Governor’s pension fix draws praise, criticism

2013-02-21T20:15:00Z 2013-02-22T14:05:07Z Governor’s pension fix draws praise, criticismBy CHARLES S. JOHNSON Gazette State Bureau The Billings Gazette
February 21, 2013 8:15 pm  • 

HELENA — Gov. Steve Bullock’s bill to repair the financially troubled Montana Public Employee Retirement System drew widespread support Thursday, except from groups upset with budget cuts to programs to help pay for the fix.

The Joint Select Committee on Pensions heard, but didn’t vote on, House Bill 454, by Rep. Bill McChesney, D-Miles City.

“It’s a reasonable, well thought out, responsible fix,” McChesney told the committee

He said it would amortize the unfunded actuarial liability of the PERS fund in 36.7 years. The fund does not currently amortize and has a potential shortfall estimated at $1.8 billion.

Billed as a “shared sacrifice,” here is how the bill would work:

— State and local government employers would pay an additional 1 percent of their employees’ salaries into the pension fund, amounting to about $12 million more annually.

— Public employees would pay an additional 1 percent of their salaries into the fund, generating $10.5 million more annually.

— Additional state funding would come from the spendable portion of the coal severance tax, which would be about $17 million a year and increasing annually.

— Other state funding of up to $21 million a year from the interest income from the coal severance tax permanent trust fund would go into the fund until fiscal 2019 and then increase to $24 million a year.

— The bill provides a trigger that would allow the additional 1 percent from employers and 1 percent from employees to end once the system is fully funded. The added contributions stop when the amortization period would no longer be more than 25 years. The actuary estimates this would occur in 2033.

— It maintains the Growth Through Agriculture and Research and Commercialization statutory appropriations at the 2013 biennium levels, although this amounts to a $3 million reduction annually compared to current law.

— It sunsets the transfer of the coal severance tax bond fund revenues to the Treasure State Endowment Fund and the Treasure State Endowment Regional Water System Fund four years earlier than under current law.

In endorsing the bill, Bullock’s budget director, Dan Villa, said it represents 18 months of negotiations between employers and employees.

“It solves our problems without increasing taxes,” Villa said.

Roxanne Minnehan, executive director of the Montana Employee Retirement Administration, endorsed the bill on behalf of the Public Employees’ Retirement Board.

“This is the only proposal significantly addressing the funding in the Public Employees’ Retirement System,” she said.

Minnehan said the bill offers the “least impairing impact” to current pension fund members, while preserving the defined benefit pension plan. That guarantees retired public employees a fixed monthly pension based on the number of years they have worked for state or local governments and the average of their top three highest years’ salaries for all but the newest employees.

Also endorsing the bill were representatives of the Montana Association of Counties, Montana League of Cities and Towns, MEA-MFT, Montana County Attorneys Association, American Federation of State County and Municipal Employees, Montana Sheriffs and Police Officers Association, Montana Association of Clerks of District Court, Montana Magistrates’ Association and the Association of Retired Public Employees.

The only opponents were groups objecting to the annual reduction in the Growth Through Agriculture and Research and Commercialization program compared to current law.

Rick Edwards, representing the Montana Economic Developers Association, said he supported the goal behind the bill, but said it shouldn’t come at the expense of the budget of the state’s research and commercialization program.

“Research and development brings money to the state,” he said. “It creates job. It increases tax rolls.

We don’t want to use a tool that’s strengthening Montana’s economy and causing us additional problems from that perspective.”

Others raising similar concerns were representatives of the Montana Bio-Science Alliance, Resodyn Corp., Montana Farm Bureau Federation, Montana Stockgrowers Association and Montana Farmers Union.

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