MN Pension Commission OKs Harmful Bill

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AFSCME Council 5 members attended every Pension Commission meeting this legislative session, including the vote on the Omnibus Retirement Bill Wednesday, to show support for strong pensions.
AFSCME Council 5 members attended every Pension Commission meeting this legislative session, including the vote on the Omnibus Retirement Bill Wednesday, to show support for strong pensions.

The Minnesota Legislative Commission on Pensions and Retirement passed a measure Wednesday that’s harmful to public workers in the MSRS, PERA and TRA plans.

Eight GOP members voted for the Omnibus Retirement Bill: Reps. Tim O'Driscoll (vice chair), Sarah Anderson, Roz Peterson, Bob Vogel; and Senators Julie Rosen (chair), David Senjem, Gary Dahms and John Jasinski. Four DFL members voted against it: Senators Sandy Pappas and Dan Schoen; and Reps. Paul Thissen and Mary Murphy.

The bill:

  • Includes a 1% cost of living adjustment (COLA) for five years and 1.5% thereafter. (The Governor and MSRS Board propose 1.5%.) Moving from the current 2% COLA to 1% would cost someone with an average MSRS pension of $16,000 about $160 a year, and $3,717 over 20 years.)
  • Increases the employer contribution rates .75% from 5.5% to 6.25% over two years and the employee contribution to 6 percent over two years.  (The Governor and MSRS Board propose a 2.25% phased-in increase from the employer.)
  • Negatively changes the augmentation rates for both deferred and active members.
  • Contains additional provisions of concern for MSRS, PERA and TRA.

“It was very clear these are party-line decisions,” said SEPC and Corrections Policy Committee president John Hillyard, who serves on Council 5’s Executive Board. “The moves they made were strictly to harm the pension plans, not to help. With a surplus of $1.6 billion, it’s more about giving back to the rich and taking away from the middle class -- this is a direct attack on our way of life.”

“Retirees are going to be guessing as to whether they should be buying their medicine or heating,” said Jeff Birttnen, president of AFSCME Council 5 Retirees United. He said retirees plan their retirements based on years of service and promised pensions, and now those pensions are being cut.  “Future retirees are going to be receiving that much less.”

Council 5 members pointed out it’s not just AFSCME that’s affected: GOP Pension Commission members voted against amendments to help teachers and the spouses of police and firefighters. The proposed changes to MSRS, PERA, TRA would hurt nearly all public workers.

“Doing that is obscene in the context of a $1.6 billion budget surplus,” said DNR worker Eric Pascal, who serves on Council 5’s Executive Board.

“The majority in the Commission revealed their lack of respect for workers,” said Pascal, who points out that while the Commission did increase the employer contributions slightly, that increase wasn’t as much as needed. They didn’t vote in any means of paying for it, either.

“As it stands right now, those contributions are going to be paid for by cuts within other agency budgets,” Pascal said. That doesn’t help workers.” Or our fellow Minnesotans.

That lack of designated funding was a hot topic for lawmakers.

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“I want to get clarification if there’s actually money to pay for these increases,” Thissen asked. “We go through all this work, we put the people through all kinds of contortions here. After promise after promise for months that we’re actually going to get money in this pension bill, and it’s not showing up, I’m going to keep asking this question until the promise is actually kept.”

“It’s an unusual circumstance to not know what the money is, especially when we’re about to vote,” Pappas agreed. “I don’t think it’s a good precedent.”

“This is a moving target,” Rosen told the Commission. As Senate Finance Committee chair, she said she’ll make sure finding the money continues to be a priority. “What’s going to happen in the next 10 days, I can’t tell you that.”

Along with figuring out where the money is, Pappas said lawmakers need to be careful about pushing people into early retirement because they fear possible changes in their pensions, especially in light of the teacher shortage.

Lawmakers offered a series of amendments including:

  • Thissen’s amendment to remove PERA provisions from the bill that the PERA board and members had opposed was defeated. (He and some other lawmakers pointed out the Commission generally only makes big changes to pension systems when the boards and those affected are in agreement.) “PERA is sustainable. Why would we reduce people’s benefits?”
  • A measure to increase benefits for the spouses of police and firefighters went down on a party-line vote, with the GOP against it and DFL members for it.
  • An amendment by Pappas that gives workers more time to adjust to a proposed change in the pension system was approved. The bill would delay a retiree’s first COLA until “normal retirement age.” Pappas’ amendment pushes back the implementation until 2023.

IB ImageDFL Pension Commission members also expressed concern about cutting pensions and dumping the burden on local governments.

“It seems like we’re going down the path with this Pension Commission of promises made to local communities to cover pension costs are going to be ignored to balance the state’s budget,” Thissen said. He said he didn’t agree with that approach, but if the state was going to do it, lawmakers had to spread the burden fairly across all communities, not pick and choose as both the House and Senate propose doing by underfunding or eliminating the state’s contribution to the Minneapolis employees’ retirement fund.

Rosen closed the Pension Commission meeting by saying Minnesota is known nationwide as a place that’s serious about its pensions, and has much healthier pensions than most states. She said she’ll continue defending pension plans.

After approval by the Pension Commission Wednesday, the bill also was passed by the Senate Committee on State Government Finance and the Senate Rules Committee. The Senate Committee on Finance is expected to hear it Thursday afternoon or after session in Room 1200, Minnesota Senate Building. 

AFSCME members from Corrections, DNR, DHS, Council 5 Retirees United and our Council 5 Executive Board made a strong showing at every Pension Commission hearing, starting in January. They plan to shadow the bill each step of the way and hold legislators who vote against strong pensions accountable in 2018.