Article: $722 million needed to fix pensions, lawmakers learn

By Matt Gouras - Associated Press Writer 12/14/05

"An attorney for the Montana Public Employees Retirement Board, which has been feuding with the governor over the way it hired a new executive director, said it is possible the state will be sued for not meeting its constitutional requirement to keep the pension funds whole."

HELENA — Lawmakers learned Tuesday that it will take more than $700 million in tax money to fix the crisis in state government’s pension systems.

They also were told they could face a lawsuit — much like the one forcing them to spend millions on education — if they don’t fix the systems’ financial problems soon.

The three boards responsible for running Montana’s public pension systems and managing their money faced legislative audits a day before lawmakers are expected to start working on a costly pension bailout at taxpayer expense.

Gov. Brian Schweitzer wants to spend $125 million of the state’s surplus to address part of a projected $1.46 billion in pension-fund deficits, then fix the rest of the problem later.

Erasing all of the deficits would require an immediate infusion of about $722 million, the Legislative Audit Committee was told. Returns from investing that money would cover the remainder of the deficit.

The management boards took some heat during the audit committee hearing. Some lawmakers expressed displeasure about a taxpayer bailout just a few years after public employee groups helped obtain increased pension benefits.

The state can increase benefits, as the Legislature did in 1999-2001 at the urging of a long list of lobbyists when pension funds were flush with stock-market gains, but cannot decrease them constitutionally.

Sen. Corey Stapleton, R-Billings, said that the Montana Public Employees Retirement Board and the Teachers Retirement System lobby for more benefits when the systems have cash, then ask for tax money in bad times.

‘‘Isn’t that convenient?’’ he said. ‘‘You couldn’t do that in the private sector.’’

David Senn, executive director for the Teachers Retirement System, said it had appeared the increases were affordable.

‘‘Things were looking good,’’ Senn said. ‘‘We had no idea the market was going to do what it did.’’

Stapleton said Republicans will be reluctant to go along with Schweitzer’s plan. GOP lawmakers don’t want to put more money into the pension funds until there is a complete solution on the table, Stapleton said.

The governor’s office has been adamant that it is better to start chipping away at the problem now, given that spare money is available.

Rep. Joe Balyeat, R-Bozeman, said the state risks throwing $125 million ‘‘down a rat hole’’ if the system is not first restructured.

The Montana Board of Investments, responsible for investing pension money, told lawmakers that steps toward improvements have been taken. Carroll South, the board’s executive director, said a new chief investment officer has been hired, a consultant has been brought on board and the investment mix has changed.

One Republican started circulating a petition to do more on the issue during this week’s special legislative session.

Rep. Dee Brown, R-Hungry Horse, said she wants an interim committee to take a longer look at the problem.

An attorney for the Montana Public Employees Retirement Board, which has been feuding with the governor over the way it hired a new executive director, said it is possible the state will be sued for not meeting its constitutional requirement to keep the pension funds whole.

Melanie Symons said the board has not talked about whether it will sue the state to force a cash infusion to fix the system. Other groups or individuals could sue if the large deficit lingers.

‘‘There’s a possibility a lawsuit could result,’’ Symons said.

One legislative plan calls for future increases of employer contributions, a combination of local and state tax money, along with the $125 million Schweitzer is requesting.

Symons said such a ‘‘good faith effort’’ would likely deflate the possibility of a lawsuit.

Schweitzer’s plan earmarks about $100 million for the teachers’ retirement system, and $25 million for the public employees’ pension fund.