Pension system overhaul advances

SANTA FE — Legislation to overhaul New Mexico’s pension system for firefighters, police and other public employees is headed to the full Senate for consideration following a tense public hearing.

Members of the Senate Finance Committee voted 10-2 in favor of Senate Bill 72, which is aimed at improving the financial health of the Public Employees Retirement Association.

The vote came after harsh public testimony Monday from retirees who objected to proposed changes to how their annual cost-of-living adjustment would be calculated.

Senate Finance Chairman John Arthur Smith repeatedly banged the gavel and interrupted one speaker, urging her to focus her remarks on the bill at hand, rather than on attacking pension executives.

The proposal, in any case, is now moving to the full Senate, having cleared its final committee.

Supporters of the legislation, Senate Bill 72, said the changes are necessary to ensure the retirement system remains solvent and can continue supporting retirees who rely on their pensions.

“The retirees are a little upset, but we’re watching out for their future,” said Sen. George Muñoz, a Gallup Democrat and sponsor of the bill. “Their future benefit needs to stay in place.”

The legislation would freeze many retirees’ annual cost-of-living adjustments for a two-year period and then move to a “profit sharing” model — in which the annual raises would fluctuate between 0.5% and 3%, depending on investment returns and the financial health of the pension fund.

Employees and the government agencies they work for would have to contribute more into the retirement system, too, though there are provisions for rolling back the increased contributions as the pension fund’s finances improve.

Two senators, Democrats Pete Campos of Las Vegas and John Sapien of Corrales, voted against the bill.

Sapien questioned why the new calculation of the cost-of-living adjustment for retirees would hinge on investment performance and the finances of the retirement system as a whole, rather than on actual changes in inflation.

But he acknowledged that lawmakers face difficult choices no matter what path they choose.

“All of them are bad options,” Sapien said. “We’re trying to take the least of the bad.”

About 40,000 retirees now draw pensions from PERA, and about 50,000 employees are working and paying into the system.

The legislation is backed by Gov. Michelle Lujan Grisham.

New Mexico’s pension system has been chronically underfunded for years, legislative analysts say. Lawmakers are also considering whether to inject about $76 million into the retirement plan to help its finances.

Senate Bill 72 focuses on the Public Employees Retirement Association, not a separate pension system that covers educators.