HELENA – The Montana Senate narrowly endorsed a bid to offset the declining value of state pension funds by prohibiting full benefits for teachers and state employees who retire early.
Senate Bill 484 would apply only to new hires in the public employees and teacher retirement systems. The Montana Constitution prohibits changing benefits guaranteed to existing employees.
The measure introduced by Republican Sen. Joe Balyeat of Bozeman was affirmed on a nearly party line vote of 26-24 on Wednesday. After one more Senate vote, it may move to the House.
“The current budget issues we have are dwarfed by the magnitude of the pension crisis that we are faced with,” Balyeat told fellow lawmakers.
Budget revenue estimates have been revised downward by about $115 million, while the value of the state’s pension funds has dropped by about $1.7 billion since July, a 22 percent decrease. The drop is the funds’ largest on record and may wrangle taxpayers into a bailout if the numbers do not improve.
The proposed law would stem the growth of the funds’ liabilities by denying full benefits to those retiring before age 65. Currently, full benefits are given at any retirement age after 30 years of work.
The bill’s supporters acknowledge it would create a drastically different retirement system, but said the funds’ rapid plummet in value demands harsh and immediate action.
“I think we run the risk of ending up with a Ponzi scheme here where the fund itself is so hollowed out we’re paying out benefits with employee contributions,” said Republican Sen. Dave Lewis of Helena, a former state budget director who supports the bill.
Democrats voted against the measure, which is also opposed by the Public Employees Retirement System.
“We’re being asked to stampede here. The sponsor here has said three times everybody is scared,” said Sen. David Wanzenried, D-Missoula. “If there’s a will to do something this session we ought to take the initiative to pull the parties together and see what the ideas are.”
Wanzenried and others said lawmakers may need to look at the pension fund problem in a special session after new measures of the funds’ value are released in July.
Opponents also argue changing early retirement rules will make it difficult to retain and recruit teachers and public employees, while exacerbating the shortfall between pension assets and liabilities.
“We anticipate that the number of new employees who will choose the defined contribution plan will skyrocket if this passes,” said Scott Miller, attorney for the Public Employees Retirement System.
By driving new hires to choose a defined contribution plan, rather than a defined benefit plan, the bill could result in fewer people paying into the fund for defined-benefit plans, Miller said.
The Public Employees Retirement System would instead like to see employer contributions increased to handle the funds’ responsibilities. Roxanne Minnehan, the system’s director, said she has asked lawmakers to sponsor legislation for such an increase, but no one has been willing.