The Omnibus Pension Bill passed the State Government Finance Committee this week and is heading to the full Finance Committee. The bill makes substantial changes to all statewide public employee pension funds and includes pension benefit changes, actuarial changes, required contribution increases, and direct state aid. The bill will resolve unfunded public pension liabilities and represents a “shared sacrifice” approach with all stakeholders contributing to the solution.
Cost-of-living adjustments or post-retirement benefits provide annual increases to pension to prevent the erosion of benefits due to inflation and other factors. This bill reduces COLAs for most plans and represents a commitment by retirees to be part of the pension solution.
Public employers, including school districts, cities, counties, and state agencies are required to provide additional funding to employees’ pensions into the future, which greatly improves the funding ratio of plans. The Legislature has committed to contributing state aid to local governments due to these increased costs and will provide this support over the next 30 years.
Finally, the omnibus pension bill reduces the assumed rate of return that the pension plans use to calculate future asset growth from 8% to 7.5%. While the stock market has seen large gains in the past few years, using a lower rate will make it less likely the state overestimates asset returns into the future. (SF 2620)