HELENA – The Republican chairman of a special committee charged with fixing the beleaguered state pension systems said Tuesday that elements of his proposal to end the plan for new employees will be part of final negotiations on the complicated issue.
Gov. Steve Bullock’s office opposed the plan in favor of the Democrat’s proposal to fix the current system — setting up protracted negotiations over a tough political issue that has seen lots of talk and little action in recent years.
State Sen. Dave Lewis said Tuesday that he expects the Joint Select Committee on Pensions will finalize a bill in March that will include fixes sought by Republicans, such as the transition to a 401k-style retirement plan more common in the private sector.
“I am hoping I have enough Republican votes, at least I think I do, to move something because I probably won’t get Democrats,” Lewis said of the end-game. “And then it is going to be up to the governor.”
Lewis indicated again Tuesday that Republicans can help force negotiation by threatening to take the issue straight to voters with a ballot referendum that bypasses the governor’s desk. But he said no decisions have been made on that matter.
Lewis, a former state employee who gets a pension, argues the pension system is fatally flawed and needs to be shut down by not allowing more employees to join. The state would continue to pay for current employees already in the system, which is generally seen as necessary due to contractual issues.
New employees who join the system would be given the “defined contribution” equivalent to 6.9 percent of their salary. Lewis said that frees the state from market risks that can make the obligation of providing a guaranteed pension expensive.
“I am absolutely concerned about the future,” Lewis said. “I don’t want the next generation of public employees to go to the cupboard and find it bare.
Bullock’s budget director argued it would cost more, particularly in the short-term, to switch to a defined contribution plan because there would be less money going into the pensions system to keep it solvent.
Dan Villa argued the state would have to start putting about $100 million into the pensions system each year if it no longer received new employee contributions because the bills one state would have to start immediately paying the pension shortfall. The new “defined contribution” retirement system would cost extra additional money.
Bullock wants both employees and employers to pay more into the current system, which would cost the state about $60 million for each of the next two years.
Lewis countered that his proposal only costs more in the short-term because the projected 30-year shortfall has to be paid off much quicker with no new money coming in. He said eventually the defined contribution plan would be much cheaper for taxpayers.
The pensions systems have a projected deficit of about $4 billion in 30 years if nothing is done. And the state faces the threat of a lawsuit — and a court-ordered fix — if the problem persists.