ND Senate Bails Out Public Worker Pensions, But Authorizes Study For Move To Defined Contribution Plans

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In his speech carrying SB2059 to the floor, Senator Dick Dever noted an alarming fact that I’ve written about before here on SAB: North Dakota’s public employee pension system, PERS, has fallen to being only 67.4% funded. In 2011 the fund was 70.5% funded, and not so many years ago the fund was 104% funded.

North Dakota is talked about often as having skipped the national recession, but this is one area of trouble the state hasn’t avoided. North Dakota’s pensions are in trouble (it’s worth noting that the state’s other largest pension fund, the Teachers Fund For Retirement, was only 60% funded per the latest audit.

Unfortunately, as these funds crater, the only “solution” (if it can be called that) the state legislature has been willing to embrace has been for taxpayer bailouts of the funds. These are done under the guise of contribution levels for both employers and employees going up, but since the taxpayers are both the employer and the ones providing the funds for the employees, it’s really just a bailout.

SB2059 is a little different though. It was amended in committee to contain an authorization for a study into the desirability of the existing pension format, and a look at a move to defined contribution plans. That’s a step in the right direction. Here’s the floor debate for the bill, which ultimately passed on a 35 – 12 vote.

There seemed to be some consensus on the floor that the future of these pensions need close scrutiny, which is a good sign. At least a majority of the legislators seem willing to admit there’s a problem, but as Senator Dever pointed out whatever is done with the pension plan going forward the state has obligations made to current employees now.

That’s true. Still, it’s hard not to see Senator Dwight Cook’s point too. “We are making a promise to some very important people…that maybe future legislators can’t keep,” he said during the floor debate. “I’m going to vote red [no] because I’m uncomfortable with this bill.”

What’s worrisome is that North Dakota has the resources to make a move to a defined contribution system of pensions easily now. It wouldn’t be hard to appropriate funds to pay out defined benefits to those in the existing system, while moving new hires over to a defined contribution system that would tie funds to individual employees and put them in charge of investments.

Right now public employees are at the mercy of the decisions made by the state’s investment officials. Wouldn’t it be a better situation to have the employees in charge of their own retirements? Especially when it removes the taxpayers from potentially budget-busting consequences?

As Senator John Andrist pointed out during the debate, these defined-benefit pensions are going broke all over the country in both the public and private sectors. The are systemically flawed. There is no bailout or reform that can fix them. We need something new. We aren’t getting that with this bill, but at least we’re getting the authorization to explore something new which may set the stage for some meaningful changes in the 2015 session.

Rob Port is the editor of SayAnythingBlog.com. In 2011 he was a finalist for the Watch Dog of the Year from the Sam Adams Alliance and winner of the Americans For Prosperity Award for Online Excellence. In 2013 the Washington Post named SAB one of the nation's top state-based political blogs, and named Rob one of the state's best political reporters. He writes a weekly column for several North Dakota newspapers, and also serves as a policy fellow for the North Dakota Policy Council.

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  • guest

    So… State employees examine our businesses and tell us our pensions are too big of a liability and should be eliminated.
    But state employee pensions are not too big of a liability due to the fact they are backed in full by the tax payer?

    • http://sayanythingblog.com Rob

      I’m not understanding your point?

      • http://Sayanythingblog.com The Whistler

        I think that perhaps he’s saying in some instances state auditors can review your books and tell the businesses what they can afford.

        I don’t know what industry that would be. Maybe nursing homes.

  • whowon

    Another study, would have been nice if they had just made the needed change THIS session. 2 more years (at least) of adding people to the broke system.

  • sbark

    A study…..by who….the state employees Assn?
    The only study needed is to google the issue as reported from other states, cut the clippings and distribute them among the legislators.
    We’ve sat and watched the news for years various states wrestling with the problem, but N.Dak needs a study at a likely cost of hundreds of thousands, if not millions. If it requires a study, it should’ve been prep’d and ready for this session of Congress.
    This is exactly where leadership towards reform needs to be pushed by a innovative Govenor, instead he is focusing on regression toward ObamaCare, and keeping his head in the sand on a issue such as this………

  • http://Sayanythingblog.com The Whistler

    Why do the state legislators think that the state’s employees are more important than us?

    I say cut the wages or headcount of the state’s employees to pay for the shortage.

    • http://nofreelunch.areavoices.com/ Kevin Flanagan

      The state pay rollers declared war on those of us in the private sector a couple of years ago. All the clowns in Bismarck are on their side.

      • Geoff Bosse

        Great point Kevin. I have zero sympathy for the public sector union members.

  • Captjohn

    You have an actuarial report showing the fund going downhill. Nothing has changed since the 90’s except things are getting worse. We knew it was going to happen then.
    A study is no more then a delay rather then facing up to reality. A reality that will cost the taxpayers greatly the longer the legislature delays. It is time they deal with reality and save the taxpayers and state employees a lot of pain in the future.

  • RCND

    Did you hear that? Its the sound of the can getting kicked down the road….. Again

  • headward

    I don’t understand why we have a pension system in the first place. All employees should have 401Ks/IRAs that they control and chose what to invest in. The legislature needs to eliminate the pension and transfer the balance over to a 401k.

  • Waski_the_Squirrel

    I know this was about PERS, not TFFR, but I wish I had the freedom to control my own retirement rather than be forced into the state’s system.

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