A plan that would increase contributions from public workers and the state to the Public Employees Retirement Association to get the pension system on a path to solvency is nearly on its way to Gov. Michelle Lujan Grisham’s desk.
The House approved the legislation in a 40-28 vote Monday after hours of debate.
Senate Bill 72 calls for a rise in contributions and a temporary suspension of cost-of-living increases for some retirees in an effort to ensure PERA can continue pension payouts well into the future, supporters say. It also calls for reduced cost-of-living increases in the years after the suspension ends.
The House made a technical change to an amendment to SB 72, so the measure will need to return to the Senate for approval before going to the governor’s desk, said Daniel Marzec, a spokesman for the House Democrats.
The governor praised the House vote in a statement Monday.
“With their vote today and with the tremendous bipartisan support this proposal has earned throughout the session, lawmakers have sent a clear message to public employees and public retirees: We will honor the promises that have been made, we will ensure the solvency of our retirement fund and New Mexico’s pension system will remain the best in the country,” Lujan Grisham said.
“There should be no illusion: These changes require sacrifice,” she continued. “The legislation ensures the sacrifice is shared and that vulnerable groups are protected, as is retirees’ sacred defined benefit.”
Senate Bill 72 increases cost-of-living adjustments to 2.5 percent for retirees over the age of 75, those with disabilities and retirees with pensions less than $25,000 after 25 years of service. For other retirees, it eventually would tie future increases to investments in the stock market ranging from 0.5 percent to 3 percent depending on investment performance.
PERA represents about 90,000 New Mexicans, including about 40,000 retirees. The $16 billion retirement fund has unfunded liabilities of about $6.6 billion. Payouts began outpacing contributions to the retirement fund in the late 1990s, according to Lujan Grisham’s office, which is backing the pension system overhaul.
Supporters of the legislation argue that unless the state acts now, it might not be able to pay public pensions in the future if the economy takes a downturn. That could matter most to younger workers who are paying into the system now and expect to retire in the next two decades, said Rep. Phelps Anderson, R-Roswell, a co-sponsor of the legislation.
“Arguably those young New Mexicans … care the most,” Anderson told fellow lawmakers on the House floor Monday. “They care the most because they have a career or work and paying in, expecting that we will live up to our promise. They’ve got a 25-year career, and when they get to the end, they would rather have 100 percent funding of our pension rather than zero.”
Although many Democrats supported the proposal, others opposed it.
“In times of crisis or economic downturns, I’ve seen this legislative body place the burden of these crises on the backs of the poor, working families, our school kids and the elderly,” Rep. Miguel Garcia, D-Albuquerque, said during the floor debate. “These efforts of solvency within PERA are placing the burden on the backs of retirees.”
Rep. Moe Maestas, D-Albuquerque, argued there’s no reason why the state is obligated to have a public pension system that’s 100 percent funded, and he questioned the assumption that a market downturn is impending and would put PERA in a position in which it is unable to issue payouts.
“What I fundamentally disagree with, and it permeates this building as a result of the banking crisis in ’08 … is this notion that these dramatic economic changes are gonna come some day and we have to prepare for them,” Maestas said. “I have not seen a single document provided to me that even contemplates certain hypotheticals in regards to that.
“The government is not going belly up. We’re not gonna owe $6 billion tomorrow,” he continued.