February 14, 2020 – New Mexico’s public pension fund is $7 billion in the hole. If lawmakers do nothing it won’t be able to pay out all the money it has promised. This legislative session Gov. Michelle Lujan-Grisham and state lawmakers have prioritized shoring up the Public Employees Retirement Association. One proposal would put PERA on a path to solvency within two decades by increasing contributions and changing the way retirees’ cost-of-living increases are calculated. 

This week at the Roundhouse Gwyneth Doland talks to lawmakers about public pensions—and a new plan to create a voluntary retirement system for the self-employed and people who work at small businesses and nonprofits. (This segment is part of our #YourNMGov project, in collaboration with KUNM radio and the Santa Fe Reporter, and funded by the Thornburg Foundation and New Mexico Local News Fund) 

Guests:
Rep. Phelps Anderson, R-Roswell
Rep. Christine Chandler, D-Los Alamos
Bill McCamley, Secretary of Workforce Solutions 

For Further Reading/Listening: 
New Mexico public pension reform passes in Senate — The Associated Press 
Podcast: Your NM Gov: Ep. 18 with Gwyneth Doland — KUNM 
PERA solvency bill advances from key committee after emotional hearing — Santa Fe New Mexican
Op-Ed: Fair PERA fixes will attract, keep workers — Albuquerque Journal
Op-Ed: Task force wants to break pensions’ COLA promise — Albuquerque Journal 

Transcript:

>>GRANT: NMIF CORRESPONDENT GWYNETH DOLAND ALSO SPENT SOME TIME IN SANTA FE, CHECKING IN ON THE PROGRESS ON PLANS TO REFORM THE STATE’S FAILING PUBLIC EMPLOYEE PENSION PROGRAM. ALL PART OF OUR, YOUR NEW MEXICO GOVERNMENT PROJECT, A COLLABORATION WITH KUNM RADIO AND SANTA FE REPORTER.

>>DOLAND: REP. ANDERSON, THE PUBLIC EMPLOYEE PENSION FUND IS IN A HOLE ABOUT AS DEEP AS THIS YEAR’S STATE BUDGET, SEVEN BILLION DOLLARS. HOW DO WE GET OUT OF THAT HOLE?

>>ANDERSON: I THINK IT IS GOING TO TAKE LEADERSHIP FROM BOTH THE LEGISLATURE AND THE EXECUTIVE. OUR GOVERNOR HAD A TASKFORCE THAT SERVED THROUGH THE SUMMER, DID GREAT WORK. I SERVED ON THE INVESTMENT PENSIONS OVERSIGHT COMMITTEE ALONG WITH SEVERAL MEMBERS OF THE SENATE AND THE HOUSE. OUT OF ALL THAT HAS EMERGED A BILL WHICH I BELIEVE IS GOING TO SET NEW MEXICO ON A COURSE TO SOLVENCY IN PUBLIC PENSIONS.

>>DOLAND: WHERE EXACTLY IS ALL THAT MONEY GOING TO COME FROM?

>>ANDERSON: THAT MONEY COMES FROM DIFFERENT SOURCE. ONE IF THE GENERAL FUND SURPLUS THAT WE ARE ALL AWARE OF IN THIS COMING FISCAL YEAR. THE SECOND WILL BE EMPLOYER CONTRIBUTION. THIRD WILL BE EMPLOYEE CONTRIBUTION. ALL OF THAT IS GOING TO ADD UP TO BRINGING OUR SOLVENCY DEFICIT TO BREAK EVEN, TO 100% FUNDING, THAT BEING BREAK EVEN, AND THIS IS OUR OBJECTIVE AND WE SHOULD GET THERE IN ABOUT 25 YEARS.

>>DOLAND: RIGHT NOW THE RETIREMENT BOARD, PERA, GRANTS A COST OF LIVING ADJUSTMENT BUT THAT IS GOING TO CHANGE, HOW?

>>ANDERSON: IT IS GOING TO CHANGE STARTING ON A THREE YEAR MORATORIUM WHEN THE COLAS WILL NOT BE FUNDED. HOWEVER, HOUSE BILL 2 HAS 70 MILLION WHICH REPLACES THAT FUNDING AND THE PENSIONERS WILL RECEIVE A 13TH CHECK FOR THE NEXT THREE YEARS FOR THEIR LOST COLA.

>>DOLAND: THAT COST OF LIVING INCREASE WILL BE CHANGED. THE WAY WE CALCULATE IT IS GOING TO CHANGE.

