SANTA FE, N.M. (AP) - A panel of New Mexico state lawmakers endorsed proposals Monday to shore up a pension fund for educators and a retirement health insurance program for public employees, as unfunded retirement obligations rise.
The state’s unfunded pension liabilities are threatening to drive up borrowing costs for the state and local governments. A major credit ratings agency has cited pension obligations in recent decisions to downgraded bond ratings for the state and Albuquerque, the state’s largest city.
Jan Goodwin, executive director of the Educational Retirement Board that oversees a $13 billion education pension fund for public school districts and state colleges, warned lawmakers that the state may end up sacrificing billions of dollars unnecessarily in coming decades by putting too little money aside for pensions and missing out on investment opportunities.
She said unfunded pension obligations reached $7.5 billion in July.
Employers such as school districts would increase contributions to the fund by 3 percent of pay over a three year period - while avoiding any increase in contributions by employees, under proposed legislation from the Educational Retirement Board.
It also would raise the minimum retirement age from 55 to 58 for new employees, and includes a one-time $248 million appropriation from the state general fund.
Democratic State Rep. Bobby Gonzales of Taos said the proposal could help the Legislature satisfy a pending court order that New Mexico increase educational resources for students from minority and low-income households.
Other provisions would shift benefit payouts toward educators who complete lengthy careers in the state, though a teachers’ union has criticized the measure.
“We’re about people working long careers,” Goodwin said. “Those are people we want to incentivize today.”
The pension oversight and investment committee endorsed the proposal by a 7-2 vote for consideration when the Legislature convenes in January.
The committee also endorsed a plan to bolster finances at the New Mexico Retiree Health Care Authority that provides low-cost insurance plans to employees in public education and state and local government.
That proposed bill would raise both employee and employer contributions to help keep pace with increases in the health care costs. An employee earning $40,000 who currently pays about $400 annually would pay roughly $600 by 2023, according to authority Executive Director David Archuleta.
Several legislators described the proposed contribution increases as reasonable.
The Public Employees Retirement Authority also is weighing how to respond to mounting unfunded pension obligations to current and former state, county and municipal workers along with judges and volunteer firefighters. Its unfunded liabilities reached $6 billion in July, Executive Director Wayne Propst said. The fund’s board has not agreed on specific legislative recommendations.
Sen. George Munoz, D-Gallup, is preparing a bill that gives greater autonomy to the Public Employees Retirement Authority to suspend cost of living increases to retirees and to increase state government contributions to the pension fund. Those kinds of decisions currently require statutory changes by lawmakers.
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