Montana pension fixes head to full Senate vote

2013-04-16T12:39:00Z 2013-05-07T19:47:09Z Montana pension fixes head to full Senate voteBy CHARLES S. JOHNSON Gazette State Bureau The Billings Gazette

HELENA — A Senate committee on Tuesday approved two bills aimed at fixing Montana’s financially troubled pension funds after amending them further.

The amended bills now go to the Senate floor for debate.

The Senate Finance and Claims Committee amended and endorsed House Bill 377, by Rep. Tom Woods, D-Bozeman, to deal with the Teachers’ Retirement System, and HB454, by Rep. Bill McChesney, D-Miles City, to address the Public Employees’ Retirement System.

The bills, backed by Gov. Steve Bullock, are intended to address the financial problems facing the funds, which have a combined unfunded liability, or potential shortfall, of $4.3 billion. State pension fund investments lost about one-fourth of their value during the national recession in 2008 and 2009.

Both bills retain the “defined benefit” pension system for public employees. It guarantees public employees fixed lifetime pensions after they retire based on a formula that uses the number of years they worked and their highest annual salaries.

Some Republicans failed in attempts to end the “defined benefit” systems and replace them with “defined contribution” plans, which are like 401(k) retirement savings accounts common in the private sector.

The two surviving bills would raise the contributions paid by public employers and their employees at least until the pension funds are on sounder footing financially and pump in state natural resources income.

The bills also would temporarily reduce the guaranteed annual benefit adjustment (or GABA), a cost of living adjustment provided to retirees.

Some retired public workers have questioned the legality of cutting retirement benefits they already have earned.

An amendment to the teachers’ retirement and public employee retirement systems that passed Tuesday would further temporarily increase the additional contribution by employers from the 1 percent as approved earlier to 2 percent. The additional 1 percent would be done in increments of 0.1 percent over 10 years until 2024.

“I am confident we are really achieving a milestone,” said Senate Minority Leader Jon Sesso, D-Butte.

He said the amendment would give the Legislature assurance that this is a step in the right direction and “make sure everyone stays the course.”

Sen. Llew Jones, R-Conrad, asked Sesso if these changes were agreed to by schools and counties.

Sesso said they were based on negotiations by Bullock’s office, the Montana League of Cities and Towns, Montana Association of counties and the various retirement systems.

The Democratic Senate leader amended the public employees’ system bill to set the GABA at 1.5 percent annually for retired employees. However, if actuarial soundness isn’t projected in 25 years or less, the GABA would be reduced by 0.1 percentage point per year that year.

For example, Sesso said, if in 2016 the fund wasn’t deemed actuarially sound for 27 years, the GABA paid to retirees would be reduced to 1.3 percent.

Sen. Dave Lewis, R-Helena, failed in an effort to amend what’s known as a “severability clause” out of the bills. If part of a law is found to be unconstitutional, the severability clause provides that only that part of the law is struck down, while the rest of the law remains intact.

Had Lewis prevailed, if the laws were challenged and parts were found unconstitutional, then each entire law would be thrown out.

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