An update from Rep. Ingraham

The Legislative Fiscal Report of the 2013 Legislative Session was recently published which reflects the fiscal impacts resulting from legislation passed during the last session. While the entirety of the fiscal impacts as found in the report can be assessed by going to the legislative website at http://leg.mt.gov, I thought I’d share a few of the highlights. Even though the Legislature is no longer in session, the decisions we made during the session are effecting you as we speak, at least until at least the next legislative session where things undergo, once again, change!

The 2013 Legislature had the advantage of growing general fund revenues this session but there were numerous budget challenges and other financial demands facing us, including pensions, employee pay, provider reimbursement rates and much more.

The fiscal report addresses these budget challenges that the 2013 Legislature faced. Montana’s public pension shortfall had increased to $4.3 billion dollars. The legislature adopted legislation to fund the two largest systems’ liabilities with a combination of state general fund, state and local employer contribution rate increases, employee contribution increases and the inflationary increases, known by many as GABA (Guaranteed Annual Base Adjustment) to reduce the fund’s liabilities.

Since serving in my first term in the legislature in 2006, Montana’s retirement systems, in most cases, have faced funding challenges, primarily as a result of investment returns that account for approximated 60% of the cost of those commitments made in good faith to those in the current systems. However, while trying to address some of the challenges and making some changes during these past four terms, the unfunded liabilities have continued to grow. Montana’s Constitution, Article VIII, Section 15, requires all Public retirement systems to be funded on an actuarially sound basis.

I’ll use the Teachers Retirement System (TRS) as an example. At the start of the 2009 Legislative Session, following legislative action during the 2007 session which should have restored actuarial soundness, TRS was about $1.56 billion underfunded. With amortization of this unfunded liability at 49.5 years, with 30 years required to meet actuarially needs, the 2011 Legislative Session faced a $1.79 billion shortfall and 71.0 years for amortization. The 2013 Legislative Session faced a $1.96 billion shortfall which continued to climb requiring infinite years to amortize if no intervention unless action as proposed in House Bill (HB) 377 was implemented.

HB 377 was passed in an effort to address the Teacher’s Retirement System’s unfunded liabilities. It implemented an increase in employee contributions, put in place a statute to appropriate $25 million annually from the public school fund guarantee account into the teachers retirement system, decreased the cap on school district retirement fund operating reserves from 35% to 20% with a one-time requirement to transfer excess school retirement fund operating reserves to the teachers’ retirement systems and created a new membership tier for employees hired after July 1, 2013.

While many of the changes from HB 377 were not the solutions all would have liked (many were called upon to make sacrifices - our schools, state and local governments and the taxpayers), it was the only bill to survive the 2013 special retirement joint committee, the House, the Senate and the Governor. The bill addressed the TRS unfunded liability, which is now at $1.63 billion rather than the $1.96 billion at the start of the session. And HB 377 is expected to amortize the shortfall within 22 years if the bill goes forth as passed. Should aspects of this legislation be legally challenged, the result could change the amortization period requiring the next session to implement further restructuring. But for now, the end result is a decrease in unfunded liabilities rather than an ever growing debt such as the federal government faces.

The Legislative Fiscal Report, a biennium budget overview, covers a great deal of information on the fiscal aspects of not only of our retirement systems, but our individual departments such as the Department of Corrections, Office of the Public Defender, Department of Health & Human Services along with other general topics and impacts such as business equipment exemptions and long-range planning for example.

The Legislative Fiscal Report is an informative report for those wanting to understand the fiscal impacts current legislation will have on the people of Montana for the next two years.

Now it’s your turn to “Keep in Touch”. I can be reached via e-mail at pathd13@blackfoot.net, or call me at 827-4652 or by mail at P.O. Box 1151, Thompson Falls, Montana 59873.