Pension problems plague state
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The unfunded liability in Montana’s pension funds is more than $3.5 billion. Yes, billion. The largest liability is in the Teachers’ and the Public Employee Retirement systems. There is much to the story, although there is no threat to retirees in the near future.
I sponsored a bill, HB632, that would add money to these systems with new coal dollars. It would not have changed our coal trust at all. My bill was the only bill last session to improve our current liability.
Russell R. Wrigg, the president of the Association of Montana Retired Public Employees, wrote a guest column in several of the statewide newspapers last month discussing my bill. He would like to see HB632 reintroduced next session.
The main reason that the funds are actuarially unsound is the downturn in the stock market. These funds depend on a return of 7 to 8 percent. We know that that hasn’t happened recently and probably will not in the near future. Also, any gain or downturn is averaged over four years, so changes are slow.
While my bill would help the situation it is not a cure. The economy in the nation has to recover. Many people are angry at big corporations, but don’t forget that retirement money is invested in Wall Street. Last I looked at the retirement portfolio, 20 percent was invested overseas including foreign currency. I don’t agree with that choice. Just another way the people of America are not investing in America.
Other states have taken radical action with pension problems. Rhode Island has suspended cost-of-living increases, raised the retirement age and started a hybrid defined benefit/defined contribution plan.
Our current retirement plans are union negotiated and we are told they cannot be adjusted for current employees. All the changes we made last session, raising retirement age, increasing employee contributions, etc., can only apply to new hires.
Wisconsin’s budget shortfalls resulted in major labor changes. The city of Vallejo, Calif., used bankruptcy to change pension plans. Once again, we need to be thankful that our Constitution requires a balanced budget.
My bill did one other interesting thing. It capped some non-general fund allocations at current dollar amounts. There is a major problem with what we call “statutory appropriations” because they are not scrutinized every session. All spending needs to be reviewed and approved every two years.
Call me at 849-6096 or e-mail jannataylor@montana.com with questions or comments. Never forget that I work for you.
