STRS...take a hint from the Land of Enchantment!

From John Curry, June 27, 2010

Leaders of the next New Mexico Legislature, by the time they convene in January, should have drafts of pension reform prepared. Interim committees, in consultation with financial and actuarial experts, including public-employee union representatives, must offer a new system: One that doesn't change rules in the middle of the game for longtime workers and contributors to the public-employees retirement fund -- but which sets a steeper ladder for new hires.

http://insurancenewsnet.com/article.aspx?id=202492

New Mexico's public-worker pensions overdue for reform

The Santa Fe New Mexican, June 27, 2010

We've come a long way from the not-so-long-ago days when our working people, who carried American progress on their shoulders, labored to the edge of their deathbeds. With the New Deal came the Social Security Act of 1935 and a retirement-insurance program allowing people to leave work at 62 or 65 with a low monthly income for the rest of their lives.

All too often, that wasn't very long: People tended to drop like flies in their 70s. Government-employee organizations led efforts at lowering retirement age or pegging it to a minimum number of years in service -- all the while looking enviously at the generous terms offered to career military, police and fire folks.

With salaries often lower than those of the private sector, the civil servants proved persuasive with management and the legislative bodies administering taxpayer money: In much of the country, many have been collecting retirement incomes with fewer than 30 years on the job. If they were hired out of high school, that meant a big percentage of their old salary when they decided to stay home -- or start another job -- in their late 40s.

At the same time, we're living longer -- at the expense of the pension funds to which we've contributed, but which might spend much more on us than we put in.

Long lives and early retirement are a wonderful combination. But it's long past time to ask: How long can we keep handing out such largesse -- especially the portion of it paid by taxpayers?

Congress caught onto that notion a few decades back -- and has been raising the Social Security retirement age toward 67. State governments, however, have been slower on the uptake. That includes New Mexico, where only last year did our legislators give government retirement a serious look. They focused on "double-dipping" -- and that's a start.

But now that our state pension funds are feeling Wall Street's economic pain, not to mention that inflicted by one crook or another, governmental finance leaders should be looking around the country -- at what their counterparts are doing in public-employee retirement reform.

Even as states cope with the potentially disastrous present, they're aiming at the future -- which is the fair way to do it.

In Illinois, for example, newly hired workers -- such as there are in these belt-tightening times -- no longer will be able to retire as early as 55: Henceforth it's 67. New York, Arizona and Missouri, among others, are working on longer-career demands. In Michigan, employee-contribution levels have been raised.

Leaders of the next New Mexico Legislature, by the time they convene in January, should have drafts of pension reform prepared. Interim committees, in consultation with financial and actuarial experts, including public-employee union representatives, must offer a new system: One that doesn't change rules in the middle of the game for longtime workers and contributors to the public-employees retirement fund -- but which sets a steeper ladder for new hires.

Since the state supposedly has a freeze on new employment, this might be the opportunity it needs to at least propose pay scales competitive with the private sector -- and some already are, since salaries and benefits in certain businesses and professions can be pretty pinche.

Lawmakers should, as the economy allows, erase today's reasoning that poor pay justifies early and good retirement. When a state worker can retire after 27 years at 80 percent of his or her highest salary, that's not just generous; it's unsustainable. Until such time as we achieve the "affluent society" envisioned by some economists half a century ago, we can't offer wholesale retirement at increasingly tenderer age. Such humane thinking -- and acting -- has taken its toll on the world's welfare nations, not to mention a growing number of states.

In New Mexico, public employees already are carrying a heavier burden of the economic downturn. Morale can't be great -- and could get worse if pension reform creates two classes of worker. Just the same, such reform is overdue.