Pension funds seek financial boost from contributors

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Funding deficiencies across several state public pension and retiree plans could mean a series of benefit reductions along with contribution increases.

Those changes are included in the second pension omnibus bill. Sponsored by Rep. Mary Murphy (DFL-Hermantown), the House Government Operations Committee, on Tuesday, approved and referred HF1152 to the House Rules and Legislative Administrative Committee.

With both employer and employee contribution increases proposed, “it’s a shared sacrifice approach,” Murphy said.

Compared to past pension bills, she added that there is less encouragement for early retirement, too.

What’s in the bill?

The following are selected bills that have been incorporated in part or in whole into the second omnibus pension bill:

There is strong Republican opposition to the approximate $13 million funding that would be used to aid the Duluth and St. Paul Teachers Retirement Funds along with a 1 percent post-retirement cost of living adjustment for Duluth teachers.

Lawrence Martin, executive director of the Legislative Commission on Pensions and Retirement, said that both pension plans are currently experiencing funding deficiencies of over 35 percent. Both funds will also see increased employee and employer contributions totaling about 1 percent in two steps.

Rep. Steve Drazkowski (R-Mazeppa) called the provision to use taxpayer funding a bail-out, adding that a cost of living adjustment included is not common in the private sector.

“These funds are failing, and we continue to go to the taxpayers and take more of their money to bail them out instead of structurally fixing the problem we have in the first place,” he said.

Murphy countered that the Duluth teachers have received limited state aid compared to other employees and have not seen a post-retirement cost of living adjustment increase in three years.

State patrol, fire and police pension plan members, meanwhile, will see benefit reduction and contribution increases in the bill.

Due to a funding deficiency of 27.2 percent for the state patrol pension plan, the bill calls for a two-step contribution rate increases totaling 2 percent and 3 percent for employers in the bill.

Increased service requirements for police and fire pension members from three to 10 years for members employed after June 30, 2010, and 20 years for members employed after June 30, 2014, also aim to address the plan’s funding deficiency of 22 percent. Police and fire members and employers could pay contribution two-step increases totaling 3 percent each in the bill.

Rep. Tim O‘Driscoll (R-Sartell) said major work is still needed to keep the pensions afloat.

Rep. Ryan Winkler (DFL-Golden Valley), pointed out that with 1.6 percent of the state’s budget going to pension plans, Minnesota is among the states that spend very little on pensions.

“We are extremely cautious and conservative on what we do,” he said.

The provisions of the companion, SF1191, sponsored by Senate President Sandy Pappas (DFL-St. Paul), have been incorporated into SF489, also sponsored by Pappas, and awaits action by the full Senate.