State’s pension fund is in good shape and getting better

As chair of the PERA Board of Trustees, I welcome the Journal’s recent focus on New Mexico’s pension liabilities (editorial, Aug.10). While PERA is in much better shape since enactment of pension reform in 2013, I agree that the board owes a duty to our members and the state to ensure we can pay the retirement benefits our members have earned.

Moody’s recent actions on the state’s bond rating are notable. However, Moody’s did recognize that the state’s direct pension liabilities for PERA are “moderate” and using Moody’s own methodology for calculating liabilities, the adjusted net pension liability for PERA is lower than the median for other U.S. states.

Long before Moody’s actions, the board in January 2017 acknowledged PERA was facing headwinds in paying down its unfunded liability by a target date of 2043. At that time, the board embarked on a year-long review of the impact of the 2013 pension reforms and what further adjustments to PERA’s investments, governance structures and benefits might be necessary to ensure the long-term solvency of the PERA Fund.

The board’s focus on liabilities has led to significant improvements in board governance and will lead to improvements to our investment strategies. This summer, the board took several important steps such as setting more appropriate investment and demographic assumptions. Taken together, these changes will provide a more realistic basis for analyzing the overall fiscal stability of the fund going forward.

The time and effort spent by the board over the past year-anda-half have also positioned us to make recommendations to the Legislature in 2019 to fully pay off our liabilities. While the specifics of those recommendations are being developed by the board during this summer and early fall, I want to assure our members and policy-makers that we are committed to this process and to continuing to lead.

I would note, however, that simply switching employees to a 401(k) model is far from a magic bullet. In fact, such a switch would have no impact on the current liabilities of PERA, and study after study has shown that a defined benefit model like PERA’s is the only one that provides a safe and steady source of retirement income.

If further refinements to the PERA defined benefit are necessary, I am confident they can be made in a manner that protects the core benefit promised to our 90,000 members while helping the state avoid further negative impact from pension liabilities. The PERA benefit is sustainable and can be provided in a cost-effective manner for current and future generations of public employees.

In 2017, PERA paid out more than $1 billion in pension benefits with more than 90 percent of that money remaining in the state. That is an enormously important economic resource, not only to PERA members, but to New Mexico’s economy. The PERA board is focused on making sound decisions to protect that valuable resource for our members and New Mexico.