Retirees ask for veto on pension fixes

capitolA group representing retired public employees has written a letter urging Governor Steve Bullock to veto the bill fixing the very pension systems they rely on.

The letter from Association of Montana Retired Public Employees President Russell Wrigg  faults the bill (HB454) for reducing the annual cost of living increases guaranteed to retirees.

“The Association feels betrayed by your office and is adamantly opposed to House Bill 454 at this time,”  Wrigg writes to the governor, “House Bill 454 could have been modified in a way that would be much more palatable to the Association and its members, and all retirees, without inflicting the harm that it has.”

Montana’s two biggest retirement systems are facing more than a $4 billion shortfall over the next 30 years if the bills passed by the legislature to shore up those plans are not signed by the governor. The measures balance the budgets of the pensions by requiring both employers and employees pitch in more money, some natural resource or general fund money is kicked in, and benefits are reduced slightly. It’s that last part that has angered retirees.

The AMRPE initially supported the fix to the Public Employee Retirement System, before it was amended to reduce the cost of living increases. Wrigg says the AMRPE was not consulted on those amendments.

“It is our understanding that your office was actively involved in those amendments that further trampled on the rights of retirees,” Wrigg writes in his letter.

Gov. Bulllock’s Budget Director Dan Villa says the administration understands the concerns of the retirees on the reductions and admits they will likely be found unconstitutional.

“We believe that ultimately when current and retired employees bring challenge to them that they will be successful,” Villa said, adding the bill fixes the retirement system with or without the reduction in yearly raises which he said just make the fix more aggressive.

“When and if they are found unconstitutional by the state courts, we will still have a solvent public pension system that does not increase taxes and we’ll be the first state in the country to do so,” Villa said.

Wrigg said he wants the pension fix bills to pass without the raise reductions–he would prefer that to them dying through a veto. He says the group will consider legal actions against the bills if the governor signs them, which is expected. But, he doesn’t approve of the tactic.

“Legislation through litigation is really not the way to solve our problems in this state,” he said.

Senate passes first state employee base pay raises in four years

The Montana Senate has passed a $116 million dollar two-year pay plan for state employees on a 37-13 vote.

It has already passed the House, but is heading back to that chamber for consideration of a Senate amendment.

Lawmakers have not given state employees base pay raises for more than four years. Senator Alan Olson (R-Roundup) said it’s time to give the raises to ensure the state retains a quality workforce.

“We want to permit coal mines, we want to permit oil wells, we want to build highways, and we need to have the qualified people there to do it,” Olson said. 

The bill removes a quarter of the funding from the $152 million pay plan originally negotiated by unions and former Governor Brian Schweitzer. That deal would have given all state employees a five percent raise each of the next two years. 

Several lawmakers complained the legislature is not included in those negotiations. Senator Rick Ripley (R-Wolf Creek) believes it’s a flawed system, saying “the whole problem is that there’s a negotiation that takes place and this body is not at the table and yet, (the legislature) comes back and is responsible for funding it.”

The new plan would give the smaller amount back to Governor Steve Bullock for re-negotiation, requesting special emphasis on the employees who have not received other types of raises over the past few years. The amendment added by the Senate also changes how future pay increases will be determined. Currently, the state compares the pay of similar government jobs in surrounding states as well as comparable jobs in the private sector in order to set wages. The amendment removes the consideration of the private sector.

“It is ironic that the legislature that wrote the law enabling the executive to give raises is now complaining about that very same law as a way to suppress what our employees are paid,” said the Governor’s budget director, Dan Villa. He says Governor Bullock is disappointed with the lower dollar amount in the pay plan and will be trying to convince the House to add more money back in as the body debates the Senate amendment.

State employees in 2009 volunteered to freeze their base pay as the Great Recession took hold. The 2011 Legislature rejected a smaller pay plan than that being considered now. Thus, base pay for employees have not gone up for more than four years. However, Republicans in favor of the smaller pay plan point out more than 60 percent of state employees have received other types of raises over the last few years.

Chuck, Sally and Mike talk oil and gas, budget, milk – and dressing up

Johnson, Mauk & Dennison 3SMALL

Tonight on “Capitol Talk”, our weekly legislative analysis program, News Director Sally Mauk talks with Lee newspaper reporters Chuck Johnson and Mike Dennison about tax holidays for the oil and gas industry, budget hearings, the dangers of raw milk – and the fun of dressing up…

What you need to know about the Business Equipment Tax debate

bull dozer

There are a number of bills before the Montana Legislature looking to lower the Business Equipment Tax in some way.

