Communities may suffer in wake of pension reforms

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By Merilee Dannemann

PERA’s fund is doing well.
That’s very good news for you if you are one of the thousands of former state or local government employees who rely on PERA (Public Employees Retirement Association) for all or part of your retirement income. (Disclosure: That includes me.)
PERA’s assets have almost doubled since the stock market cratered at the end of 2008. The fund now has close to $14 billion, with current earnings at roughly 17 percent. The “unfunded liability” — the projection of how much money will be owed over time compared to what’s available — is still worrisome but going down. This was accomplished in part by legislation in 2013 in which PERA-covered employees and retirees accepted a package of benefit reductions.
If you’re not covered by a secure pension, you could ask how any of this benefits you or why you should have the slightest interest in the solvency of these programs. It’s a common question.
Here’s my answer: First, public service work is valuable work, and community’s benefit when people who have expertise in their jobs keep working at them. Second, the whole community benefits when some of its members have stable, secure retirement income.
Government workers are distributed everywhere, including the smaller and poorer communities. Their purchases help keep the stores open. If they stay in their home communities after they retire, they’re a positive economic factor.
With public pensions under attack in some other states, it’s worth mentioning this every now and then.
After years of angst finding a formula that would restore PERA to stability, suddenly the program is faced with a new problem: a city with a policing problem.
Albuquerque’s big municipal police force is losing officers to an increase in retirements, due in part to those very changes that saved PERA — reduction in the way benefits are calculated. The city has more than 1,000 officers at full strength but is already down by about 200, with more retirements expected. To retain experienced officers, the city has voted to offer salary increases to officers who stay.
Other municipalities facing the same issue may want to do the same.
This extra salary translates into extra pension. In the normal course of careers, contributions to the pension fund increase gradually over time. Between the employee and employer contributions, plus earnings on those funds, the total should cover that employee’s pension benefits — at least, that’s the theory. When a large group of employees gets a big bump in salary right before they are due to retire, it throws off the numbers.
So, on one hand, it’s a relief that a legislative interim committee has been sympathetic to the proposal offered by PERA director Wayne Propst, who asked for a five-year moratorium on changes to let the fund’s stability improve in the wake of the recent reforms.
On the other hand, the police problem is a serious concern, and it’s a statewide concern. Ironically, as retirements and vacancies increase in Albuquerque, it’s not unlikely that the city will draw replacements from the police forces of outlying communities.
And finally, a five-year legislative moratorium is unenforceable. Even if the full Legislature enacts a bill (or more likely, a memorial, which doesn’t have the force of law), it would be merely a statement of intention, and intentions can change.
This issue is sure to pose a challenge when the Legislature convenes in January. I’m hoping legislators can find a solution that doesn’t hurt one legitimate public interest at the expense of the other.

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