Think tank urges reforms to aid New Mexico seniors

A new report by Think New Mexico — Solving the Hidden Crisis: Achieving Retirement Security for All New Mexicans — recommends reforms for policies affecting the state’s growing numbers of recent retirees and elderly residents. Courtesy image

Getting old stinks — to use a bowdlerized version of a popular expression among contemporary senior citizens.

In New Mexico, that’s truer than in most states.

New Mexico ranks third in the nation for its rate of senior citizens living in poverty, faring better than Washington, D.C., and Mississippi, with 12.2 percent of people over 65 trying to get by on an income that falls below the federal poverty line of $12,490 a year for a household of one — just under the average Social Security benefit in the state of $13,900. Meanwhile, the average cost of food, housing and health care comes to about $28,000 a year.

Two-thirds of private sector employees in New Mexico don’t have access to retirement savings programs through their jobs. And to further exacerbate seniors’ economic struggles, New Mexico is one of 13 states that tax Social Security benefits — and New Mexico’s tax is the highest among them.

To try to ease this situation, a Santa Fe-based policy-reform think tank called Think New Mexico is proposing a number of legislative actions it says the state should take to help retirees.

Following a year in which the Legislature and new administration of Gov. Michelle Lujan Grisham focused heavily on the state’s youngest populations — creating a new Early Childhood Education and Care Department, infusing new funding into the K-12 public education system and overhauling numerous education policies — Think New Mexico believes it’s now time to improve policies affecting the state’s growing numbers of recent retirees and elderly residents.

“As the state with the third-highest percentage of seniors living in poverty, it is simply wrong that New Mexico is one of the 13 states that taxes Social Security benefits,” Think New Mexico Executive Director Fred Nathan said in an interview. “In order to achieve retirement security for all New Mexicans, we need to increase access to retirement accounts for private-sector workers and stabilize pensions for public-sectors workers.”

The new report by Think New Mexico, Solving the Hidden Crisis: Achieving Retirement Security for All New Mexicans, “provides a pathway to addressing both challenges,” he said.

The report’s recommendations — which Nathan wants to be considered in the 2020 legislative session — include repealing the state’s personal income tax on Social Security benefits.

Also, Think New Mexico is advocating for the state to manage a system of individual retirement accounts offered to private-sector workers whose employers don’t offer retirement savings plans. This would automatically deduct a percentage from workers’ paychecks to deposit in their accounts. Employees would be able to opt out if they didn’t want to participate.

Under this proposal, private businesses also would not be forced to participate. But those that did would no longer have to pay their annual $25 state business filing fee.

Then there are recommendations intended to help firm up the state’s public pension funds.

These include taking $700 million out of the current budget surplus and infusing it into the Public Employees Retirement Association and the Educational Retirement Board. This could either be an interest-free loan or an allocation, the report says.

The study also recommends consolidating investment management of those two pensions, saying this would achieve higher returns and lower fees.

Finally, Think New Mexico advocates for increasing the qualifications of those who sit on the oversight boards of the two pension funds.

A spokeswoman for Gov. Michelle Lujan Grisham declined to comment on the report late Friday, saying her office had just received it and she didn’t think the governor had seen it yet.

Legislative leaders interviewed Friday said would they need to learn more details about Think New Mexico’s recommendations in the just-released report but thought the proposals were worthy of consideration and liked the idea of making life easier for retirees.

“It’s important to have a vibrant retiree community in the state,” said Rep. Jim Townsend of Artesia, the Republican leader in the House of Representatives. Echoing part of the report, Townsend said making the state more attractive for retirees would be an economic boon for New Mexico.

“We’ve got to do something. We’ve been stagnant too long,” he said.

House Speaker Brian Egolf, D-Santa Fe, said he liked the idea of eliminating the tax on Social Security benefits. Democratic legislators have been working on a plan that would eliminate the tax on military retirement benefits, he said.

“Eliminating the tax on Social Security might be great policy, too,” Egolf said,

But before he could endorse any of the proposals, he added, he’d have to have a clear sense of the financial impact on the state.

The Think New Mexico report, quoting estimates from the Legislative Finance Committee, says the state would lose $73 million a year if the tax were removed for all retirees. However, it says, if New Mexico followed the lead of states like North Dakota and West Virginia, and targeted low- to middle-income retirees (such as married couples with an adjusted gross incomes of less than $100,000 and single retirees earning less than $50,000), the hit to state revenues would be only about $21 million to $29 million.

Speaking of that proposal, Townsend said, “I haven’t seen the details, but we have a lot of work to do with the [state’s] tax structure.”

Egolf said he liked the idea of the state managing individual retirement accounts for some private-sector workers but said, “I definitely want to see all the details.”

Citing the state investments scandals that rocked the final years of Gov. Bill Richardson’s administration — and sunk Richardson’s appointment to President Barack Obama’s Cabinet — the speaker said, “We don’t want political influence affecting those investments. We’ve had some issues with that in the past.”

One of Think New Mexico’s proposals Egolf didn’t take an immediate shine to was the idea of spending $700 million of the budget surplus to inject into the state’s two major investment funds. He said he doesn’t see the Legislature embracing that idea at this point.

He expects, instead, lawmakers will prefer to spend “right-now” money on needed infrastructure projects throughout the state, such as roads and bridges.

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