HELENA – Saying it was betrayed by Gov. State Bullock’s office, a group representing retired Montana public employees is urging him to veto the bill that seeks to fix pensions for public employees.
“We understand that the bill is your bill, and it would be highly unusual for you to veto it at this point, but that is what we are asking,” Russell E. Wrigg, president of the Association of Montana Retired Public Employees, said in the letter Saturday to Bullock. “House Bill 454 tramples on the statutory and constitutional rights of retirees and has the potential to inflict severe harm to current and future retirees.”
About 2,000 retirees in the Public Employees’ Retirement System belong to the association.
“The association feels betrayed by your office and is adamantly opposed to HB454 at this time,” the letter said.
At issue was an amendment to the Guaranteed Annual Benefit Adjustment, to reduce the current 3 percent annual cost of living pension raises.
In response, Bullock’s budget director Dan Villa said the governor’s office opposed the amendment that sought to change the GABA and questioned its constitutionality.
“We understand that both current employees and retirees are considering legal challenges to address the amendments, and we support that action,” Villa said. “It’s important to keep in mind that this likely unconstitutional amendment doesn’t change one important fact: by implementing the remainder of Gov. Bullock’s plan, Montana is the first state in the nation to fix our pension system without raising taxes.”
Villa added: “Failure to act now would pose an even greater risk to current and future retirees.”
The bill was the Bullock administration’s measure to fix the finances of PERS, while HB377 was its plan to address the Teachers’ Retirement System.
Montana’s eight pensions face a combined potential shortfall of $4.3 billion, largely because their investments lost about one-fourth of their value during the 2008 recession. Fixing the pension systems financially was major issue before the 2013 Legislature.
Wrigg said HB454, in its original form, was introduced at the request of Bullock’s office. It provided that both employees and employers contribute an additional 1 percent of salary to the PERS pension fund, along with coal tax money and interest. It helped make PERS actuarially sound and didn’t modify the 3 percent GABA.
But Wrigg said the Joint Select Committee on Pensions amended the bill to reduce the GABA from 3 percent to 1 percent for most retirees and for future retirees.
“While those amendments were distasteful, at least they contained a trigger to allow the GABA to be returned to 3 percent when certain actuarial factors came to be,” Wrigg said.
While not actively opposing HB454, Wrigg said the group told legislators that it believed the bill violated employees’ contractual rights.
When the bill reached the Senate Finance and Claims Committee, Wrigg said it was further amended by Sen. Jon Sesso, D-Butte, which “made a bad bill worse.” He said it is his understanding that Bullock’s office was “actively involved” in those amendments, although Villa said the administration supported only a portion of them.
The association opposed the Sesso amendments, Wrigg said, but was unaware of their full impact until after the Senate passed HB454 and it returned to the House. An updated fiscal note was published then to explain its impact.
HB454 as amended permanently reduced the GABA to 1.5 percent from 3 percent, but included a trigger that further cut it to 0.9 percent in 2014, Wrigg said.
“Even worse, it contains no trigger for the GABA to be increased back to the 1.5 percent or to 3 percent,” Wrigg said. “While the bill impliedly provides that the GABA can return to 1.5 percent, there is no specific mechanism that provides for such an increase.”
Wrigg said it could be that the GABA is permanently fixed at 0.9 percent.
“Moreover, we were shocked to find out that the 1 percent contribution by the employees and the employers would only last six months, and would be eliminated Jan. 1, 2014,” Wrigg said.