House passes plan to preserve state employee pensions

Representative Keith Regier (R-Kalispell)

Representative Keith Regier (R-Kalispell)

The House of Representatives has decided to move forward with a plan to fix the state’s ailing pension systems, a plan brought forward by Governor Steve Bullock.

As we’ve reported, the  state’s biggest retirement systems are on pace to be more than $4 billion in debt over the next 30 years if their funding mechanism isn’t changed.

The Governor’s plan is split into two bills which separately address the state’s two largest systems, the Teachers Retirement System (TRS) and Public Employees Retirement System (PERS). Those plans require both employers and employees put in more money toward the pensions. They would also take more money from state trust lands. The House approved both by wide margins Thursday, 60-39 for the TRS plan and 64-35 for the PERS plan.

“I think most citizens of Montana are gonna see that we’re just trying to bail out a failed plan,” said Representative Keith Regier (R-Kalispell). He sponsored another bill which became the top alternative to the Governor’s plan. It would have moved all new hires over to defined contribution plans, which are similar to 401(K) plans used often in the private sector. Making that shift would have cost the state more money, but Regier argues only for the short term. Under his plan, the state could eventually transition out of the pension program. The state would contribute money to the defined contribution plans of the employees, but the stability of those plans would be based on the whims of the stock market.
“It comes down to who should have the risk for somebody’s retirement,” he said, meaning the individual employees with the defined contribution plans or the state with the current pension system.
Representative Tom Woods (D-Bozeman)

Representative Tom Woods (D-Bozeman)

Representative Tom Woods (D-Bozeman) sponsored the Governor’s plan to fix the Teachers Retirement System. He says House members realized it was the best way to move forward, “that it’s more expensive to close defined benefit plans than to fix them.” He believes the two bills have cleared their biggest hurdles as they move over to the Senate.

“I believe these bills will pass,” said Eric Feaver, President of the state’s largest public employee union, the MEA-MFT. “This is the session to do it, we have the money to do it, we have the commitment.” Feaver is a strong supporter of the pension fix bills even though he believes parts of the measures are unconstitutional. While the Governor’s pension bills were in a joint-select committee responsible for pensions, lawmakers added amendments which would lower the guaranteed cost-of-living adjustment built into the plans of current employees. Legislative legal staff have warned this could be a breach of contract.
“That’s a problem,” Feaver said. He says he will lobby to try to remove those amendments in the Senate or if the bill makes it to Governor Bullock’s desk. If they make it all the way through the process, he believes he and several other plaintiffs could mount a successful lawsuit to strip them.
“The bills need to pass anyway,” he said.
Lawmakers in favor of the 401(K) retirement plan shift are not giving up. On Wednesday, Senator Dee Brown introduced a bill which, if passed, would put the proposal before the voters.
Advertisements

Governor’s pension fix and 401K proposal both move forward

Pension Joint Select Committee Chair Dave Lewis (R-Helena), right, and committee member Rob Cook (R-Conrad)

Pension Joint Select Committee Chair Dave Lewis (R-Helena), right, and committee member Rob Cook (R-Conrad)

The Joint-Select Committee on Pensions has had a tough job the last few months– wading through the complex budget shortfall facing the state’s largest retirement systems. Over the next 30 years, those funds will end up more than $4 billion in debt if nothing is done.

When the committee first started meeting, it was mentioned that the committee would try to put forth one, encompassing bill to fix the pensions, combining what they liked from the 18 different bills presented to them. But as discussions moved forward, it became clear the group of eight Republicans and four Democrats were considering two main, and opposing, ideas.

  • Governor Steve Bullock’s proposal: This plan, modified from a plan put forth by former Governor Brian Schweitzer, would keep the current ‘defined benefit’ retirement systems in place for future employees. It would attempt to fix the plans by requiring employees put more of their money into the retirement systems, requiring employers put in more money, and then pulling some money in from state trust lands. The Governor’s plan is being carried by Representative Bill McChesney (D-Miles City). It’s HB454
  • A ‘Defined Contribution’ model: This moves all future employees to ‘defined contribution’ plans, which are similar to 401(k) retirement plans used widely in the private sector. The idea has largely been spearheaded by Committee Chair Senator Dave Lewis (R-Helena) who says the current model is unsustainable in the long-term. Lewis’s ideas were modified into HB338 carried by Representative Keith Regier (R-Kalispell). This proposal would pay for current pension funds from other sources.

Ultimately, the joint-select committee decided to pass both ideas on to the House Appropriations Committee. Chair Lewis says he has received criticism for not settling on one bill, but he says the two main ideas are in too stark opposition to combine.

“You can’t meld those,” he said. “These are policy choices the Legislature’s going to have to make.”