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F I S C A L I M P A C T R E P O R T
SPONSOR Rodella
ORIGINAL DATE
LAST UPDATED
HB 1109
SHORT TITLE Public Safety Volunteer Retirement Act
SB
ANALYST Aubel
APPROPRIATION (dollars in thousands)
Appropriation
Recurring
or Non-Rec
Fund
Affected
FY07
FY08
$500.0
Recurring
Law Enforcement
Protection Fund
(Parenthesis ( ) Indicate Expenditure Decreases)
REVENUE (dollars in thousands)
Estimated Revenue
Recurring
or Non-Rec
Fund
Affected
FY07
FY08
FY09
$500.0
$500.0 Recurring
Public Safety
Volunteer
Retirement
Fund
($500.0)
($500.0) Recurring General Fund
(Parenthesis ( ) Indicate Revenue Decreases)
ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)
FY07
FY08
FY09 3 Year
Total Cost
Recurring
or Non-Rec
Fund
Affected
Total
$50.0
$50.0 Non-Rec PERA
(Parenthesis ( ) Indicate Expenditure Decreases)
May conflict with HB 861 and SB 1023 (duplicate), SB 433
Relates to HJM 32 and SJM 26 (duplicate)
SOURCES OF INFORMATION
LFC Files
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House Bill 1109 – Page
2
Responses Received From
Department of Public Safety (DPS)
Department of Finance Administration (DFA)
Public Employees Retirement Association (PERA)
SUMMARY
Synopsis of Bill
House Bill 1109 enacts the Public Safety Volunteer Retirement Act and appropriates $500.0
thousand from the law enforcement protection fund to the created public safety volunteer
retirement fund to provide retirement benefits. A public safety volunteer is defined as any non-
salaried volunteer serving on the New Mexico Mounted Patrol or as a member of a volunteer
program of a county sheriff’s department or municipal police department.
FISCAL IMPLICATIONS
The appropriation of $500.0 thousand contained in this bill is a recurring expense to the law
enforcement protection fund. Any unexpended or unencumbered balance remaining at the end of
FY08 does not revert to the law enforcement protection fund. The new fund is created in the
State Treasury and consists of appropriations, transfers, gifts, grants, donations and bequests
made to the fund.
HB 1109 also potentially impacts the general fund. Current language in Section 29-13-3 NMSA
1978 requires the State Treasurer to transfer any non-obligated balance in the law enforcement
protection fund in excess of $100.0 thousand to the general fund. HB 1109 amends this section
by adding the $500.0 thousand distribution for the public safety volunteer retirement plan to that
threshold, thereby reducing the amount that would go to the general fund by $500.0 thousand.
PERA states its operating budget will be negatively impacted by HB 1109. Adding a new
retirement act to those already administered by PERA requires system changes to PERA’s
computerized pension administration system. Similar changes in the past have cost up to $50.0
thousand. If further revisions to the system are necessary in FY08, PERA will be required to
seek a Budget Adjustment Request to cover the costs of these system changes.
PERA will incur operating costs related to printing, postage and dissemination of information for
statewide law enforcement agencies, including reporting procedures and forms.
Continuing Appropriations
This bill creates a new fund and provides for continuing appropriations. The LFC has concerns
with including continuing appropriation language in the statutory provisions for newly created
funds, as earmarking reduces the ability of the legislature to establish spending priorities.
SIGNIFICANT ISSUES
The primary issue is whether to provide public safety volunteers with a retirement plan similar to
volunteer firefighters. HB-1109 would create the following benefit levels for eligible public
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House Bill 1109 – Page
3
safety volunteers:
Age
Years of Service
Benefit Level
55 or more 25 or more $200 per month for life
55 or more at least 10, less than 25 $100 per month for life
In the event a retirement annuitant dies, the surviving spouse shall receive an annuity equal to
two-thirds of the retirement annuity being paid to the retirement annuitant at the time of death.
The annuity shall cease upon the surviving spouse’s marriage or death.
Retirement benefits are payable under the Public Safety Volunteer Retirement Act regardless of
whether the annuitant is eligible for benefits under another state retirement system. A public
service volunteer may begin to claim service credit for each year, beginning on or after January
1, 2007. An eligible member may also obtain up to 5 years of additional service credit filing
prior to December 31, 2007.
