would likely discuss it with candidates.

Sen. Dave Lewis, R-Helena, said in his 40-some years of state government, HB 294 was the biggest mistake he ever made. But said at the time it was believed it would be successful and at there were balanced pension plans that had surpluses. However, that was not the case when the stock market faltered in 2003, 2008 and 2009.

In the 2011 legislative session, Lewis said he introduced a bill for a defined contribution plan that put all the risk on the employee. That bill did not pass.

“We have to get rid of the current pension plan,” Lewis told Montana Watchdog in a telephone interview. “We cannot have the taxpayers of Montana cover stock market losses for state employees.”

“We have to stop the bleeding,” he said. “We just get in deeper every year.”

David Senn, TRS executive director, said his department would work with actuaries to sees how close the governor’s numbers get “us to where we need to be.”

He said it looked to be in the “ballpark” of what needs to be done. The TRS has 18,000 active members and 13,000 retired members.

Roxanne Minnehan, PERS executive director, said she was happy the governor was looking at ways to solve the problems with unfunded actuarial liability and to stay with a defined plan for the public employees.

“I look forward to working with him and the legislature to come to a solution,” she said.

The PERS has 28,659 active members and 18,183 retired members.

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  • Linda Leligdowicz

    I think the governor’s plan to “fix” the state’s pension plans will work.

  • Ginny Baldwin

    I think the plan will work. Ginny Baldwin

  • http://tomglover.org Tom Glover

    Take a math problem and choose the appropriate operation and make adjustments accordingly. In this case, manage risk with actuarial

    tables then manage contributions and benefits.

    OR

    Take a defined benefits pension, turn it into a Madison Avenue ad campaign with impossibly beautiful people looking over their beach into the sunset while their stock broker feverishly calls actual elderly people, probably confused, using stock gibberish language and then sells them junk. The aptly-named defined contribution plan.

    OR

    Scream bloody murder. Vilify public servants for a year, make them look greedy and selfish, then throw your hands up and say it is just impossible to fix government without destroying it.

  • Gayle Graf

    Great idea, as always, Brian!

  • Daniel Burmeister

    Many parameters will affect the solvency of the fund. One that I see as an issue is the 7.5% return required

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