Pay, pension bills advance in the House

HELENA — The House on Thursday approved and sent to the Senate a bill to raise state employees’ pay and to fix the state’s public pension funds.

In addition, a new pension bill was introduced calling for a referendum to go on the 2014 ballot to require new public employees to become members of a “defined contribution” plan, which is like a 401(k) plan in the private sector. Sen. Dee Brown, R-Hungry Horse, is the sponsor of Senate Bill 406.

Most public employees now join “defined benefit” pension plans. These guarantee pensions for retirees based on a formula that uses the number of years they worked for the public agencies and the averages of their top years’ salaries.

On a 65-34 vote, the House gave final approval to HB13, by Rep. Kathy Swanson, D-Anaconda, which provides money for pay hikes for state employees.

The bill has been amended and no longer provides for 5 percent, across-the-board increases in state employees’ base pay in each of the next two years, as was negotiated by unions and then-Gov. Brian Schweitzer. Gov. Steve Bullock also has endorsed the agreement.

Instead, it appropriates $113.7 million over the next two years for raises. That is $38.2 million or 25 percent less than the $151.9 million that Bullock had budgeted for the matching 5 percent raises.

As amended, the bill would leave it up to the executive branch to divvy up the raises and direct it to pay “particular attention to the lower pay bands and those who did not receive a base pay increase in the biennium beginning July 1, 2011.”

Many state workers have not had an increase in base pay for four years. However, about half of the executive branch workers received pay raises in fiscal 2012 through a separate “broadband” pay plan.

The House gave final approval to two bills intended to shore up Montana’s financially troubled public pension funds, which face a potential shortfall of $4.3 billion.

Both bills retain the “defined benefit” pension systems. They increase the contributions made by both current employees and employers and rely on infusion of cash from natural resource funds and, in case of the Teachers’ Retirement System, excess school district reserves, to help improve their financial footing.

HB377, by Rep. Tom Woods, D-Bozeman, which targets the Teachers’ Retirement System, passed 60-39.

HB454, by Rep. Bill McChesney, D-Miles City, which seeks to fix the Public Employees’ Retirement System, was approved by 64-35.

Meanwhile, Brown’s proposed referendum would require all new public employees to become members of a “defined contribution” retirement plan, which is similar to 401(k) plans common in the private sector.

Brown said she believes “defined contribution” retirement plans need to be debated at the Legislature.

“It’s part of the mix,” Brown said. “If we don’t have that discussion, I think we have fallen down on our obligation to the taxpayers of Montana.”

She said she hopes Bullock and legislators can come up with a retirement plan that is portable, like a defined contribution plan. That way Montanans who have left to work in other states can return with their “defined contribution” retirement plans instead of having to start over in “defined benefit” plans.

A similar proposal, HB338, by Rep. Keith Regier, R-Kalispell, was tabled.

Brown’s bill would require a certain percentage of employer and employee contributions to go to pay off the unfunded liabilities of the “defined benefit” plans, while the rest would go in the “defined benefit” plan. After that obligation is paid off, all contributions would go into the employees’ retirement accounts.

In response, MEA-MFT President Eric Feaver called the proposed referendum “capricious” and “cynical.” Public employees have opposed these bills and want to retain the defined benefit pension systems.

“I find it hard to believe after this Legislature has buried all of those DC (defined contribution) plans it will go with that,” he said. “I suppose they could refer a referendum plan out there, but it would frightful. It would create a horrendous black hole.”

Distributed by MCT Information Services