House committee approves PERSI contribution increase
The House Commerce and Human Resources Committee Tuesday approved a retirement pension contribution increase for members of the Public Employee Retirement System of Idaho (PERSI) even though an outside analyst’s projection says that the agency carries an approximately $10 billion unfunded liability.
“I have never heard anything about a $10 billion unfunded liability,” Rep. Douglas Hancey, R-Rexburg, told IdahoReporter.com after the committee hearing. “Where did that figure come from?”
The figure comes from Bob Williams, a researcher with the private, nonpartisan State Budget Solutions organization. Not only does he have concerns about an unfunded liability, Williams also worries that PERSI is mistakenly assuming that its funds’ investments will produce a return of 7-8 percent annually.
“The state is using budgeting gimmicks—unreasonable expectations on the rate of return in their investments, writing off financial losses over several years and so forth—in estimating that they have only $1.2 billion in unfunded liabilities,” Williams has told IdahoReporter.com. “They aren’t being realistic.”
At its December meeting, the PERSI board of directors granted a 1 percent cost-of-living adjustment (COLA) to its 37,150 retirees. The action will cost the fund an estimated $50 million annually, according to Patrice Perow, PERSI spokesperson. Perow told IdahoReporter.com that the economic markers PERSI uses for determining an increase actually justified a 1.69 percent increase.
PERSI provides retirement benefits and services to a majority of state and local government employees throughout Idaho. PERSI membership includes full-time state employees and local school district employees, as well as for employees of most other city and county government agencies.
The PERSI board also took action at its December meeting on a revenue measure that is expected to generate approximately $40 million from its 65,270 active members, including contributions from the employees amounting to approximately $25 million annually, but also costing the governmental agencies that employ PERSI members an extra $15 million annually. Perow notes that “the rate increase was first proposed in 2009,” but had been postponed.
In recent years, questions have emerged about retirement funds’ financial sustainability amid state and local government budget reductions and profiles of state liabilities that generally show pension plans to be funded at less than 100 percent.
In Idaho, for example, Perow says PERSI is currently funded to cover 86.6 percent of its current obligations. According to records obtained by IdahoReporter.com, figures now show that Idaho taxpayers are contributing $2 for every $1 that PERSI members contribute to their own retirement accounts.
When asked about the additional $15 million cost to government agencies that the contribution increase will entail, Rep. Ron Mendive, R-Coeur d'Alene, told IdahoReporter.com “That’s more than I expected. I didn’t realize it would be that high. I guess we should have asked about this.” Mendive also expressed surprise at the unfunded liability figure, and noted that information he has received from PERSI portrayed the agency as “quite solvent.”