>>ANDERSON: GOING FORWARD, IT IS GOING TO BE A RECALCULATION. IN GOOD YEARS IT WILL BE GOOD YEARS ON COLA AND BAD YEARS WILL BE LESS GOOD YEARS, OR LOW COLA YEARS AND PROTECTED IN THERE ARE OUR STATE EMPLOYEES WHO ARE ON PENSIONS AT THE LOWER END OF THE PENSION RANKS AND THOSE COLAS WILL BE ESPECIALLY PROTECTED.

>>MCCAMLEY: LET’S TALK ABOUT WHAT THE ISSUE IS. PEOPLE ARE LIVING LONGER AND BECAUSE OF THAT, THEY ARE TAKING MORE MONEY OUT OF THE SYSTEM THAN THEY SOMETIMES PUT IN BY WORKING THE SPAN OF TIME THEY DID. BACK WHEN THE PENSION SYSTEMS WERE PUT INTO PLACE IN THE 30’S, 40’S, PEOPLE LIVED A CERTAIN AMOUNT OF TIME AFTER THEY WORKED AND THEN PASSED AWAY. WELL, NOW, PEOPLE ARE LIVING LONGER AND YET WORKING THE SAME AMOUNT OF TIME. SO, WHEN YOU LOOK AT WHAT MONEY IS GOING IN VERSUS WHAT MONDAY IS GOING OUT, THERE IS A LOT MORE ON THE BACK END THAN THERE USED TO BE. THAT IS WHY IT IS IMPORTANT THAT PLACES AROUND THE COUNTRY, NOT JUST NEW MEXICO, LOOK AT WAYS OF CHANGING THE SYSTEMS TO SECURE A PENSION AND THAT IS WHAT WE ARE TRYING TO DO HERE.

>>DOLAND: THAT IS NOT THE ONLY RISK, RIGHT?

>>MCCAMLEY: IT IS NOT. WHEN THE STATE BORROWS MONEY TO DO THINGS LIKE CONSTRUCT NEW ROADS OR NEW LIBRARIES OR NEW SCHOOLS, WE BORROW JUST LIKE YOU BORROW MONEY TO GET A HOUSE. WE PAY AN INTEREST RATE ON THAT. IT IS CALLED A CREDIT RATING. IT IS CALLED A BOND RATING. LIKE YOUR AND MY CREDIT RATING, THE HIGHER YOUR BOND RATING IS, THE LESS MONEY YOU HAVE TO PAY OUT TO GET THAT MONEY. IF YOUR BOND RATING SHRINKS JUST LIKE IF YOU’RE CREDIT RATING SHRINKS, IT COST YOU MORE TO BORROW MONEY. THAT BOND RATING IS DETERMINED BASED ON RISK. IF WE DON’T DO WHAT WE CAN TO MAKE THIS PENSION SYSTEM MORE SOLVENT, MORE LESS RISKY OVER TIME, THAT MEANS THERE IS A CHANCE THAT OUR BOND RATING COULD GO DOWN, WHICH COSTS YOU AND ME AND OTHER TAXPAYERS MORE DOLLARS WHEN WE WANT TO MAKE A NEW SCHOOL, A NEW ROAD. THAT IS REALLY IMPORTANT TO MAKE SURE THAT WE HAVE THE INFRASTRUCTURE NEEDED GOING FORWARD. TO A DIFFERENT THING, THE AGENCIES THAT ARE MAKING THESE DETERMINATIONS HAVE IN THE PAST DECREASED BOND RATING FOR OTHER STATES THAT DIDN’T DO THE RIGHT THING AND MAKE THESE THINGS SOLVENT OVER TIME.

>>DOLAND: I WANT TO ASK YOU ABOUT THE PUBLIC EMPLOYEES WHO ARE WORKING HERE NOW. THEY ARE GOING TO BE ASKED TO PAY A LITTLE BIT MORE.

>>MCCAMLEY: ME TOO.

>>DOLAND: DO THEY SUPPORT THIS?

>>MCCAMLEY: YES. ALL THE UNIONS THAT WE CAN COUNT SUPPORT IT, INCLUDING AFSCME, AMERICAN FEDERATION OF MUNICIPAL EMPLOYEES, COMMUNICATION WORKERS OF AMERICA, WHICH REPRESENT A BUNCH OF PEOPLE WORKING IN THE PUBLIC SECTOR, THE INTERNATIONAL ASSOCIATION OF FIREFIGHTERS AS WELL AS THE ALBUQUERQUE POLICE OFFICERS ASSOCIATION. SO, ALL OF THE UNIONS THAT WE KNOW ABOUT ARE ACTUALLY SUPPORTING THIS BECAUSE THEY WANT TO MAKE SURE THAT THEIR MEMBERS, WHICH ARE CURRENT EMPLOYEES, HAVE A SYSTEM THAT IS PROTECTED AND DEFINED MOVING INTO THE FUTURE. THAT IS REALLY IMPORTANT TO THEM, REALLY IMPORTANT TO THE GOVERNOR, REALLY IMPORTANT TO EVERYBODY.

