Proposal would guarantee funding for two pension plans
Washington lawmakers want to amend the state constitution to guarantee yearly contributions to state pension plans. State Treasurer Jim McIntire and a bipartisan group of legislators on Tuesday proposed a minimum rate for state contributions.
The Associated Press
OLYMPIA — Washington lawmakers want to amend the state constitution to guarantee yearly contributions to state pension plans.
State Treasurer Jim McIntire and a bipartisan group of legislators on Tuesday proposed a minimum rate for state contributions.
While Washington on the whole has one of the most financially secure pension systems in the country, two retirement plans for state employees and teachers have an unfunded liability of about $6.9 billion.
Those are costs the state is already committed to paying, McIntire said. A constitutional amendment would ensure the state can't put off payments during tough budget times, so pension plans don't experience similar underfunding.
"We need to be able to pay our bills; those particularly that we've already incurred," he said. "And this constitutional amendment, I think, will give us the fiscal discipline to do that."
Washington now has 10 open pension programs that are funded at a rate of 118 percent of future liabilities.
However, two programs that were closed in 1977 — PERS1, which covers state and local public employees, and TRS1, which covers teachers — have been underfunded several times in the past 30 years, and are now only funded at 72 percent of future liabilities.
Average payment to retirees on these closed pension plans is $21,200 a year, compared with an average $19,300 for those under the open pension plans, according to McIntire's office.
The proposed amendment would ensure funding for those open pension plans by requiring the state pay at least 80 percent of the state actuary's recommended contribution rate every year.
The 80 percent floor gives legislators some wiggle room to accommodate financial issues of the day without letting changing economic assumptions lower contribution rates.
"Too often in the past, we have allowed the overwhelming budget problems in the state to link to underfunding these pensions, and to me, this is just not acceptable," said Sen. Steve Conway, D-Tacoma, prime sponsor of the amendment in the Senate.
"We have a commitment to the employees of these states that we manage these pensions to provide the benefits we committed to them."
The legislators sponsoring the amendment reiterated that these benefits should not be seen as an optional cost, but rather an obligation of the state.
In changing the constitution, they face the steep challenge of obtaining a two-thirds supermajority in the Legislature. The measure also would require approval by voters in the next general election.
Sen. Mark Schoesler, R-Ritzville, Adams County, compared the need for a pension amendment to the state's Rainy Day Fund, which came about through a constitutional amendment.
The policy was first introduced in the early 1980s, but repeated changes and amendments kept it from being fully effective, he said.
"I think pension funds are the same situation," he said. "We agree it's a good idea to fully fund pensions, but without constitutional protection, we can manipulate that any biennium we choose, and I think that's unfortunate."
Backers of the proposal say time is a crucial element in the funding of state pension programs: Investing at the rate recommended by the state actuary allows those dollars to earn interest that will be available to pay retirees their promised benefits.
"For us to make the lowest cost to taxpayers, we need to make these contributions now," McIntire said. "If we avoid this, if we put these payments off, it will cost the taxpayers more money in the future."