The Competitive Enterprise Institute is a free market group based in Washington with which we sometimes work. They, like Rio Grande Foundation, are concerned about the fiscal impact of government employee pensions, specifically the fact that they are under-funded and poorly-designed in the first place. As time passes absent systemic reforms, these pension systems are destined to consume ever-greater public resources.
The RGF has known for years that New Mexico’s pension system was among the most troubled in the nation, but efforts to compare pension problems from state-to-state are challenging. The CEI report (available here) offers several different evaluations based on different methodologies each using their own calculation techniques. All of these are useful, but as Table 8 of the report illustrates, New Mexico’s pension system, when compared with those of other states, fares the worst when the various studies are factored together.
This poor result is particularly amazing considering the constant attention (at both the state and national levels) given to pension reforms in Illinois and other states facing pension issues.
Other states are dealing with the pension reform issue. Oklahoma recently shifted all new hires to a 401K-style system.
And I think the N.M. state pension crisis exists despite the fact that N.M. has the 2d highest contribution rate for state workers in the U.S. of 18% (second only to IL, which contributes a whopping 33%).
As our children and grandchildren leave the state for better employment opportunities elsewhere,single party Dem rule will continue until the state collapses financially ,and the only people still residing here are recipients of government aid and government workers who administer it.
NM has one of the highest poverty rates in the nation. We find no problem paying for Medicaid, Welfare and Illegals. According to records, 70% of babies born in NM are on Medicaid. Why are people who bring kids into this world with no means to support them not charged with Child Endangerment? They are going to end up in poverty and on the public trough for most of their lives. The least the State should do is fully fund the pension plans for those who actually worked for it.
Has anyone figured out how many members of the New Mexico legislature are drawing (or are eligible for) government employee pensions?
With no private sector to speak of, most of the state’s political class and much of the electorate is rooted in a government-employee culture in which defined-benefit pensions are considered an entitlement and the 401K is a foreign concept.
Paul;
It is my understanding, as a P.E.R.A., member that the cost to the taxpayer occurs only during the period of employment; that pensions are funded by investment returns and that N.M.P.E.R.A is now solvent, due to recent changes enacted by the state legislature. Governor Martinez agreed to “sign off ” on the changes, provided there would be no additional costs to the taxpayer.
I attended a P.E.R.A. Board Outreach Meeting in Albuquerque, two meetings of the Pensions and Benefits Interim Committee at the Capital and a P.E.R.A. board meeting during the fiscal crisis.
John Rivers
According to this article, the recent pension bill DID increase taxpayer contribution by 0.4 percent. That may be a small number, but we’re talking about really big numbers here. The bigger issue is that these programs assume a higher rate of return than is typically achieved in the market thus creating an “unfunded liability.” Over time, this situation will require taxpayers to kick in more money. Here’s an article one of our analysts wrote on the issue.
I believe the expected rate of return is 6% – 7%.
Paul;
In one of your attachments, there is indication that the cost to the state for managing the pension system is 6%; so that should be sufficient.