Senate gives initial approval to pension fixes

State Senators have given initial approval to a pair of bills seeking to fix the state’s public employee pension systems.

A coalition of Democrats and moderate Republicans passed the bills.

The measures fund long-term debt that faces the state’s two biggest retirement plans.

Capitol Reporter Dan Boyce says some Republicans don’t think that is going to work.

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Revenue Estimate passes out of Senate Tax Committee

The Montana Senate Taxation Committee unanimously passed the bill containing the state’s revenue estimate on Friday. The estimate is used as a basis for state spending. Lawmakers from a joint House/Senate Committee have been meeting to discuss the estimate provided to lawmakers from the Legislative Fiscal Division.

The revenue estimate passed by the committee is a little more than $4 billion over the next two year budget cycle. The Senate Taxation Committee also unanimously amended the estimate $30 million higher during their Friday meeting, due to adjusted figures from the Legislative Fiscal Division.

Another amendment to add an additional $30 million to the estimate failed on a party line vote. This additional $30 million would have moved the figure closer to the higher estimate provided by the Governor’s Office of Budget and Program Planning, which uses a different method for predicting revenue.

Sen. Christine Kaufmann

Sen. Christine Kaufmann

Senator Christine Kaufmann (D-Helena) says the process of coming to the revenue estimate is a good one that resulted in a good starting place, but it could be better. She thinks economic factors studied by the Governor’s Office show revenues coming in stronger than what has been previously anticipated and she thinks that will keep happening throughout the session.

“We could have added a little bit more money to the estimate, and I think that would provide us a little more room for whatever we might need in terms of investing in public education and other services for Montana,” she said.

Sen. Ron Arthun

Sen. Ron Arthun

Republican members of the Taxation Committee say the revenue estimate could be off either way, positive or negative. Senator Ron Arthun (R-Wilsall) say the more conservative estimate will lead to less spending and “if the revenue comes in at a greater amount, there will just be more in the coffers for the next session.”

The revenue estimate now moves up to the full Senate for a vote next week. If passed, it moves over to the house.

Pension bill moves step closer to 2013 Legislature

An interim committee of lawmakers has moved a plan to fix the state’s pension systems one step closer to the 2013 Legislature. The proposed bill start with the pension fix proposed by the Schweitzer Administration.

The State Administration and Veteran Affairs  (SAVA) Committee has voted to approve bills to potentially fix debt problems plaguing the state’s two biggest employee retirement systems.

The Public Employee Retirement System and Teachers Retirement System are expected to be about $3 billion in the hole over the next 3 decades.Wilsall Republican Senator Ron Arthun.

“We need to address this because we’re getting so much farther behind on our unfunded liabilities,” said Wilsall Republican Senator Ron Arthun.

Arthun joined a seven to one majority passing a bill for the Teachers Retirement System. The bill has both the employees and employers paying more into the system to correct the shortfall over the long term. Then coal tax revenue would fill in the rest.

A fix for the Public Employee Retirement System generated a little more debate in the SAVA committee. A bill for that system passed 5 to 3.

This fix has much of the same framework as the teachers plan; an infusion from natural resource taxes and more from the employees. The controversy here comes in asking for more from the employers, which are many times city and county governments. Some public comment at the meeting accused the committee of trying to balance the budgets of the pensions on the backs of local governments, leading to forced tax hikes.

Senator Arthun says it has to be a shared sacrifice.

“I think some of the burden has to be shared by the local governments,” Arthun said.

Executive Director of the Montana League of Cities and towns Alec Hansen says local governments are willing to make a reasonable contribution to solve this problem.

“It’s vitally important to restore actuarial balance to those programs. It’s also vitally important to protect the retirement benefits of our employees,” Hansen said.

The bills passed by the SAVA committee now move over to the Legislative Finance Committee for another review. SAVA will view them again in November before making a decision on whether or not to send the measures to the 2013 Legislature.

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.