Difference between revisions of "Public pensions in New Mexico"

From Ballotpedia
Jump to: navigation, search
(Created page with "{| align="right" | |- |{{Pension profile | name = New Mexico public pensions| pension image = | number of funds = 5 | pensio...")
 
Line 202: Line 202:
 
[[category:state salary]]
 
[[category:state salary]]
 
[[Category:Pensions]]
 
[[Category:Pensions]]
[[Category:Sunshine Review pages]]
+
[[Category:Sunshine Review pages]][[Category:Pension information by state]]

Revision as of 06:34, 1 July 2013

New Mexico public pensions
Pension system
Number of pension systems 5
State pension systems: • Public Employees' Retirement System
• Educational Employees' Retirement System
• Judicial Retirement System
• Volunteer Firefighters' Retirement System
• Magistrate Retirement System
System type: Pension
Local pensions
Number of local pension systems 0
Pension health
Estimated liabilities:* $29,003,362,000 (2011 PEW study)
Percent funded: 76%
Unfunded liabilities: $6,960,807,000 ($6.9 billion)
State employees
Number of state public employees: 56,530
Total pension fund members (active and inactive): 158,847
Beneficiaries receiving payments: 61,721
State Information

New Mexico public pensions are comprised of five pension systems administered by the Public Employees Retirement Association. New Mexico teacher and school employees participate in a pension system administered by the New Mexico Educational Retirement Board.

New Mexico has 56,530 total public employees as of 2010.[1] In Fiscal Year 2010, the state has a total of 158,847 active and inactive pension fund members, with 61,721 receiving periodic benefit payments. [2]

New Mexico’s pension funding level has dropped from 96% in 2000 to nearly 83%, with the required contribution growing from $334 million in 2000 to more than $667 million in 2010.[3]

As of June 30, 2008, New Mexico’s unfunded pension liability was $4,519,887,000 while the unfunded retiree health care liability was an additional $2,946,290,000. [4]

Every member of the 12-member pension board is in a position that is eligible for a pension.[3] A recent study by economists Joshua Rauh of the Kellogg School of Management at Northwestern University and Robert Novy-Marx of the University of Chicago Booth School of Business concluded that the New Mexico pension fund will run out of money in 2023.[5][6]

Public pensions

Plan Value Unfunded liabilities Percentage funded Active members Avg. Pension
Public Employees Retirement Association of New Mexico [7] $14.6 billion $2.1 billion 76 percent 64,195 members $26,500
New Mexico Education and Retirement Board [8] $15.2 billion $5.6 billion 63 percent 61,673 members $26,500

PERA

The Public Employees Retirement Association administers four retirement plans:Public Employees Retirement Fund, Judicial Retirement Fund, Magistrate Retirement Fund, and the Volunteer Firefighters Retirement Fund.

NMERB

The Educational Retirement Board was established in 1941. The New Mexico Legislature provides the employer’s portion of the monthly contributions, 13.9 percent, to a member’s account. Member's benefits are based on this formula: Final Average Salary x Years of Service x 2.35% = Gross Annual Benefit.

The Education Retirement Board is renegotiating funding and benefits with the New Mexico Legislature. The legislature has proposed an increased individual contribution and increasing the retirement age for the beneficiaries. Meanwhile ERB reps feel that they've already made significant sacrifices and have proposed ERB members pay a half a percent more per year for the next four years, with the state contributing an additional three percent over the next six years.[9]

Reform

According to the Pew Center on the States 2010 report The Trillion Dollar Gap, New Mexico's unfunded pension liability in 2008—$4.5 billion—was greater than the state’s annual payroll. [10]

In 2009 ithe legislature increased employee contributions and decreasing employer contributions for some members.to save $42 million in 2010. [10]

Rep. Mimi Stewart sponsored HB 644, which was passed in the house with a 37-32 vote. It increased the retirement age and tied COLA increases to the consumers price index.[11]

In 2011 New Mexico Gov. Susana Martinez signed legislation that is projected to save $111 million. The provision requires nearly 82,000 state workers, public school employees and college faculty to pay an additional 1.75 percent of their salaries into their pensions next year, saving the state almost $50 million. A similar 1.5 percent pension swap was enacted in 2009 and that's continued for another year, saving nearly $43 million. The measure saves $18 million by postponing pension contribution increases the government was to make under a 2005 law to improve the solvency of an educational retirement program. [12]

The Educational Retirement Board is proposing changes to the pension system for school district and University employees. The changes include a minimum retirement age of 55 and limits on cost of living increases. [13]

2013

The Senate overwhelmingly approved legislation to shore up the New Mexico Public Employees Retirement Association. The reform bill would reduce retirement benefits for current employees, retirees and future government workers. It would also impose stricter retirement eligibility guidelines on future employees.

