Gov. Michelle Lujan Grisham has signed a bipartisan bill into law that aims to put New Mexico’s state pension system on a path to solvency.
Senate Bill 72, one of the high-profile bills of the 2020 session, calls for increasing contributions from public workers and the state in a bid to eventually eliminate the Public Employees Retirement Association’s $6.6 billion unfunded liability.
“By paying out more than it was taking in, PERA was on a path to eventual bankruptcy,” Lujan Grisham said in a statement on Monday. “Now we’ve reversed course, and I’m confident New Mexico can keep its promises to current and future retirees.”
Lujan Grisham made the bill one of her priorities for the session after issuing an executive order last year to create a working group that drafted a pension reform proposal. Many of that task force’s recommendations were incorporated into the eventual bill, sponsored by Sen. George Muñoz, D-Gallup, and Rep. Phelps Anderson, R-Roswell.
The Legislature allocated $55 million towards the solvency effort, an amount the Senate reduced from the governor’s original request of $76 million.
The measure does not address the unfunded liability of the Educational Retirement Board’s pension system, which serves teachers and other school employees. Lujan Grisham and the ERB said last week they expect a push in the 2021 session to reform that system.
Within the fine print of the PERA bill is a measure to reduce the annual cost-of-living adjustments retirees receive for three years by pausing the compounding factor currently applied to those payments.
Those payouts will then move to a profit-sharing model instead of the 2 percent annual raises retirees currently receive in their pensions. Under the new profit-sharing model, the adjustment will range between 0.5 percent and 3 percent.
Some retirees opposed the measure, contending the changes to the cost-of-living adjustments could make it harder for them to pay for increasingly expensive goods and services.
The bill’s journey through the legislative process yielded some fireworks as well. Senate Finance Committee chair John Arthur Smith, D-Deming, slammed his gavel multiple times and eventually stopped PERA board member Loretta Naranjo Lopez from speaking during a hearing after she accused the pension system’s staff of “embezzlement” and the governor of “undue and unethical influence” on the board.
But the bill had a lot of support among organizations in the state, including the New Mexico Municipal League, the New Mexico Association of Counties, AFSCME Council 18 and the New Mexico Professional Firefighters Association.
Responding to concerns from retirees, the Governor’s Office and PERA executive director Wayne Propst said during the session that older retirees need not worry about the reform because it increases the cost-of-living adjustment by 0.5 percent for those over 75 years of age, which is 30 percent of the current 41,000 recipients.
They also noted the pension system’s average benefit is $31,000, which would give PERA retirees more than the average active state employee when added to Social Security payouts of about $18,000 per year.
Propst said in multiple hearings that if legislators didn’t approve a major overhaul, the next economic recession could have a dire impact on New Mexico’s ability to pay for public employees’ retirement plans. The system is currently only 69 percent funded and was projected to stay at virtually the same level if nothing was done.
“It’s never easy making changes,” Muñoz said in a statement Monday. “A downturn is inevitable and we’ve taken the right steps to guard against it.”
The Senate voted 25-15 in favor of the plan, and the House approved it in a 40-28 vote.
Lujan Grisham on Monday also signed Senate Bill 111, which provides incentives for public retirees to return work as school employees.
The legislation, sponsored by Sen. Mimi Stewart, targets substitute teachers, professors, bus drivers, secretaries and others, allowing them to go back to work without paying non-refundable contributions into the Educational Retirement Board pension system.