>>DOLAND: I AM HERE WITH REPRESENTATIVE CHRISTINE CHANDLER OF LOS ALAMOS, TALKING ABOUT THE PROPOSAL FOR A NEW STATE RETIREMENT PLAN. REPRESENTATIVE, THE HOUSE HAS APPROVED THIS PROPOSAL ALREADY. WHY DO YOU WANT TO CREATE A NEW RETIREMENT PLAN FOR THE STATE?

>>CHANDLER: AT THIS POINT IN TIME, WE KNOW THAT OVER 60% OF EMPLOYEES THAT WORK FOR PRIVATE EMPLOYERS OF THE STATE, HAVE NO PRIVATE RETIREMENT PLANS. IN ADDITION, WE ALSO KNOW THAT MORE THAN 80% OF PEOPLE WHO ARE TRYING TO SAVE FOR RETIREMENT HAVE LESS THAN $10,000 SAVED. SO THIS BILL IS INTENDED TO ALLOW EMPLOYERS TO VOLUNTARILY PARTICIPATE SO THAT THEIR EMPLOYEES CAN BEGIN DEVELOPING THE HABIT OF RETIREMENT SAVINGS. AND THAT IS VERY IMPORTANT FOR THE STATE BECAUSE WE KNOW WE HAVE A HIGH POVERTY RATE AND HIGH RATE OF INDIVIDUALS WHO ARE OLDER WHO ARE IN POVERTY OR JUST ON THE EDGE OF POVERTY AND THIS IS INTENDED TO PROVIDE THEM WITH A TOOL TO PLAN FOR RETIREMENT.

>>DOLAND: SO, WHO WOULD BE ALLOWED TO PARTICIPATE IN THIS PROGRAM?

>>CHANDLER: PRIVATE EMPLOYERS IN THE STATE OF NEW MEXICO, SELF-EMPLOYED INDIVIDUALS AND NOT-FOR-PROFITS. SO WE KNOW THERE ARE A LOT OF NOT-FOR-PROFITS AS WELL, WHO DON’T HAVE THE WHEREWITHAL TO OFFER RETIREMENT PLANS OR COMPLEX RETIREMENT SAVINGS PLANS, SO, THIS WILL HELP ALL OF THE ABOVE AND, YOU KNOW, ENSURE THAT PEOPLE WHO WORK FOR THOSE, OR WHO ARE SELF-EMPLOYED, WILL HAVE ACCESS TO A RETIREMENT SAVINGS PLAN.

>>DOLAND: CAN’T THEY SIGN UP WITH MERRILL LYNCH OR SCHWAB?

>>CHANDLER: THEY CAN AND WE HOPE THAT THEY DO BUT THIS MAKES IT EASY FOR PEOPLE. WHEN YOU’RE EMPLOYED AND YOU JUST ARE ALLOWED TO HAVE OR YOU CAN SET UP AUTOMATIC PAYROLL DEDUCTION, WE KNOW THAT PEOPLE ARE 15 TIMES MORE LIKELY TO PARTICIPATE IN A RETIREMENT SAVINGS PLAN IF IT IS DONE THROUGH THE EMPLOYER, THROUGH AN AUTOMATIC DEDUCTION.

>>DOLAND: IS IT GOING TO COST THE STATE MONEY TO SET THIS UP?

>>CHANDLER: WE DID HAVE APPROPRIATION IN THE BILL BUT IN WORKING WITH THE STATE TREASURER’S OFFICE, WHO HAS BEEN FANTASTIC, BY THE WAY. THEY HAVE BEEN VERY MUCH ON BOARD WITH THIS. HE HAS SAID HE IS WILLING TO WORK WITHIN HIS BUDGET AT THIS POINT IN TIME TO STAND THE PROGRAM UP. AND WE MAY NEED AN APPROPRIATION DOWN THE ROAD TO HELP SUPPORT THE PROGRAM BUT AT THIS POINT THE TREASURER THINKS HE CAN HANDLE IT WITH THE MONIES HE IS BEING APPROPRIATED RIGHT NOW.