The public retirement system has roughly 86,000 members, including about 55,000 active workers. Th bill moved to the House. [14]

Contribution increase

Under the FY2012 state budget, state employees and educators will pay an extra 1.75 percent of their salaries for their pensions, saving the state nearly $50 million. [15]

Eligibility

The New Mexico state legislature increased the number of years of service prior to retirement eligibility from 25 years to 30 years.[16]

Lawmakers, however, are eligible to receive a pension after 5 years of service.[17]

Funding levels

Currently, 84 percent of PERA is funded by Buck projects, but this number is expected to drop to 63 percent within three years.[18] ERB is funded at 68 percent, but that is expected to drop to 58 percent by 2012.[18]

The state's pension liabilities can be calculated in a variety of ways, which yield different numbers. Below are the numbers as calculated by to the Pew Center on the States,[3] the American Enterprise Institute[19] and Professors Robert Novy-Marx of the University of Chicago and Joshua Rauh of Northwestern University, Kellogg Graduate School of Management.[20]

In Thousands
PEW (2008) AEI (2008) Kellogg (2009)
$$4,519,887 $27,875,180 $23,900,000

Other information from the Pew Center on the States Feb. 2010 publication "The Trillion Dollar Gap":

State Pension Funding Levels 2008 (figures are in thousands)[3]
Latest liability Latest unfunded liability Annual required contribution Latest actual contribution
$26,122,238 $4,519,887 $667,691 $591,279
State Retiree Health Care and Other Non-Pension Benefits Funding 2008 (figures are in thousands)[3]
Latest liability Latest unfunded liability Annual required contribution Latest actual contribution
$3,116,916 $2,946,290 $286,538 $92,121
Underfunded pension liabilities
Number of pension plans Pension assets ($bn) Stated liabilities ($bn) Funding status (% of tax revenue)
2 $16.2 $26.7 -554%

This data is based on projected data from 2008 census data.[21] In 2008, $1.94 trillion was set aside for pensions, but it is estimated that states have $5.17 trillion in unfunded liabilities.

Rate of return

New Mexico presumes a 8.00% return rate on its pension investments.[3]

Controversy

Bruce Malott was previously chairman of the state’s teacher pension but was forced to resign following a loan scandal. Malott received a $350,000 personal loan from Anthony Correra, an investor who lost his license from the securities industry because of allegations of insider trading.[22]

Correra has loaned the money to Malott after his accounting firm owed hundreds of thousands of dollars in taxes when IRS determined that a tax shelter that Malott and others participated in had no legitimate business purpose.[22]

The Albuquerque Journal reported that Malott’s $2,500 monthly payment was sent a woman who had a son with Correra.[22]

Collective bargaining history

Collective bargaining in New Mexico started in 1955 after a ruling by then Attorney General Richard H. Robinson agreed employees at the New Mexico State Insane Asylum could organize and bargain. Robinson also ruled all state and local government employees could organize and bargain. That changed in 1959, when Attorney General Hilton A. Dickson, Jr. said that government employees could organize, but their government employer need not recognize them as a union. Between 1963 and 1986, the New Mexico legislature considered at least 17 public sector collective bargaining bills and failed to pass a single one of them. In 1989 a court case made its way to the state Supreme Court, which ruled in favor of collective bargaining and public employee unions. Following that ruling, the legislature passed a 1992 bill allowing collective bargaining in New Mexico. The bill contained a sunset clause that called for its expiration after seven years. An extension was passed in 1999, but it was vetoed by Gov. Gary Johnson. In 2002 Bill Richardson campaigned for governor on a new collective bargaining law, and after he was elected, such legislation was signed in 2003. The New Mexico Public Employees Bargaining Act allows:

  • To promote harmonious and cooperative relationships between public employers and public employees;
  • To protect the public interest by ensuring at all times the orderly operation and functioning of state government;
  • Guarantee rights of public employees to bargain collectively [4]

Local public pensions

Main article: Local government public pensions

According to the United States Census Bureau, the state has no locally-administered pension systems.[23]

Transparency

Main articles: Public pension disclosure and Governmental Accounting Standards Board

Data availability

Information on PERA can be found on its website. Financial audits (called comprehensive annual financial reports) are archived since 1989, along with investments, investment analyses, and actuarial studies.[24]

