PERA Pension Reform Quackery

August 19, 2019

- PERA Task Force Chairman Misrepresented PERA’s Issue to Fit His Selfish Solution.

 

- The "solution" makes all PERA fund take the medicine, although only two funds are sick.

 

- Pension reform task force is stacked in favor of public safety retirees.

 

Imagine, you go to your doctor (Governor Michelle Lujan-Grisham in this case) and present to her your symptoms. Your pension fund (PERA) is still sick even after SB 27 was passed in 2013. Doctor MLG refers you to an “expert” to fully diagnose and recommend how to fix your illness. Except in this case the “expert” is not an expert in anything related to pensions. The governors’ expert is her Labor Secretary, Diego Arencon, whose background is that of a career Albuquerque Firefighter, AFD union president and Fire lobbyist. The guy who's entrusted with coming up with pension reform only experience has been that of a lobbyist for his own self interest in pension reform. The governor did not pick the right person.

 

 

Apparently, Governor MLG didn’t think that a pension expert was necessary to diagnose and treat the $15 billion-dollar PERA pension illness. Quackery continues to reign supreme at PERA.

 

Arencon immediately appointed his own “experts,” stacking the PERA Task Force with firemen and police officers who also have ZERO knowledge of how a pension fund operates. Fire and police represent less than 10,000 PERA members, yet they had seven votes on this task force. Retired Public Employees, represent 40,000 PERA members but they received only one vote. AFSCME represents 25,000 PERA members they also received one vote. It’s obvious that Diego stacked this task force with friends who would blindly follow him.

 

This stacked task force was exposed to Governor MLG, but she turned a blind eye. This is certainly not the way for her to start her tenure as governor.

 

I confronted Arencon about stacking this task force. He denied it but offered no reason why public safety needed seven votes, while RPENM and AFSCME received only two.

 

Then Diego decided to only hold two public meetings! All other task force meetings were closed to the public. No formal record was kept as to what was said by TF members and witnesses. Governor MLG and Attorney General Balderas were both contacted regarding this blatant disregard for public testimony, which is effecting 90,000 New Mexico families. Again, the silence from the governor and attorney general was deafening. Is this the change we voted for (complete disclosure, I voted for both Balderas and MLG)?

 

It comes as no surprise that Arencon’s rubber stamped task force presented a plan to fix PERA that would force all PERA members to share the pain. He calls it the “shared risk” plan. But the problems at PERA don’t require shared risk, nor shared pain. The problems at PERA are very specific, but Diego intentionally refused to address them.

 

In 2017 PERA Executive Director Wayne Propst, in his annual report to the PERA Board, presented three graphs (they are in this column). The graphs show that SB 27 worked for all of the funds within PERA, with the exception of two, Fire and State Workers (Arencon was a fireman and as a lobbyist he worked with legislators who represent State Workers).

 

 

 

 

These PERA graphs show that by 2043 all PERA funds are 100% solvent, except Fire and State Workers. Those two funds (representing half of PERA membership) dive to below 40% solvency by 2043 and to 0% solvency by 2066!

 

I called Director Propst and asked him why Fire and State Workers are heading into insolvency? Propst's answer: Fire and State Workers funds provide lucrative benefits that the contributions into those funds can’t pay for. Propst stated that any time you have a pension fund in trouble it comes down to benefits being paid out and not enough contributions being paid in. It’s that simple.

Fire and State Workers funds are the real problem afflicting the PERA fund.

 

Prior to the task force first meeting I asked Arencon if he was going to take testimony regarding the sickness that is destroying the State Workers and Fire funds?

 

 

 

Arencon’s reply was shocking. “I will not pit funds against each other “, he said. Thereby killing any chance for a real solution to PERA’s problem. The PERA patient is on the operating table but the Dr. Arencon refused to cut the cancer out.

 

Arencon tried to convince me that everyone in PERA should suffer to bail out Fire and State Workers funds. His reasoning was full of self-interest. Arencon is a still a lobbyist for Fire.

 

Arencon’s argument amounted to going to a doctor to treat a woman’s very serious cancer. This cancer has been hard on the woman’s entire family (PERA). But the doctor really likes this woman and knows the chemotherapy that would make her well would be tough on her, probably make her ill in the short-term. Dr. Arencon decides that the best course of action is to not treat the woman’s cancer but to call her family members in and force them all of them to take a dose of chemotherapy. It does not matter to Arencon that the other family members (Police Fund, Municipal Workers Fund etc) are completely healthy. Dr. Arencon figures that by making the entire family ill (all PERA members), it will somehow help the woman he loves (PERA Fire and State Worker funds) to get better.

 

This is insanity!

 

 

 

This task force just continues the dysfunction that we have witnessed at the PERA Board and the PERA Executive staff (who are still under investigation by the Attorney General and State Auditor). Instead of being honest about the problems and taking serious testimony from pension experts around the nation, we get more shenanigans from people we trust (and the governor trusted) to fix PERA.

 

I hope Governor Grisham and the legislature toss into the trash the recommendations of this blatantly slanted task force. Nothing that they recommended will fix Fire and State Workers funds and this was done on purpose!

 

If any recommendations from this task force are approved by Governor Grisham and the legislature, I will guarantee that in two years PERA will be back screaming about how the fund is still going insolvent.

 

Dear Governor Grisham and the New Mexico Legislature, how about putting people in charge of fixing PERA who aren’t under investigation, who are pension experts, who hold public meetings and who don’t come with an agenda?

 

My recommendation is simple, the governor instructs the legislature (IPOC Committee maybe) to start taking PUBLIC testimony from ALL pension experts, with a focus on the illness in the Fire and State Workers Funds, but with an eye on rewriting the entire PERA statute. This will take months, possibly an entire year. Then in the 2021 legislative session present the proposal to the legislature and vote on it. This is the only way to honestly fix PERA.

 

Does the governor and legislature have the courage to do what is right? 90,000 PERA voters are watching.

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