The New Mexico Senate on Wednesday approved a $76 million investment in the state Public Employees Retirement Association in a move to get the pension system on a path to solvency.
Senate Bill 72, sponsored by Sen. George Muñoz, D-Gallup, also comes with costs for government employers and public workers — who will pay more into the retirement system — and retirees, many of whom will receive smaller cost-of-living increases in their payouts.
The state has no choice, Muñoz told fellow senators, because of the $16 billion PERA fund’s unfunded liabilities of about $6.6 billion.
“We are avoiding the cliff if we do this,” he said. “At the end of the day, this fund has to be solvent.”
The Senate voted 25-15 in favor of the plan. It now heads to the House for consideration.
PERA represents about 90,000 New Mexicans, including 40,000 retirees. According to Gov. Michelle Lujan Grisham’s office, it began running into financial trouble in the late 1990s when payouts from the fund began outpacing contributions.
Lujan Grisham created a task force last year to study potential changes, and many of that group’s recommendations were included in SB 72.
If enacted into law, the measure will temporarily halt many younger retirees’ cost-of-living adjustments. Then it will move to a profit-sharing deal with raises ranging between 0.5 percent and 3 percent, depending on investment performance.
Average increases are now around 2 percent.
Sen. John Sapien, D-Corrales, was one of several Democrats to vote against the bill. He voiced the most opposition to the proposal, saying it will unfairly deprive retirees, a group that includes former firefighters and law enforcement officers.
With more time, he argued, officials could develop a better solution that would not have such a negative effect on those in the system. Lawmakers likely will have to deal with the problem again in a few years if SB 72 doesn’t work, he added.
But Muñoz said legislators have to “act now” to save the ailing fund.
“If we don’t make changes to PERA, we will remain funded 69 to 70 percent, no matter what happens to our economy,” he said. “We could lose these funds completely.”
Sen. Mimi Stewart, D-Albuquerque, praised the bill. She said “it protects the elderly and it protects the disabled and it protects lower-paid workers.”
That’s because SB 72 would increase the cost-of-living adjustment for retirees over the age of 75 from 2 percent to 2.5 percent starting in July. It also exempts retirees on disability and those with pensions lower than $25,000 after 25 years of service from any of the bill’s changes.
The governor lauded the Senate vote in a news release.
“We have made promises to New Mexico’s current and future retirees, and these changes will ensure those promises are kept,” Lujan Grisham said. “A stable and solvent PERA matters to all New Mexico taxpayers. We must make changes now – the alternative is to saddle New Mexicans with unacceptable risk.”