SANTA FE, N.M. (AP) - A credit rating agency has warned that New Mexico’s unfunded pension obligations to public employees continue to cast a shadow over government finances, even as state government income and spending have rebounded.
Moody’s Investor Service said in a report Thursday that the general fund budget plan recently signed by the governor improves the financial health of public schools and community colleges that have wrestled with austerity measures.
The budget increased annual general fund spending by 12% to $7 billion, including a roughly half-billion dollars boost in public education spending. The state’s credit rating remains unchanged after two downgrades since 2016.
At the same time, Moody’s analysts warned that pension reforms this year did not increase contributions sufficiently to reduce the problem of unfunded financial liabilities.
Employer pension contributions to the state’s two major pension funds for government and education workers will rise by 0.25% starting July 1, under a package of reforms signed by Democratic Gov. Michelle Lujan Grisham.
“While contribution increases are one way to curb the unfunded liability, in this case the influx of funds is not enough to reduce pension leverage,” Moody’s wrote of the situation at the Educational Retirement Board that oversees defined benefit pension plans for about 60,000 active members and 46,000 retirees.
Educational Retirement Board Executive Director Jan Goodwin disagreed with the assessment, citing provisions of a new law that delays the rapid accrual of pension benefits for future educational workers until they surpass 20 years of service. Goodwin said 65% of public education workers retire or seek other work before 25 years of service.
That change “will have a dramatic effect on future liabilities for new members,” Goodwin said. “I think that is an improvement and their comments don’t reflect that.”
Additional reform proposals this year stalled for the Public Employees Retirement Association that oversees retirement benefits for state personnel, cities, State Police, judges and more. That prompting Lujan Grisham to order the creation task force to recommend changes.
State government and school districts offers robust pension benefits that include automatic cost-of-living adjustments and eligibility for federal social security.
Assets overseen by the Educational Retirement Board were estimated at $12.5 billion at the start of the year. The Public Employees Retirement Association held $14.6 billion.
Please read our comment policy before commenting.