The proposed Public Safety Volunteer Retirement Act is modeled after the Volunteer
Firefighters Retirement Act, which is unlike any other PERA retirement plan in that it is not
funded based upon contributions from salary. Public safety volunteers are not salaried
employees and their “retirement benefits" will not derive from employment. Rather, the benefits
will be provided by the Legislature and the source of funding to meet the Fund’s statutory
obligations is an annual appropriation of $500.0 thousand from the law enforcement protection
fund.
While HB 1109 does address the issue of creating a retirement fund for public safety volunteers
similar to one established for volunteer firefighters, it affects a fund that potentially has added
impact from other legislation posed during the session. If each of these bills is enacted, the fund
may not be able to sustain the distributions and transfers that will be required. New legislation
would be required to either increase revenues to the law enforcement protection fund or to revise
and reconcile the various demands put on the fund.
No actuarial study was requested by the volunteer public safety group affected by this
legislation. Without an actuarial study, PERA cannot determine whether the funding source
proposed by HB 1109 is sufficient to comply with Article XX, Section 22(C) of the New Mexico
Constitution, which states in relevant part, “The legislature shall not enact any law that increases
the benefits paid by the system in any manner or changes the funding formula for a retirement
plan unless adequate funding is provided."
ADMINISTRATIVE IMPLICATIONS
Each respective law enforcement agency will be required to be accountable for the certification
of each public service volunteer.
Although PERA cannot assess the precise administrative impact of this legislation because it
does not presently have sufficient information regarding the number of potential participants, it is
reasonable to assume that the administrative impact to PERA could be similar to the current
requirements for the Volunteer Firefighter Retirement Plan, which are substantial.
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House Bill 1109 – Page
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PERA currently has three FTEs processing the Volunteer Firefighter Retirement Plan, dedicating
approximately 1,000 hours on Volunteer Firefighters Retirement issues between December and
April. Statewide, there are approximately 300 Volunteer Fire departments
.
Beginning in
December, PERA staff prints member lists for each department, provides for detailed reporting
forms, and sends out instructional correspondence. From January through March, volunteer fire
departments report service credit on behalf of their members. PERA staff must verify service
credit, contact the Volunteer Fire departments to address discrepancies and post service credit for
each member into PERA’s computerized pension administration system. New member form
information also must be entered.
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
HB 1109 may conflict with HB 861 and SB 1023 (duplicate), which increase the actual
distribution to all participating law enforcement agencies.
HB 1109 may conflict with SB 433, which amends the current supplemental death benefits that
are paid out of the peace officers’ survivors’ fund, which is supplemented by the law
enforcement fund.
HB 1109 relates to HJM 32 and SJM 26 (duplicate), which cite the difficulties in posting service
credit and administering the Volunteer Firefighters Retirement Act, and request appointment of
an interim committee to consider amendments to remedy problems that become identified by the
interim committee.
TECHNICAL ISSUES
The public safety volunteer retirement fund is created in the state treasury, with an annual
transfer of $500.0 thousand on or before the last day of July. However, HB 1109 vests
investment and administrative authority in the Public Employees Retirement Association
(PERA), which creates a conflict. The State Treasurer is responsible for administering and
investing funds in the treasury.
OTHER SUBSTANTIVE ISSUES
The current projection model utilized for this analysis considers the annual transfer of $500.0
thousand from the law enforcement protection fund into the public safety volunteer retirement
fund. According to DFA, if current revenues remain consistent, the law enforcement protection
fund can sustain the impact of the transfer. However, the number of potential volunteers who are
eligible for benefits is unknown. Therefore, no actuarial study has been developed to ascertain
whether this annual transfer would provide a solvent and sustainable retirement fund for public
safety volunteers as intended.
The law enforcement protection fund is currently funded from ten percent of all money received
for fees, licenses, penalties and taxes from life, general casualty and title insurance business
pursuant to the New Mexico Insurance Code [59A-1-1 NMSA 1978], except for money received
from the health insurance premium surtax imposed by Subsection C of Section 59A-6-2 NMSA
1978, shall be paid monthly to the State Treasurer and credited to the fund.
The State Treasurer is limited in its investment options, reducing the potential return for fund
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House Bill 1109 – Page
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growth to meet future benefit obligations.
WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL
Public safety volunteers, as defined in HB 1109, will need to seek out other avenues to fund their
retirement benefits.
POSSIBLE QUESTIONS
1.
Is it timely to enact a new volunteer retirement act modeled on the Volunteer Retirement
Act at the same time both HJM 32 and SJM 26 identify serious administrative problems
with existing law and request appointment of an interim committee to consider
amendments.
MA/nt