NMERB provides investment reports, board meeting minutes, financial audits, actuarial reports, and other information.[25] [26] [27] [28]

Names of pension recipients are not available. As of June 30, 2011, PERA has 64,195 members and 29,496 retired members and beneficiaries.[29]

Disbursement amounts are not available for PERA, but the NMERB provides a benefits calculator for unofficial estimates.[30]

Fund performance data

Fund investment performance data is available for both pension funds.[24][31]

Rate of return

The assumed rates of return for NMERB and PERA are 7.75 percent.[32] [7]

Unfunded liabilities

PERA and NMERB provided the amount of unfunded liabilities in their Comprehensive Annual Financial Reports, $4,971,175,036 and $5,650,842,751, respectively, as of 2011.[7][8]

Oversight

Is pay-to-play, the practice of investment managers making contributions to officials with influence over public pension fund decisions, addressed by state law or by pension fund rules? Are pension agents and lobbyists allowed to influence investments?

Is there an external body providing oversight to the body administering the pension funds?

Moss Adams LLP performed an independent audit on the NMERB 2011 CAFR, and the independent audit report can be found on page 20 of the CAFR.[33]

Atkinson & Co., Ltd. performed an independent audit on the PERA 2011 CAFR, and the independent audit report can be found on page 22 of the CAFR.[34]

See also

External Links

References

  1. 2010 Annual Survey of Public Employment and Payroll, Census 2010
  2. 2010 Annual Survey of Public Employment and Payroll--Membership by State, Census 2010
  3. 3.0 3.1 3.2 3.3 3.4 3.5 "State Pensions and Retiree Healthcare Benefits: The Trillion Dollar Gap,” Pew Center on the States, accessed January 4, 2011
  4. 4.0 4.1 Rio Grande Foundation, Public Employees
  5. New Mexico Watchdog, Study: NM state pension plan will run out of money in 13 years, Sept. 9, 2010
  6. New Mexico Watchdog, More on the perilous state of pensions, Sept. 23, 2010
  7. 7.0 7.1 7.2 2011 PERA CAFR
  8. 8.0 8.1 2011 NMERB CAFR
  9. New Mexico Watchdog, More on NM state pension plans: ERB plan gets cool reception, Dec. 21, 2010
  10. 10.0 10.1 Pew Center on the States, The Trillion Dollar Gap: New Mexico Fact Sheet
  11. New Mexico Watchdog, State pension bill resurrected, passes House floor; “Stop lying about me,” sponsor says; “Nice ethics,” union says, March 15, 2011
  12. Real Clear Politics, New Mexico gov. signs budget, pension changes, April 8, 2011
  13. Public Broadcasting, NM Legislature: Pension Reform, Jan. 17, 2012
  14. ABQ Journal, Breaking: Pension solvency bill endorsed by Senate on 38-4 vote, March 7, 2013
  15. Forbes, NM revenues improving, $360M available in 2013, July 15, 2011
  16. PERA, New PERA General Member Hired After July 1, 2010 See Plan Changes, June 2010
  17. USA Today, How state lawmakers pump up pensions in ways you can't, Sept. 23, 2011
  18. 18.0 18.1 New Mexico Watchdog, Update on state pension plan story: Co-chair of retirement task force says, “We’re not in crisis and we’re not going belly-up”, Sept. 10, 2010
  19. Biggs, Andrew, The Market Value of Public-Sector Pension Deficits, AEI Outlook Series, no. 1 (2010)
  20. Novy-Marx, Robert and Joshua Rauh, 2010, Public Pension Promises: How Big Are They and What Are They Worth, Journal of Finance (forthcoming)
  21. Northwestern University, The Liabilities and Risks of State-Sponsored Pension Plans, May 2010
  22. 22.0 22.1 22.2 New Mexico Watchdog, Bruce Malott’s resignation: “I have no embarrassment”, Sept. 2, 2010
  23. "Public Employee Retirement Systems State- and Locally-Administered Pensions Summary Report: 2010", United States Census Bureau, April 30, 2012
  24. 24.0 24.1 PERA investment information
  25. Annual reports
  26. Investment reports
  27. Meeting minutes
  28. Actuarial reports
  29. PERA members and beneficiaries statistics
  30. NMERB Benefits Calculator
  31. NMERB investment data
  32. NMERB Investment Policy, page 6
  33. Independent NMERB audit report, page 20
  34. Independent PERA audit report, page 22