And the key words to remember are threshold and exemption.

Community News Service Reporter Amy Sisk and I talk through it:

Wednesday the House Taxation Committee heard Governor Steve Bullock’s proposal. It would increase the tax’s threshold from $20 thousand to $100 thousand. That means a company would not have to pay tax on the equipment they buy until they cross over that $100 thousand mark. (The definition of what constitutes business equipment is quite broad, pretty much everything except livestock and real estate.)

“We believe this bill is a keystone to creating jobs across the state of Montana,” Governor Bullock’s Budget Director Dan Villa told the committee. He says the measure would eliminate the tax for about 11-thousand small businesses.

Big Dipper Ice Cream in Helena is one of the businesses that pays Business Equipment Tax now but would not have to with the higher proposed threshold. Owner Anna Doran says she would put that extra money toward “expanding my wholesale business and paying my Seniors (more) who are starting college next fall.”

Several business groups like the Montana Chamber of Commerce also spoke in favor of the Governor’s Proposal, calling it a “step in the right direction.” Yet, they also said they would support Business Equipment Tax bills put forth by Republicans which create a tax exemption.

So, what’s the difference?

If a taxpayer crosses a threshold, they would need to pay tax on their full amount of business equipment.  as skeptical Representative Brian Hoven (R-Great Falls) put it, “If we have $99,900 in business equipment…we will pay no tax, but if we have $100,001 we will pay tax on $100,001.”

With an exemptionsay of $100-thousand again, the company would only pay tax on the business equipment purchased after crossing the $100-thousand mark. In the scenario put forth by Rep. Hoven, the business owner would pay tax on that $1 of the $100,001.  Representative Jerry Bennett (R-Libby) has a bill in the works to create an exemption on equipment purchased up to $250-thousand. Republicans argue this method would help more businesses.

Representative Mary McNally (D-Billings) is sponsoring the bill containing the Governor’s proposal. She says raising the threshold more fiscally responsible. Lawmakers  have lowered the amount of the Business Equipment Tax the past few Legislative Sessions. It will lower again from 2-percent to 1.5-percent this year. “We have been steadily decreasing this tax and increasing the amount we are taking out of other sources to make governments and schools whole.”

In the mid-90, the Business Equipment tax was 9-percent with no threshold.

In 2012, the Business Equipment Tax brought in more than $88 million to state government. It goes mostly to schools and local governments.

Legislature reaches unprecedented stalemate on revenue estimate

A committee of state lawmakers found themselves in an unprecedented stalemate earlier this week.

The legislature’s Revenue and Transportation Interim Committee failed to pass an official revenue estimate in their last scheduled meeting before the legislative session begins in January. It’s the first time the committee has not passed a revenue estimate since the current process was put into place a couple decades ago.

The estimate failed on a party line vote as democrats are trying to get some change into the process.

The Montana Legislature’s revenue estimate is a big deal. Legislative services chief legal counsel Todd Everts says it’s the starting point lawmakers use to set their budget. Because by law, budget expenditures cannot exceed the revenue estimate. So you have to have a revenue estimate “and under law it’s the revenue and transportation interim committee that’s required to introduce that resolution,” Everts said.

And normally the Revenue and Transportation committee passes the resolution on their last meeting before the session. They are required to do so before the first business day in December.

This time it failed on a six to six party line vote. Democrats wanted to take the revenue estimate resolution and put it into a bill—specifically the general budget bill known as House Bill two.

The Governor’s office has thrown their support behind the idea.

“What we’re proposing to do is no different than what every family in Montana does with their checkbook. Make sure your expenses and your revenues are all kept in one place,” said the Governor’s Budget Director, Dan Villa. It’s also a strategy.

“It would require that all 150 Legislators for the first time in four sessions actually have the opportunity to vote not only on what the expenses look like but what the revenues look like,” Villa said.

During the last few sessions, both Democratic and Republican Speakers of the House have sort of held the revenue estimate hostage from the Senate. This happens by the Speaker keeping the revenue estimate in the House Taxation committee and it never gets debated by the full House or Senate. Lawmakers on both sides during the interim have been working on a way to address this situation. The idea of moving the revenue estimate into the larger budget bill was the Democrat’s way of going about this. But Legislative legal counsel Todd Everts says it would be in conflict of the state constitution.

