HELENA – Like the stock market, Montana’s public pension funds are slowly starting to recover, but are still well below peak levels.
Through May 8, Montana public pension funds’ combined assets were $5.9 billion. Carroll South, executive director of the state Board of Investments, said that’s up from a low of $5.4 billion in February, but well below the peak of $8.5 billion in October 2007.
And lawmakers remain concerned the pension funds may not meet future demands without some major changes.
Legislators have assigned an interim committee to study current trends and best practices in public retirement systems.
A bill, sponsored by Rep. Don Roberts, R-Billings, appropriated $200,000 for the interim committee to hire consultants, such as actuaries, to evaluate the state’s pension system.
A recent evaluation states that the Teachers’ Retirement System’s current contribution rates will not lead to enough investment gains over time to meet its liabilities.
Roberts said changes may be needed in both the pension and investment policies. He said the public retirement and teachers’ retirement funds may be unrealistic in expecting 7.75 percent to 8 percent returns each year.
“If we can’t expect 8 percent earnings, then it would take a huge injection of taxpayers’ dollars to make the system whole,” said Sen. Dave Lewis, R-Helena, a former executive director of the Board of Investments. “And I don’t think taxpayers want to pay it.”
In 2005, the Legislature put $100 million in general fund money into the teachers’ retirement system and $25 million into the public employees’ retirement fund. Lawmakers approved another $25 million for the teachers’ fund in 2007.
However, this year, lawmakers rejected Gov. Brian Schweitzer’s request that they put $43 million in federal stimulus money into the teachers’ retirement system.
Legislators will have to decide if the state can continue to offer a defined benefit system to new employees, Lewis said.
Public employees have a “defined benefit” pension system, meaning they are guaranteed a certain monthly pension based on the number of years they worked and their highest three-year average salary.
That’s different from a 401(k), in which the monthly pension is based on the amount of money in the 401(k) when a person retires.