Patricia “Patty” French, the board chair of the Public Employees Retirement Association, had an … interesting piece in New Mexico Political Report this week. Thanks to reforms adopted in 2013, the official beamed, PERA is “projected to meet our goal of being 100% funded by 2043.”
Feeling better about the Land of Enchantment’s long-term fiscal solvency now? Probably not. But there’s reason for more worry. As the Pew Charitable Trusts recently documented, New Mexico’s total unfunded liabilities — pensions and healthcare for government workers, as well as bonded debt — are quite disturbing. When ranked according to share of state personal income, New Mexico is sixth from the bottom:
Give French her due. There’s no question that 2013’s pension-reform reform package was a decent first step. Among other things, it reduced cost-of-living (COLA) adjustments from 3 percent to 2 percent for most beneficiaries, delayed COLA eligibility, increased employee contributions, and lengthened the vesting period.
But the ultimate answer to New Mexico’s mammoth pension liability remains a full transfer of all new employees to a defined-contribution system. A flexible, modern approach to retirement income would be good for workers and taxpayers alike. Rest assured, recognizing the power of state-employee unions, legislators’ desire to shift to a 401(k) system is low.