SANTA FE, N.M. (AP) — A proposal to shore up the long-term finances of a pension system for state and local government workers in New Mexico cleared the Legislature on Wednesday and heads to Republican Gov. Susana Martinez.
The measure addresses one of the largest financial problems confronting state government. The governor plans to review the bill before deciding whether to sign or veto it, according to a spokesman.
If the proposed changes to the Public Employees Retirement Association are implemented, the pension program is projected to rebuild its finances and within three decades have 90 percent of the assets necessary to cover benefits for retirees in the future.
Currently, the projected cost of future retirement benefits is $6 billion greater than the pension fund’s assets.
“It is not a perfect bill, but it is a bill that begins to solve a $6.2 billion problem,” said Rep. Luciano “Lucky” Varela, a Santa Fe Democrat.
The pension system covers about 31,000 retirees and 55,400 state and local government workers, including police and firefighters
The proposed pension overhaul won final approval Wednesday when it passed the House on a 48-17 vote.
Like other public employee retirement programs across the country, the New Mexico pension system’s finances have deteriorated partly because of investment losses during a nationwide recession and generous benefits that include potential retirement at a relatively early age.
The legislation would reduce yearly cost-of-living adjustments for pension benefits from 3 percent to 2 percent. Those currently become available two years after retirement, but the bill would phase in a seven-year waiting period. The inflation adjustments would be 2.5 percent for some retirees with yearly pension of $20,000 or less.
Rep. Emily Kane, an Albuquerque Democrat and firefighter, unsuccessfully tried to change the bill to provide for 3 percent cost-of-living increases once the pension fund’s finances improved.
“We have people that are living on fixed incomes,” Kane said. “We have public employees who have done their time and are now trying to plan how to accommodate rising health care costs. We have people who are living on their pension alone.”
Workers would be required to pay an additional 1.5 percent of their salaries into the pension fund. Contributions by governmental employers would increase 0.04 percent.
The House rejected a proposed amendment that would have increased the contribution from taxpayers — the amount paid by governmental employers — by an additional 1.1 percent. The pension system’s governing board initially had suggested a 1.5 percent boost in employer pension payments but those were trimmed by lawmakers because of concerns a higher amount could derail the legislation.
“The governor has worked diligently with legislators from both parties and is pleased that they voted down an additional increase in taxpayer contributions to the government-employee pension fund,” Martinez spokesman Enrique Knell said. “She remains concerned about the solvency level the bill achieves and will thoroughly review it.”
The measure provides for new retirement eligibility and benefits for employees hired after July 1. They would have to work longer before being able to collect pension benefits.
Currently, most employees covered by PERA pension plans can retire with full benefits at any age if they have worked at least 25 years.
Under the legislation, most future workers could retire with full benefits if they meet a so-called “rule of 85″ — their combined years of work and age at retirement equaling or exceeding 85. Public safety employees would be able to retire after 25 years on the job rather than the current 20-year requirement.