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F I S C A L I M P A C T R E P O R T

SPONSOR Martinez

ORIGINAL DATE

LAST UPDATED

2-23-07

3-04-07 HB

SHORT TITLE State Fire Marshal Retirement Plan

SB 1188

ANALYST Aubel

ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)

FY07

FY08

FY09 3 Year

Total Cost

Recurring

or Non-Rec

Fund

Affected

Total

$84.4

$84.4

$168.8 Recurring

Fire

Protection

Fund

Total

$50.0

Non-

Recurring PERA

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Public Regulatory Commission (PRC)

Public Employees Retirement Association (PERA)

SUMMARY

Synopsis of Bill

Senate Bill 1188 proposes to provide state fire marshals with the same benefits as provided under

the current State Police and Adult Correctional Officer Member Coverage Plan 1. Specifically,

state fire marshal members, if approved by an election of the affected membership, would be

eligible for a 20 percent service credit enhancement benefit, a 3 percent pension factor and an 80

percent pension maximum now only available to state police officers and adult correctional

officers. “State fire marshal members" are defined as the state fire marshal or a member who is

employed in the office of the state fire marshal and whose duties are defined in Chapter 59A,

Article 52 NMSA 1978. The state fire marshal member’s contributions under the proposed

State Police Member, Adult Correctional Officer Member and State Fire Marshal Member

Coverage Plan 1 will be 7.6 percent of salary; the employer contributions are 25.1 percent.

FISCAL IMPLICATIONS

The estimated increase in unfunded liabilities to the PERA fund is calculated at approximately

$435,311. SB 1188 does not provide for an appropriation to pre-fund this unfunded liability that

results from the proposed benefit enhancements. Instead, the bill increases the employer

Senate Bill 1188 – Page

2

contribution rate, from 16.59 percent to 25.1 percent, which will amortize the liability in less

than 30 years.

According to PRC, the employer contribution for fire marshals is distributed from the fire

protection fund (FPF). The incremental payment that is generated from the 8.51 percent increase

in employer contribution rate is approximately $84.4 thousand, which will be a recurring

operation budget impact to PRC and paid from the FPF. PRC maintains that because revenue

from the FPF exceeds over $50.0 million, there should be little fiscal impact to the fund as a

whole.

PERA’s operating budget will be negatively impacted by SB 1188, which will require changes to

the new pension computer system that PERA is in the process of implementing. Future benefit

enhancements amending the PERA Act will likewise result in a change order, with associated

costs, to PERA’s existing contract with the vendor. Such changes in the past have been up to

$50.0 thousand. If further revisions to the system are necessary in FY08, PERA will be required

to seek a BAR to cover the costs of these system changes.

SIGNIFICANT ISSUES

The bill affects approximately 24 FTE who work directly for the fire marshal office or at the fire

fighter training academy, who are exposed to potentially hazardous and dangerous situations,

chemical agents, and other combustible solids and liquids in the functions of their jobs. PRC

maintains this bill would align the fire marshal with those classes of jobs that have a retirement

benefits based on job hazard and, therefore, bring equity to the retirement plans.

The primary policy issue is whether state fire marshal members should receive a 20 percent

service credit increase in all credited service (past and future).

The employee contribution rate will increase from the current 7.42 percent to the new 7.60

percent, which will produce a minimal increase in salary reduction.

The cumulative effect of multiple benefit enhancements is unknown. However, the combination

of enhancing members’ prior service credit, providing salary increases in excess of PERA’s

assumed rate of 4.5 percent per year for existing members of the State Police and Adult

Correctional Officer Plan, and any downturn in the near-term future performance of the PERA

portfolio could possibly cause a decrease in the funded status of the existing State Police and

Correctional Officer plan below 100% and also have a measurable effect on the funded status of

the overall PERA system.

ADMINISTRATIVE IMPLICATIONS

PERA will need to print information, administer the election, transfer the related assets and

liabilities to the new fund, and update the computer system.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

Relates to HB 280, which creates a 20-year retirement plan for statewide E-911

telecommunicator workers.

Senate Bill 1188 – Page

3

Relates to HB 595, which creates a 20-year retirement plan for statewide district attorney

members.

Relates to HB 765, which proposes to add probation and parole officer members to State Police

Member and Adult Correctional Officer Member Coverage Plan 1.

Relates to HB 411, which creates a new member coverage plan under the PERA Act allowing a

20-year retirement plan for Law Enforcement Academy Instructor members.

Relates to SB 576, which creates a 20-year retirement plan for statewide district attorney

members.

Relates to HB 800, which proposes to add motor transportation officers and special investigator

members to State Police Member and Adult Correctional Officer Member Coverage Plan 1.

Relates to HB 1109, which creates a retirement act for public safety volunteers modeled after the

volunteer firefighters retirement act.

Relates to HB 1100, which proposes to add juvenile correctional officers to State Police Member

and Adult Correctional Officer Member Coverage Plan 1.

Conflicts with SJM 6, which proposes a 2-year moratorium on benefit enhancement legislation

affecting the Public Employees Retirement Association

TECHNICAL ISSUES

Page 8, line 20, states that the retirement board shall certify, “a majority of the members voting

have voted to approve adoption of that plan at an election." Line 20 should be corrected to state,

“a majority of eligible members have voted to approve adoption of that plan."

OTHER SUBSTANTIVE ISSUES

SB 1188 provides for an 18-month eligibility period for state fire marshal members to first

become eligible to retire with enhanced benefits under the plan. PERA maintains that a 36-

month mandatory waiting period is appropriate before members are eligible to retire from the

plan to allow for payment of contributions at higher levels toward their enhanced benefit prior to

retirement. This will lessen the impact of increased liabilities on the new plan that may occur if a

number of members immediately retired with enhanced benefits sooner than normally projected.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

The

State fire marshals will continue to be covered by State General Plan 3. State fire marshals

are eligible to retire at any age with 25 or more years of service credit. They receive a 3 percent

pension factor for every year they earn service credit and are capped at 80 percent of their final

average salary. For State General Plan 2, state fire marshal members pay 7.42 percent of their

salary in contributions and their employer pays 16.59 percent of salary in contributions.

Senate Bill 1188 – Page

4

AMENDMENTS

Page 9, line 4 before the word “payment" insert “normal or disability retirement or payment of

normal or disability retirement benefits

".

MA/csd