Idaho lawmaker wants to avoid hike for state’s employees’ pension contributions
Idaho government workers and teachers may avoid being forced to make bigger pension contributions next year after a key lawmaker asked the board overseeing the state’s $11.1 billion retirement fund to forgo a planned rate hike.
Sen. Dean Cameron, the Joint Finance-Appropriations Committee co-chair, asked the board that governs the Public Employee Retirement System of Idaho to cancel increases meant to help make up losses after the 2008 financial meltdown. The value of investments in Idaho’s fund has since recovered significantly, as markets rose.
The proposed 32 percent, three-phase increase is scheduled to begin July 1, but needs legislative approval.
The five-member pension board meets next Dec. 7 to discuss whether to recommend the increase – or change course.
Cameron, R-Rupert, said he’s concerned if the board insists on putting the hike to a vote of lawmakers, some of them will be tempted to try to reduce the system’s benefits – as many corporations have done and other states consider how to cover their funds’ massive liabilities.
“For now, everything appears to be appropriately funded,” Cameron said Thursday. “My advice to the board was … they ought to permanently forgo the (request) for any rate increase. It just fuels the whole issue” of changing the pension fund.
Active state employees now pay 6.23 percent of their salaries into the pension fund, while the employers’ share is 10.39 percent. That means somebody earning $50,000 annually pays $3,115 a year, while Idaho pays $5,200; such employees’ payments would rise by $280, if the first phase of the rate hike goes through.
From the state government’s perspective, there’s a big reason not to pursue a hike: The state doesn’t have $15 million – its share of the proposed increase just for fiscal year 2012 – due to a budget gap that could be $340 million.
“The table is bare,” said Rep. Maxine Bell, R-Jerome and Cameron’s budget committee co-leader who also backs canceling the hikes.
Idaho’s pension fund appears robust, with 86 percent of its longterm liabilities funded. But after the 2008 plunge in the value of the Idaho fund’s assets, the pension board recommended increasing worker and state contributions starting in 2011 to help make good on a $3 billion unfunded liability.
That liability – an estimate of all future payments to retirees that the fund now doesn’t have assets to cover – has since been cut to $1.6 billion, as markets recovered.
That’s much smaller than Oklahoma’s $16 billion or Maryland’s $33 billion liabilities – and is dwarfed by California’s liability, estimated in April to be nearly $240 billion.
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