This year’s legislative session was important to some people with pensions, as a big-ticket bill to shore up New Mexico’s retirement system for state employees was passed.
But there was another group of retirees that by comparison received little attention: former teachers and school employees.
That could change as soon as next year.
Gov. Michelle Lujan Grisham, the Educational Retirement Board and the sponsor of this year’s state employee pension bill all say they expect a push in the 2021 session to reform the pension system that serves state educators.
“It’s something the governor expects to get done,” her spokesman Tripp Stelnicki said.
Senate Bill 72, the high-profile 2020 legislation sponsored by Sen. George Muñoz, D-Gallup, calls for increasing contributions from public workers and the state to put the Public Employees Retirement Association’s system on a path to solvency.
Lawmakers authorized a hefty appropriation of $55 million to help pay for the reform — albeit reduced in the final hours of the session from the original request of $76 million. Lujan Grisham is expected to soon sign the bill.
Yet there was no comparable effort to help shore up the Educational Retirement Board’s system, which actually has a lower funding level than PERA’s — 63 percent versus 69 percent.
Supporters of overhauling the educators’ system say action is long overdue, pointing out retired teachers’ benefits have long been worse than those of state employees and little has been done to address the disparity.
“Teachers aren’t respected,” said Sen. Mimi Stewart, D-Albuquerque, a retired educator. “They’re not thought of as professionals and it’s reflected in their retirement benefits.”
Jan Goodwin, executive director of the ERB, said a plan to speed up her system’s path to solvency is likely.
“The governor has said fixing ERB is a priority,” Goodwin said. “We’ll be working with her and her staff.”
Goodwin said a reform should involve increasing the state’s contributions to the pension system, which are already significantly lower than the amount it gives to PERA. That discrepancy will widen even further once this year’s PERA legislation, which increases state contributions, goes into effect.
A 2019 bill did increase the ERB’s employer contribution rate by 0.25 percent, but Goodwin said that wasn’t enough.
“What happened with the bill last year is we didn’t get the employer contribution increase we were seeking,” Goodwin said. “If we had the same contributions as PERA, we’d be 100 percent funded right now.”
The governor agrees and “is clear the changes to ERB in 2019 didn’t go far enough,” Stelnicki said.
Such an effort to shore up the ERB system could be particularly important to carry out before a potential economic downturn occurs. Such fears of market turmoil were stoked last week, as the S&P 500 and Nasdaq plummeted drastically from their highs in February amid anxiety over the coronavirus.
“If we see 30 percent losses in the market over the next six months, then those funds become really hard to keep maintained,” said Muñoz.
A potential recession was one of proponents’ main selling points for the PERA reform, with Executive Director Wayne Propst warning the system had no cushion if markets fell dramatically and sapped investment returns.
While such an effort to shore up the Educational Retirement Board would aim to ensure the long-term security of educators’ pensions, it wouldn’t necessarily address the fact that those benefits are subpar when compared to what other public employees receive.
For example, educators receive an average benefit of $23,472 per year — less than the average of $28,642 that other public employees get under PERA, according to a 2018 report by the Legislative Finance Committee. That’s because the state’s so-called pension multiplier used to calculate retirement payments is higher for PERA members.
Stretching those figures out over time makes the discrepancies even more apparent. If a state employee and an educator started working in 1980 with the same $45,000 salary and worked for 25 years, the former would receive $930,000 more in benefits over 30 years of retirement than the educator, according to figures provided by Goodwin.
“I don’t see why there should be a disparity,” she said.
The imbalance exists in what active employees pay for health insurance, too. Public school workers can pay more than twice as much for health insurance than other state employees.
For instance, school employees with a salary of $41,000 who get single coverage medical plans through the New Mexico Public Schools Insurance Authority pay an average of $3,468 per year in member costs, while state employees with the same salary pay $1,500 per year under the General Services Department’s Blue Cross plan, according to an August 2019 LFC report.
Stewart sponsored legislation this year, Senate Bill 254, that would have increased employer contributions to health insurance costs for low-income school employees. But the bill was never taken up by the Senate Finance Committee.
“That was one issue we tried to make some progress on and did not,” said Charles Goodmacher of the National Education Association New Mexico. “There’s a major discrepancy on that side of things.”
The General Services Department’s insurance program did get help from the state this session. The main budget legislation, House Bill 2, allocated just over $10 million “for prior year shortfalls” in the “employee group health benefits program.”
The Governor’s Office did not say whether it would pursue initiatives that could increase benefits for retired educators, saying that “retirement security is the paramount concern.” It also pointed out that health care costs were a “separate issue” from the ERB pension system, and said it would attempt to address each issue.
Asked why discrepancies exist between educators’ and state employees’ benefits, Stewart said she believed it could be a case of prejudice against women, since more teachers are female.
“There’s more men who work for state government and more women who work for educational system,” she said. “There’s an old mythology that women don’t need as much money. They’ve got husbands. I don’t understand it, but it sure is frustrating for those of us who have been trying to change this for many years.”
Muñoz said he doesn’t believe that’s the case. He pointed out that it’s appropriate for PERA members to get better benefits because educators work fewer hours and receive more vacation than state workers — their workdays typically end earlier and they usually get long summer vacations.
“My wife was a teacher and now is a principal,” he said. “We have this argument all the time in our house.”
But Muñoz does believe New Mexico needs to accelerate ERB’s path to become 100 percent funded. That wasn’t possible this session, he said, because it was only 30 days long and it would be difficult to overhaul two separate pension systems at once.
So, is 2021 the year for ERB?
“I think it has to be,” Muñoz said. “ERB needs to be fixed. You’ve got to make it structurally sound.”