Both big pension fixes still alive at Legislature

HELENA — The Montana Legislature inched closer Tuesday to finding a fix for its beleaguered pension system when a committee decided to advance both of the major proposed fixes.

But the Joint-Select Committee on Pensions opted to leave the big decision to the House, which will have to choose between a plan to fix the current system and one to end it in favor of a defined-contribution plan.

Analysts say Montana's public pension system, which includes both state and local government employees, faces a roughly $4 billion shortfall in 30 years if no action is taken.

Republican legislative leaders prefer the plan that axes the pension for new employees and replaces it with a defined-contribution plan that is similar to a 401(k) savings plan. Supporters argue taxpayers would no longer have to guarantee employees' future benefits, while opponents argue it is unfair and creates huge upfront costs to fix the plan for current employees.

Gov. Steve Bullock wants a fix within the current defined-benefit system. The final version of that plan, covered in two bills, forces both employers and employees to pay more. The pension inflationary adjustment would also be cut, under amendments made in the pension committee.

Supporters say that plan takes a measured approach to fixing a valuable benefit for state employees, while opponents argue it just throws more money at the problem.

House Speaker Mark Blasdel said he believes both plans will go to the full House floor after analysts calculate the final effect of some changes made in committee. Each bill aims to bring the pensions systems back into balance in about 30 years.

Both bills could face a constitutional challenge in court because they adjust contracts with current employees. But supporters argue the state faces a bigger court challenge if the pension system runs out of money.

State Sen. Dave Lewis of Helena, the Republican who ran the pension committee, said the pension systems already are paying out more money each year than they take in and are dipping into the invested reserve.

Lewis called it a "huge" decision for Democrats to agree to reduce the annual inflation increase for pension retirees, which is as high as 3 percent for some employees. That decision garnered enough Republican votes to advance the bill out of committee, but its fate is still uncertain in the GOP-controlled Legislature.

"Even if we trim that defined benefit plan, the problem for me is that the taxpayers are still at risk," Lewis said.

The Democrat carrying Bullock's proposed fix of the system said Democrats were willing to reduce the inflationary increases in an effort to find a solution.

"We all agree we have to find a way to fix this," Rep. Bill McChesney said. "We can't pass this onto the next Legislature."

Any pension fix still faces the full House, the Senate and Bullock's potential veto. No clear path exists for either plan, McChesney said.

"I think it's going to be a fight the whole way," said the Democrat from Miles City.