State should fix pensions now

And so it begins to unfold. Problems with state retirement programs were largely swept under the rug during the recently concluded legislative session, but now there are plans to shed light on why the funds are faced with huge deficits.

Figuring out what happened through a study is fine and dandy, but the main task at hand is developing a remedy to restore the retirement accounts. Hopefully, the situation can be competently addressed before the next Legislature meets in two years.

We say this because we consistently maintain Montana state government should be responsive, and in this case, solving the problem in 2007 isn't exactly a nimble response when lawmakers were aware of the problem in the fall of 2004. When fiscal problems are left to fester, it usually costs taxpayers more money in the end.

The problems with the Public Employees Retirement System and the Teachers Retirement System were first reported last fall through a legislative audit. That report found that the two systems, which have 71,000 active and retired members, have long-term financial obligations that far exceed income from contributions and investments.

The teachers' pension deficit grew from $384 million in 2002 to $758 million two years later, while the public employees' deficit increased from $1 million to $467 million over the same period.

The reason for the decline has generally been attributed to investment losses that came when the stock market tumbled in the wake of the 2001 terrorist attacks. But Gov. Brian Schweitzer's administration suspects that an increase in benefits, granted prior to the stock market decline, probably compounded the deficit growth. Some lawmakers have questioned whether the state Board of Investments made some poor investment decisions, adding to the problem.

Given that many people have suffered losses in their 401(k) retirement programs during the same period, some folks are wondering why state government has to bail out the retirement systems at all. No one is offering to help Mr. and Mrs. Smith for their equally worrisome losses.

The answer here is pretty simple: The two retirement systems aren't 401(k) plans at all; they are state-sponsored pension funds subject to legal requirements. It's generally recognized that state government has a responsibility to keep the systems financially sound.

But despite that responsibility, lawmakers killed two bills that would have started the process of bailing out the pension funds. The bills would have required the state to increase contributions to the pension plan by $10 million over the next two years, and local governments would have been required to raise an additional $15 million through property taxes from people who are trying, as noted, to recover their own retirement accounts.

It's pretty clear that Gov. Schweitzer's appropriate promise to avoid new or increased taxes played a part in the bills being quashed.

But this is a "must-fix" situation that should have been addressed with money that was available. It should have been a higher priority for a Legislature that managed to increase general fund spending by more than 11 percent. And it won't get any better by waiting to see which way the political winds shift in the next election.

It's an obligation, and obligations have to be met now, not tomorrow.