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Workers asked to pay more for retirement benefits

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By Barry Massey

SANTA FE, N.M. (AP) — State and local government workers and educators could see their take-home pay shrink in the next several years under proposals to have them contribute more out of their salaries for retirement benefits.

Taxpayers also would chip in tens of millions of dollars under proposals endorsed by a legislative committee on Wednesday to shore up the long-term finances of two programs for public employees — a retirement system for educators and a separate program offering health insurance to retirees from state and local government jobs as well as public schools and universities.

The measures will be forwarded to the Legislature to consider when it convenes in January for a 60-day session. Lawmakers and the governor must approve the proposals before higher payroll contributions would take effect.

One proposal calls for nearly 62,000 educators to pay an extra $46 million over two years into their pension system, starting in July 2013. That would mean a $520 increase over those two years for an educator earning $40,000 annually. The proposed pension fund increases — boosting the contribution rate by 1.3 percent from what's paid currently — would not apply to educators earning $20,000 or less a year.

Under another measure, 133,000 public employees, including educators, would pay $30 million over three years for retiree health care while taxpayers pay $60 million more.

For a government worker or educator earning $40,000 annually, the proposal would cost them an extra $300 over the three years starting in July 2014. Their payroll contribution rate would increase by 0.75 percent over the three years.

The higher payments by taxpayers — $30 million from the state and $30 million from cities, counties, schools and other governmental employers —would take place over three years, starting in the 2016 budget year if lawmakers approve the proposal for a 1.5 percent increase.

If nothing is done, the retiree health care program will run out of money in 2029. The program is financed by payments from government workers and their employers — meaning taxpayers — as well as insurance premiums paid by about 50,000 retired public employees. The program also receives investment income from its balances of about $244 million.

Mark Tyndall, executive director of the Retiree Health Care Authority, said the agency has or will take other steps to improve the program's solvency, including requiring greater co-pays for retirees for some their insurance coverage. The goal is to make the program solvent until 2045.

However, the proposal likely faces opposition when it surfaces in the Legislature next year.

"This may be a hard sell" to lawmakers who put together the state budget, said Sen. Carroll Leavell, R-Jal, a member of the Legislature's Investment and Pensions Oversight Committee. He objected to the proposed $30 million increase on state government.

The educational pension program has about 35,000 retirees. The health of public pensions in New Mexico and other states has deteriorated partly because of investment losses during market declines. Besides that, people are living longer and drawing retirement benefits for more years.

The pension proposal is backed by educational unions but could run into trouble in the Legislature from some lawmakers who think it doesn't go far enough to improve the retirement system's solvency.

Other provisions of the pension proposal would change benefits for workers hired in the future, including imposing a minimum retirement age of 55.

Current law calls for taxpayers to pay an additional $72 million over the next two years into the educational pension system.