Gov. Michelle Lujan Grisham on Tuesday endorsed a plan to overhaul the state’s pension system to safeguard against ballooning retirement debt.

Public employee retirement reform is one of Lujan Grisham’s top priorities in the January legislative session. Among the changes called for in the plan are proposals that would increase a cost-of-living adjustment from 2 percent to 2.5 percent for retirees over age 75 after July 1, 2020; cap pension inflation adjustments at 3 percent; and increase contributions on active workers and public employers.

The cost-of-living boosts would also be tied to “investment performance.”

A draft bill provided by the Governor’s Office calls for employers and active employees to pay a 0.5 percent annual increase in their retirement contributions each year for four years. That includes municipal and county workers, although the increases would be delayed for the first two fiscal years after the legislation takes effect, if the Legislature approves it.

“Reforming our pension system, making sure it remains one of the best in the United States, requires backbone and shared sacrifice,” Lujan Grisham said in a statement.

“We must be proactive,” she continued. “A kick-the-can-down-the-road approach when we have a multi-billion dollar unfunded liability hanging over employees’ and retirees’ heads is unacceptable. Left unattended, that shortfall will, sooner than later, obligate painful cuts and wreak havoc on future generations of retirees — if we do not come together and act now.”

The governor-backed plan would exempt people with pensions lower than $25,000 who worked in the public sector for at least 25 years from any retirement system changes, according to her office.

The plan also would delay contribution increases for municipal and county workers for two years, eliminate a seven-year wait period to qualify for an inflation adjusted pension and allow employees returning to work — such as retired police officers — to qualify for inflation adjustments, among other changes.

According to the Governor’s Office, the plan would reduce the state’s unfunded pension liability by $700 million and place New Mexico on a path toward eliminating that liability in 25 years.

Lujan Grisham called the draft proposal “a fair deal for our retirees” that takes care “of our most vulnerable” and offers a bipartisan solution for “shoring up our retirees’ benefits for the future.”

The Democratic governor in February created a pension reform task force to look into ways to reduce the state’s debt liability.

Lujan Grisham’s office said the task force’s previous recommendations had been endorsed by a variety of unions, including those that represent public-sector workers and first responders.

AFSCME Council 18 retiree director John Doran said Tuesday the union — which endorsed the plan — had serious concerns with the previous recommendations. He said he had not yet had a chance to compare the governor-backed plan to the task force proposal.

The task force had called for a combined 4 percent increase in pension contributions for employees and employers and linked cost-of-living increases to investment performance.

“It was a very short-term solution that would have long-term consequences, and we were very concerned about that,” Doran said. “We can’t count on Wall Street returns to bail us out anymore.”

State Sen. John Arthur Smith, chairman of the Senate Finance Committee, said he’s glad the governor has released a draft of the bill for discussion. He called unfunded pension liabilities “a statewide emergency” that needs to be dealt with immediately and questioned whether most people understand the severity of the problem.

He and other lawmakers will spend the next couple of weeks parsing the 91-page draft bill. Smith said he wants to study the plan and get feedback from different retiree groups in his district before making up his mind on whether to support it.

“I’m not certain we can do this in a 30-day session, but if we can that’d be even better,” he said.

Wayne Propst, executive director of the Public Employees Retirement Association, told state lawmakers during a panel discussion in November that if something isn’t done soon, the next economic downturn could leave New Mexico unable to pay public pension costs.

House Speaker Brian Egolf and Senate Majority Leader Peter Wirth in statements issued by the Governor’s Office both applauded Lujan Grisham’s endorsement of the plan.

“The governor, along with the Pension Solvency Task Force, have done what seemed almost impossible: create a plan with broad support that balances solvency with critical needs of families and seniors,” Egolf said. “With this new plan, we will keep our promises to employees for decades to come.”

Wirth called the overhaul “innovative and fair.”

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(3) comments

Jeff Varela

Doran said. “We can’t count on Wall Street returns to bail us out anymore.” This is why contribution and benefit adjustments (COLA) are necessary. PERA is not going to invest it's way out of the solvency problems. Get it?

Jeff Varela

About time that a studied and reasonable recommendation has been proposed. Current PERA Board could've/should've come up with this proposal over a year ago. Let's proceed to get this passed during the legislative session.

Chris Mechels

This piece is all about Michelle rewarding her base with Pork, making the funding shortfall even worse. She doesn't seem to get it.... Like her plan for Alternative Energy by 2045, and support for Fracking today, to keep the money rolling in. Like Reagan, she holds conflicting ideas simultaneously, with a happy smile. Will our little Thumbelina ever grow up? Seems doubtful from her actions to date.

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