Enchantment State News

As the cost of living increases, New Mexico is seeking to reform its underfunded public pensions.

Democratic Gov. Michelle Lujan Grisham is supporting a proposal that would raise the retirement contribution amounts from taxpayers and state and local government employees, the Associated Press recently reported. She said it would right the pension-fund ship by setting it on course to eliminate unmet pension obligations within 25 years.  

The underfunded pensions for the Public Employees Retirement Association (PERA) have reached the $6.6 billion mark, causing credit-rating downgrades for Albuquerque and the state, according to the AP. A 3-percent cost-of-living increase in the public pension funds is the reason for the underfunding, says a state senator.

New Mexico state Sen. Stuart Ingle (R-Portales) | https://www.nmlegis.gov/

“They’ve just had too many cost-of-living allowances over the years,” state Sen. Stuart Ingle (R-Portales) told the Enchantment State News in a phone interview. “In 10 years, that amounts to 40 percent when you compound it.”

He said, for example, if you start at $40,000, it grows to $56,000, and when you’re 60-65 with another 15 years to live, the cost-of-living allowances continue to escalate and there is more going out than coming in.

“Pretty soon you’re paying out more than your public-employee fund is making or can make,” Ingle said.  

A cost-of-living adjustment, or COLA, is a periodic augmentation in the amount of a retired public employee’s regular pension payment due to inflation. 

“New Mexico’s pension plans, there’s nobody that equals what ours pays out and with what you pay in the United States,” Ingle said, referring to the PERA and the New Mexico Educational Retirement Board (NMERB). “I want to try to keep our pension program halfway solvent and this is one of these years when maybe we can get something done on it. Nobody’s gonna like every aspect of it. . . . We’ve either got to do something and to make it better or we’ve got to change it.”