ND House Rejects Closing State Pension FundsTeachers and government workers helped defeat two bills in the North Dakota House on Friday that would have closed their pension funds to newly hired employees, although advocates for overhauling the retirement systems promised the debate would continue.
By: Associated Press,
BISMARCK, N.D. (AP) — Teachers and government workers helped defeat two bills in the North Dakota House on Friday that would have closed their pension funds to newly hired employees, although advocates for overhauling the retirement systems promised the debate would continue.
In separate votes, the House rejected proposals to shut off the state Public Employees Retirement System pension fund, which covers state government employees and dozens of local agencies, and the Teachers' Fund for Retirement, which administers pensions for public school teachers.
The measure affecting the Public Employees Retirement System fell one vote short of approval. It won a 47-46 plurality, but at least 48 votes, which is a majority in the 94-member House, is needed for any measure to pass.
Representatives defeated the Teachers' Fund for Retirement measure more handily, rejecting it on a 56-38 vote. Shortly afterward, they approved a separate bill to increase the pension contribution rates from teachers and their school districts over the next four years.
Rep. David Monson, R-Osnabrock, acknowledged the two pension systems were underfunded in the aftermath of a severe stock-market downturn two years ago.
However, closing the funds to new members was "a knee-jerk reaction" that would have its own financial consequences, he said. Monson, who is a former House speaker and assistant GOP majority leader, compared the plan to selling one's winter coat in North Dakota after a few warm days in February.
"There is no crisis here. We've been here before and we will be here again. The sky is not falling," Monson said. "You don't sell, you don't panic when you're at the low. We're pretty much at the low, I hope. I think we're on the way back up."
Advocates of closing the funds said doing so would cost money, but that it would assure North Dakota taxpayers that they would eventually be shed of guaranteeing pension benefits for teachers and government workers.
Rep. Scott Louser, R-Minot, said North Dakota's pension fund shortfalls have not reached a crisis point, but he argued it was better to take action without the pressure of a looming calamity.
"We've seen examples all across the country of pension plans that are crippling state budgets," Louser said. "This is the time to act, when we're not in crisis. . . . This is a logical, thoughtful decision."
Analysts said both funds could be exhausted in 30 years if lawmakers do not take action. The bills would have closed the public employees' fund on Aug. 1, and the teachers' fund on July 1, 2012. In both cases, new hires would have been put into a 401(k)-style retirement savings plan that did not pay guaranteed benefits.
The bills would not have affected the benefits of current or retired workers. At present, retired state employees and teachers are assured a monthly pension check, which is based mostly on each worker's salary history. The checks are not indexed for inflation.
After the vote, lawmakers were abuzz about the possibility of reconsidering the public employees' pension vote when the House reconvenes on Monday.
Rep. George Keiser, R-Bismarck, missed the vote and could ask for another, as could any of the 46 legislators who voted against the bill.
Keiser said Friday he was not inclined to ask for reconsideration and said he had been leaning toward a "No" vote on the public employees' pension measure. Keiser was among the 56 House members who voted to reject closing the Teachers' Fund for Retirement.
Keiser said he missed the public employees' pension vote because he was participating in a conference call being conducted by the National Conference of Insurance Legislators, of which he is president.
The Public Employees Retirement System covers most North Dakota government workers and employees of a number of local governments, including 81 cities and 48 of the state's 53 counties. Among the cities are Fargo, West Fargo, Grand Forks and Williston.
According to the system's most recent annual report, it has almost 20,700 contributing members and about 7,400 retirees. Recent analysts' reports say the system's pension fund now can cover only 73.4 percent of its liabilities; its estimated unfunded liability was $586 million last June, compared to $284 million in June 2009.
The North Dakota Senate is considering a separate bill that would increase both employer and employee contributions to the public employees' fund to shore up its finances. The Senate's Appropriations Committee is reviewing the legislation, and the full Senate expects to vote on it next week.
The Teachers' Fund for Retirement has about 9,900 contributing members and almost 6,700 retirees, according to its most recent annual report. As of last June, it had about 70 percent of the assets needed to cover its obligations, and an unfunded liability of $795 million, public filings say.
Spokesmen for the North Dakota Public Employees' Association and the North Dakota Education Association, which represents public school teachers, said they were pleased by Friday's votes, but that they did not expect critics of the pension system to ease up.
The public employees' pension bill was "a tremendous and terrible threat to long-term state employee compensation in North Dakota," said Stuart Savelkoul, the association's director. "We're nervous that the margin is so close."
Greg Burns, the Education Association's director, called the votes "a very good thing for educators and public employees, and we think it's very good for the state as a whole."
"I think people saw the defined benefit pension crisis is really not a crisis," Burns said. "We have a way to fix it."
Supporters of switching government workers and public school teachers to 401(k)-style plans were angered, saying the Republican-controlled House had lost an opportunity to relieve taxpayers of a potentially significant burden.
Republicans hold 69 House seats to Democrats' 25. On the public employees' vote, backers of the overhaul legislation fell short of a 48-vote majority because 21 Republicans opposed them. All 25 Democrats voted no.
"It used to be that the Republican Party could blame a handful of rogue caucus members for teaming up with Democrats and defeating good legislation. That time has passed," Dustin Gawrylow, director of the North Dakota Taxpayers Association, said in a statement. "They can no longer blame Democrats . . . because Democrats barely exist in the Legislature."
Public employee pension overhaul bill is HB1228.
Teachers' pension overhaul bill is HB1256.