State pension system must be fixed

It was about one year ago when lame-duck Gov. Schweitzer proposed a solution to Montana’s public-employee pension problem. 

It was well recognized at the time that the governor’s solution had no realistic chance of moving forward, but at least it brought some attention to a growing problem. At the time, we were talking about a $3.4 billion long-term shortfall in the public-employee and teacher retirement systems.

Today, that number has grown to $4.3 billion, making this matter even more urgent, and as the final days of the 2013 Legislature dwindle down to a precious few, there are three bills still alive which could help resolve or alleviate the situation.

Let’s be clear about the problem first. The state of Montana has promised its public employees and teachers a guaranteed pension benefit after a certain length of service, but the state does not anticipate having enough money to meet those obligations over the long term.

Two bills — House Bill 377 and House Bill 454 — aim to improve the pension funds’ solubility by increasing contributions made by both current employees and employers. They also provide for a moderate decrease in benefits if certain actuarial conditions are met.

Originally, HB 454 also contained a provision that would have allocated a portion of the coal-severance tax income to the public employees’ retirement system, but that has since been removed. 

We are encouraged that these bills take steps in the right direction, but we wonder if they may not be baby steps when giant steps are needed. After all, there are a lot of teachers and a lot of public employees, and a lot of them are politically active voters who will not be happy if their pensions are substantially cut. There are also unions who will work to prevent benefits of future employees being cut, so there is a lot of pressure to fix the problem with Band-Aids when the equivalent of amputation may be the more appropriate treatment.

That puts legislators in a tough position, which is why we had high hopes for a bill proposed by Sen. Dee Brown, R-Hungry Horse, which would put a referendum on the ballot to allow the state’s residents to decide for themselves whether they want to make a major change in the state’s pension programs.

That referendum, if passed, would require “new public employees who would otherwise become members of the public employees’ or teachers’ retirement system to instead become members of a defined contribution retirement plan similar to a 401(k) plan.”

In essence, that would put future public employees in the same boat as most private sector employees, allowing part of their compensation to be invested toward their retirement, but with no guarantee of a specific outcome. Employers would also contribute toward new employees’ retirements as well as contributing a similar amount toward satisfying the outstanding liability of the defined benefit pension system that now exists.

We think the voters of the state, who have made significant cutbacks in their own finances during hard times, would probably approve such a system. Whether legislators and the governor will have the courage to let voters make the choice remains to be seen, however. 

Though it may represent the only financially sound solution available, at this point Brown’s bill is tabled in committee.

Editorials represent the majority opinion of the Daily Inter Lake’s editorial board.