Artlcle: Pension bailout could be costly- Legislative session could be needed to solve $300M bailout headache

By MATT GOURAS - Associated Press Writer - 12/01/2005 "Bob Vogel, director of governmental relations for the Montana School Boards Association, said they are not happy about the hit to local property taxpayers. He called it a "necessary evil." HELENA - The taxpayer bailout of the state's public employee pension systems will cost nearly $300 million over the next six years under a plan that could be headed to a special legislative session. An interim legislative panel unanimously approved the plan Wednesday, which includes a one-time infusion of $125 million into the retirement systems for public employees, teachers, sheriffs and game wardens. It also would order an increase in the employer contributions, money that comes from state and local governments and is paid for by taxpayers. By 2011, that increase will be costing taxpayers about $40 million more each year, according to an analysis done by the governor's office. Much of the money will be coming from local property taxes used to pay benefits for teachers. A total of about $288 million would be put into the retirement systems through 2011 - and the problem still wouldn't be fixed. Potential deficits in the state's teacher and public employee retirement systems rose to $1.4 billion earlier this year. Blame has been heaped on investment losses when the stock market tumbled after the 2001 terrorist attacks, benefit increases and lack of oversight. The thorny issue served as the backdrop to a dispute earlier this month when Gov. Brian Schweitzer filed a lawsuit to block a key hiring decision made by The Public Employees Retirement Administration. PERA withdrew its offer to hire Terry Teichrow as its executive director. As the stock market rose in the late 1990s, groups working on behalf of the employees helped lobby for hikes in their pension benefits. The Legislature obliged without putting any money into the system to pay for the increases. The bill is now coming due. "I am not satisfied with the (proposed fix), because all it does is put the burden on taxpayers," said Rep. Verdell Jackson, R-Kalispell. Jackson, on the State Administration and Veterans' Affairs committee that approved the plan Wednesday, said he voted for the bill to keep the issue alive, in hopes he can find another way to fix the problem. He had been seeking to cut the retirement benefits. Lawmakers have been told it would be unconstitutional to reduce the retirement benefits once they have been increased for existing employees. At the same time, the state is required to make the pension system whole again. "We are between a rock and a hard place," Jackson said. Jackson said lawmakers will also need to reform the retirement and investment boards that helped with the decisions that led to much of the deficit. He said veteran lobbyists hoodwinked inexperienced legislators, who replaced veteran lawmakers following term limits, when they helped push through the pension benefit increases in 1999-2001. "The lobbyists don't term out," he said. Schweitzer, expressing frustration at the way the problem developed, has promised to fix the pension system. The Legislature may be coming back to Helena for a special session to fix school funding and the pension issue could be included in the call. "It's clearly one of our top concerns," said Sarah Elliott, press secretary to Schweitzer. Bob Vogel, director of governmental relations for the Montana School Boards Association, said they are not happy about the hit to local property taxpayers. He called it a "necessary evil." "Local taxes will go up to pay," he said. Vogel asked lawmakers to consider using more state tax money to fix the system, and less from the school districts that employ the teachers. The committee also is looking at closing "loopholes" that allow teachers to get big increases in their retirement benefits at the end of their careers, sometimes by retiring and then coming back to work. Carroll South, executive director for the Board of Investments, said Schweitzer has made it clear to him that he is to be vocal with opposition to pension changes that could create deficits. He said he didn't feel there was anything he could have said in 2001 to stop that round of increases - without risk of "being run over by the train." "When you look at the support that bill had ... I'm not so sure it would have been safe for me to stand up and say 'wait a minute,"' he said.