Fiscal impact
reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for
standing finance committees of the NM Legislature. The LFC does not assume
responsibility for the accuracy of these reports if they are used for other
purposes.
Current FIRs (in
HTML & Adobe PDF formats) are available on the NM Legislative Website (legis.state.nm.us). Adobe PDF versions include all attachments,
whereas HTML versions may not.
Previously issued FIRs and attachments may be obtained from the LFC in
|
SPONSOR |
|
DATE TYPED |
|
HB |
|
||
|
SHORT
TITLE |
Change Educational Retirement Contributions |
SB |
460 |
||||
|
|
ANALYST |
Gilbert |
|||||
APPROPRIATION
|
Appropriation
Contained |
Estimated
Additional Impact |
Recurring or
Non-Rec |
Fund Affected |
||
|
FY04 |
FY05 |
FY04 |
FY05 |
||
|
|
$40,000.0 |
|
Significant |
Recurring |
General
Fund |
(Parenthesis
( ) Indicate Expenditure Decreases)
Relates to SJM 17 and HJM 26
LFC Files
Response
Received From
Department
of Finance and Administration (DFA)
New
Mexico Corrections Department (NMCD)
New
Mexico Public Education Department (PED)
No
Response From
Educational
Retirement Association (ERA)
SUMMARY
Synopsis of Bill
Senate
Bill 460 appropriates $40 million from the general fund to the Educational
Retirement Board (ERB) for expenditure in fiscal year 2005 and subsequent
fiscal years.
This
bill also amends §
Under
this bill, ERA benefits remain unchanged. The increased funding is intended to
reduce the ERA unfunded actuarial liability, thus improving the financial
integrity of the fund.
Significant Issues
Due to the ERA’s poor investment fund performance,
they no longer meet the Governmental Accounting Standards Board (GASB) 30-year funding
period benchmark for public pension funds.
The most recent actuarial study for the ERA fund reflects an unfunded actuarial
liability period of 78 years, which is likely to increase in future years due
to unrealized fund losses.
The appropriation and added contributions provided
by SB 460 will assist ERA in reducing its unfunded actuarial liability funding
period. However, even with increased funding, ERB investment fund performance
must improve in comparison to its peers.
The
Executive and Legislative Finance Committee (LFC) have recommended additional
FY04 BAR language to allow the ERB to request budget increases from other state
funds for up to $100 thousand for the purpose of contracting for a study
outlining options for achieving actuarial soundness for the ERB fund. Such
funding is contingent on review by the Secretary of the Department of Finance
and Administration (DFA), and approval by the State Board of Finance and LFC. The study is to be completed and recommendations
made to the DFA and the LFC by
FISCAL IMPLICATIONS
The appropriation of
$40,000.0 contained in this bill is a recurring expense to the general fund.
Any unexpended or unencumbered balance remaining at the end of fiscal 2005
shall not revert to the general fund.
The Public Education Department (PED) higher
education and public schools would see expenditures increase by 1% of salaries for
all ERA members. Neither PED nor the
schools would be able to absorb the increase without a corresponding increase
in their appropriations.
Since
the New Mexico Corrections Department (NMCD) is considered a "local
administrative unit", the NMCD would have to pay a higher percentage to
the ERB for all ERA members. This would increase in the NMCD’s expenditures.
Based
on the FY 05 budget request, this bill would mean an increase to the NMCD of
approximately $36,742 {($3,672,362 x 9.65% = $354,383) – ($3,672,362 x 8.65% =
$317,659)}.
RELATIONSHIP
Both SJM 17 and HJM 26 request the
Educational Retirement Board to consider a cost-of-living increase to retirees.
OTHER SUBSTANTIVE ISSUES
The ERB needs
additional assets to meet GASB actuarial standards. The increased contributions
contained in this bill will potentially address this problem, but to determine
the exact impact an actuarial study must be completed.
RLG/lg:yr:njw