“The Constitution requires that the general appropriation bill shall only contain appropriations,” Everts said.

The Governor’s office disagrees. But Senate Minority Leader, Butte Democrat Jon Sesso says they will accept the recommendations of legislative staff.

“OK, we don’t want to push for an alternative our own attorneys are advising us against, so we set that down,” Sesso said.

But the Democrats still didn’t approve the resolution. Sesso says the Revenue and Transportation committee should wait until the Rules committee meets on December 3rd to consider some rule changes and then convene a last minute impromptu meeting to pass the revenue estimate.

Sesso says he’s worried by passing the revenue estimate first the rules to change how it would be implemented would not have been passed by the rules committee “and as a result it would have been business as ususal and I thought that we had bipartisan support that business as usual was not acceptable anymore,” he said.

Sesso and Senate President, Billings Republican Jeff Essmann  both sit on the Revenue and Transporation Committee.

Essmann calls this irresponsible. He says the committee was talking about rule changes to how the revenue estimate is put to use. But he says passing those rules is the job of the rules committee. The revenue committee, he says, is supposed to pass the estimate.

“To attempt to use their effort to block the fulfillment of a statutory duty in an effort to force a rule change I think was counter productive,” Essmann said.

Especially when there is general consensus on the amount of the revenue estimate which is rare. He’s not so sure there will be an impromptu meeting on December 3rd.

“I expect the rules committee to meet to discuss the proposed rule changes and make a decision,” he said.

“And then you will all meet as Revenue and Transportation right afterward?” I asked.

“No, that meeting has not been called,” Essmann replied.

“Do you expect it to be called?” I asked.

“Not at this point.”

“So then what happens if there is not a meeting held on its last statutorily possible date to pass that revenue estimate?”

“I’ll be discussing that with the Speaker of the House,” Essmann said.

If the estimate is not passed as required by law, Legislative legal Counsel Todd Everts isn’t sure what is going to happen.

“I’m not sure what the remedy would be,” he said.

Governor’s Budget Director speaks with lawmakers about proposal to fix state pension plans

Governor Brian Schweitzer’s office is pitching a new strategy to help fix a growing shortfall in the state’s public employee retirement plans. The plans for teachers and other public employees will need more than $3 billion over the next 30 years to break even. The Governor’s Budget Director spoke Thursday with the committee that would draft legislation to implement this plan.

Bozeman Senator, Democrat Larry Jent says lawmakers are obligated to fix the debt problems of the public employee retirement plans. And it needs to happen soon.

“As a fiscal priority, I would rank pensions as being the number one priority facing the 2013 legislature,” he said.

The Constitution insists these pension plans be financially sound—which they haven’t been for about a decade. And Jent says it’s a moral obligation too, for the nearly 80-thousand Montanans who are either receiving the benefits now or will in the future.

Jent sits on the State Administration and Veteran Affairs Interim Committee. That’s the committee in charge of drafting a bill to address this problem. He approves of the new plan from the Governor’s office.

There are two retirement plans that are being addressed here—the Teacher’s Retirement System and the Public Employee Retirement System. Each plan has its own financial problems and the Governor’s plan addresses each one individually. But they’re similar.

It’s a three pronged approach:

  1. Increase contributions from Employees.
  2. Increase contributions from the employers, like schools, local governments, or the state.
  3. Increase revenue coming from state trust lands.

Villa says this strategy will make the retirement plans solvent again in the coming decades. And he says it all could be accomplished with reserve funds that do exist or should exist at the state and local level.

“We’re not increasing taxes a single cent with our proposal,” Villa said, “and we’re simply asking the local governments do what we’ve done in managing our money and not raising taxes yet still fixing our unfunded liabilities.”

Wilsall Senator, Republican Ron Arthun has problems with that analysis. He’s interested in the proposal, but he says it would not be a pain-free solution. He says some local governments and school districts may have a hard time finding extra cash.

“I’ve talked to many school boards and they are strapped already so I don’t know where the money will come from,” Arthun said, unless that money comes from a local tax increase.

Villa says this plan has been released well in advance of the 2013 Legislature to give local governments and school districts time to weigh in.