New Mexico’s pension fix gets a court challenge

By Rob Nikolewski on September 3, 2013
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By Rob Nikolewski │ New Mexico Watchdog

SANTA FE — A deal among New Mexico groups to shore up an estimated $12 billion in unfunded liabilities faces possible derailment by a court challenge.

The compromise, approved by leadership of the and the , passed by the Legislature and signed by , calls for public employees and employers — read: taxpayers — to kick in a little bit more to get plans on a more stable fiscal path.

FACING A COURT CHALLENGE: A new law aimed at fixing a $12 billion hole in New Mexico’s public pension plans will be heard before the state Supreme Court.

But four retirees from the ERB say it’s unfair their cost of living adjustments have been reduced and took their case to the . The five justices will listen to arguments Wednesday about whether the public pension deal violates contractual obligations to retirees in the system.

“This is a really important decision,” said , the New Mexico legislative director for the . “If we can’t come up with a plan that’s already been approved by the Legislature and the executive and the stakeholders involved and if that gets turned away, the courts are sending us the way of Detroit.”

The attorney for the four ERB retirees said the new law violates the state’s constitution.

“We have a property right here in our constitution,” said , who will argue that the high court issue an extraordinary writ to block the law’s implementation. “All this discussion of who’s going to shoulder the burden is beside the point.”

In , the state constitution states that a member of the PERA and ERB plans “shall acquire a vested property right with due process protections under the applicable provisions of the New Mexico and United States constitutions.”

Berger interprets that to mean that reductions cannot be made to those already receiving retirement benefits.

State Sen. , D-Gallup, sponsored the legislation and nursed it past some union members who complained it went too far while withstanding arguments from the opposite side that the pension fix didn’t go far enough.

“Nobody is happy about (the compromise),” Muñoz told Tuesday, “but it is what we had to do,” adding that he thinks if the state supreme court turns back the law, it will be a “disaster.”

Supporters of the new law point to recent state court decisions in Colorado and Minnesota as examples that the New Mexico pension reform act is legal.

Minnesota made changes to its state retirement plans in 2009 and 2010, and some retirees sued to challenge a reduction in their cost of living adjustments. But a the changes were a “reasonable and appropriate exercise of legislative authority.”

, a group of retirees challenged actions that reduced the COLA retirees were eligible to receive, but Colorado District Court held that the statute granting COLAs contained no clear and unambiguous evidence that retirees were entitled to an unchanged COLA for the duration of their benefits. The case is now before the Colorado State Supreme Court.

“(Opponents) can test it in court, but Colorado already tested it,” Muñoz said. “We had that case in mind during the legislative process here.”

Berger said constitutions in other states were muddier about making such changes. “It’s much more straight forward here (in New Mexico),” she said.

It’s unclear whether the New Mexico Supreme Court will rendered a decision Wednesday.

“It’s better in the long run for everybody” if the law is upheld, Muñoz said.

Berger argues the ERB cost of living adjustment amounts to $2 million out of a $10 billion fund. “The burden to the state is not huge,” she said. “For the petitioners, it is huge. They are aging … We’re not in dire straits. This is not going to bankrupt the fund.”

“We’re sympathetic” to the retirees’ argument, Bundy said. “In a perfect world we wouldn’t need to make any changes … (but) to have the court overturn this, that would be a real usurpation of the Legislature’s and the governor’s responsibilities.”

If the high court kicks the case back to the Legislature, Bundy said, “I don’t think we’d get a deal.”

Contact Rob Nikolewski at and follow him on Twitter @robnikolewski

Posted under Capitol Report.
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One Comment For This Post So Far

  1. NMObjectivist
    4:54 pm on September 3rd, 2013

    This is another example of the great folly of unfunded pension liabilities. A responsible government would immediately stop making promises of unfunded pension payments. The same is true for all levels of government and for all private companies.

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