Lots of news to report on government pensions. For starters, Carter Bundy of AFSCME and I have disagreed on a variety of issues (just look it up), but I completely agree with him that if New Mexico’s Supreme Court voids the pension deal reached during the last session on the grounds that COLA adjustments violate the “property rights” of retirees, then New Mexico will be on the path of Detroit.
Interestingly-enough, our friends at State Budget Solutions shined a light on the pension situations of New Mexico and other states in a recent brief. According to the report, New Mexico faces an unfunded pension liability of $42 billion with a funded/unfunded ratio of 33%. The average state ratio is 39%. More problematic is the fact that our liability as a percentage of the economy is 53% which is the second-highest among states. Ohio’s is 56%, but the average state’s is only 27%.
Unfortunately, New Mexico’s government pension system is already bleak. The Courts can only make the situation bleaker with an adverse decision.
Lastly, there has been a fair amount of discussion of judicial pensions in New Mexico and the need to reform them. We agree. In fact, policymakers should consider transforming judicial pensions into a defined contribution (as opposed to a defined benefit) program. This would protect taxpayers while allowing some of the most educated and highly-paid public employees in New Mexico to invest their own money for their own retirements. One objection to defined contribution retirement systems is that average government workers are not capable of investing for their own retirements, but judges would seem to be highly-educated enough to be a test-case for this reform…perhaps freeing additional funds for judicial pay raises?