Cain: Support SB 72, Which Reforms PERA Pension System

State Director
Americans for Prosperity New Mexico

Dear Governor, Lt. Governor, Attorney General, Treasurer, Cabinet Secretaries, Senators, Representatives and Staff,

On behalf of Americans for Prosperity-New Mexico activists across the state, I urge you to support Senate Bill 72, which reforms the PERA Public Employees Retirement Association pension system, when it is voted on. This vote may be recorded in our 2020 session legislative scorecard.

Senate Bill 72 sponsored by Sen. George K. Munoz would institute much needed reforms to the Public Employees Retirement Association pension fund. Some of the important changes that this legislation includes are increasing the employee and employer contributions and changing the COLA system to be more responsive to the market. However, this is just an important first step and additional changes are necessary.

Over 25 years, this plan should reduce the $7 billion PERA unfunded liability by $6 billion. Unfunded pension liabilities and other post-employment benefits across the United States exceed $6 trillion. This poses a risk for taxpayers who fund the system, as well as the beneficiaries of the plan.

Senate Bill 72 increases both the employer contribution, as well as the employee contribution, requiring both parties to be part of the solution. To avoid a sudden increase, the legislation phases the increases in contributions over a period of four years.

Another modest improvement to the PERA system that this legislation includes is the move to a new cost-of-living adjustment (COLA). Having a COLA that better reflects inflation is an improvement over a flat COLA because it is more responsive to the market.

However, the change does not occur for retirees over 75 years of age, retirees who are disabled, those with 25 years or more of service and those with less than $25,000 in yearly benefits (an increase from $20,000 in current law). In fact, these individuals will receive an increased COLA of 2.5 percent. This piece of the plan does come with a cost of $76 million dollars over three years to pay for the so-called “13th check”.

While this plan offers improvements in the system for both employees and taxpayers by addressing some necessary changes now, and provides increased contributions from employees, there are still issues that need to be resolved. One such issue, is that PERA, like many funds, uses an assumed rate of return that is much higher than what can reasonably be expected to occur over time.

I look forward to working with the committee, the legislature, the governor and the supporters of this legislation, including PERA and public labor unions, to make future changes in New Mexico’s public pension system. These changes will help ensure the long-term fiscal solvency of our state’s public pension system, protecting both taxpayers and beneficiaries.

It is for these reasons that I respectfully ask you to vote yes and support Senate Bill 72.

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