MN House Republicans Continue War on Teachers

Doing nothing to adjust the TRA fund now will compound the problems. The future costs will be much higher, and eventually, the People of Minnesota will be saddled with a whooping bill. The GOP seem to think that they are not responsible for fulfilling the terms of the State’s contract with its workers, especially those who teach our future generations of citizens. Perhaps they prefer to buy election support with tax breaks and refunds.
Here is the latest from Laurie Fiori Hacking, Executive Director, Minnesota Teachers Retirement Association keeping us informed from the Capitol:
“This evening the House voted 75 to 48 to approve SF 3, a scaled-down version of the pension bill that does not include TRA’s funding stability provisions but does include the funding stability measures for other systems (MSRS, PERA P&F and SPTRFA).  Most of the debate focused on the bill’s preemption and parental leave provisions, provisions which have caused the governor to declare he would veto the bill.
Rep. Mary Murphy (D-Hermantown) stated that the pension elements in the bill were not what had been passed in the regular legislative session nor by the Pension Commission.  Rep. Murphy characterized the process as “broken.”  House Minority Leader Melissa Hortman (D-Brooklyn Park) said there was no reason to tie the fate of pensions to the preemption issue. “

Senate passes doomed bill to House

The Senate just approved the pension bill (SF 3) with a vote of 34 to 30. Most of the debate on the bill centered on the controversial preemption language contained in the bill which the governor opposes. Sen. Scott Dibble (D-Minneapolis) offered an amendment to remove the contentious preemption language, but that amendment failed by a vote of 30 to 32.  SF 3, if it progresses, would next move to the House for consideration.

SF 3 does not contain the TRA funding stability provisions but it does include TRA’s administrative provisions. The stability provisions and funding for the other systems (MSRS, PERA P&F and SPTRFA) are included in the bill.  The bill also contains labor-related provisions such as ratifying parental leave in the various state labor contracts. It also contains the controversial local preemption provision that bars local governments from adopting local ordinances governing wages and benefits provided by private employers. The governor previously vetoed the preemption bill and last night issued a statement indicating he intends to veto the pension/preemption bill.  We will keep you posted if there is further action on this bill.

Courtesy of Laurie Fiori Hacking, Executive Director, Minnesota Teachers Retirement Association

Special Session Deadline Extended

The legislature continues to work, but progress is uncertain as of 8:30 this morning.

From Laurie Hacking, Exec. Dir. of TRA:

“The pension bill (SF 3) was finally posted late last night, however, it has not been voted on yet. It does NOT contain the TRA funding stability provisions but it does include TRA’s administrative provisions. The stability provisions and funding for the other systems (MSRS, PERA P&F and SPTRFA) are included in the bill.  The bill also contains labor-related provisions such as ratifying parental leave in the various state labor contracts, a measure that the governor supports. It also contains the controversial local preemption provision that bars local governments from adopting local ordinances governing wages and benefits provided by private employers. The governor previously vetoed the preemption bill and last night issued a statement indicating he intends to veto the pension/preemption bill (see below).  We will keep you posted as things unfold during the day.”

When all is said and done. Thank Governor Dayton and those legislators who have stood up for Minnesota’s state workers. They have been relentless in putting people before profits. That has been the great thing about Minnesota, and it must never be lost.

Here’s why funding is at issue

Late Sunday night the Senate unanimously approved the pension bill. Action today will move to the House. TRA’s financial stability measures were not initially included in the bill, but a floor amendment added back the TRA sections.  The TRA provisions, however, become effective only “if an appropriation is made to TRA in the 2017 legislative session for the employer contribution increase.”  It remains unclear whether in the final hours of the session legislative leaders and the governor will agree to provide the funding needed to cover the costs.  A summary of the TRA provisions in the Senate-passed bill are described below.  Note that none of these provisions are effective unless funding is provided in the 2017 session.

  • COLA: Reduces TRA’s 2% COLA to 1% for five years, effective 2018-2022; for the next five years (2023-2027), the COLA increases 0.1% per year until reaching 1.5% in 2027.  Eliminates future COLA triggers that would increase COLAs if system funding improved. Also requires LCPR to study COLAs for all plans and make recommendations for the 2021 legislative session.
  • COLA Delay: Delays payment of the first full COLA until a member reaches normal retirement age (age 66 for post-89 hires and age 65 for pre-89 hires). Implementation of the normal retirement age COLA is delayed five years, until January 1, 2023.  Under this proposal a teacher retiring at age 62 would have a frozen benefit for four years until eligible for a full COLA, whereas under current law the wait period for the full COLA is 18 months. Members retiring at age 62+ with 30 years of service or retiring under the Rule of 90 are exempt from this COLA delay. Also exempt are disabilitants and younger survivors of members who die while active.
  • Early retirement benefits: Reduce early retirement benefits by eliminating current-law augmentation rates that are used in calculating benefits.  Early retirement benefit augmentation would be eliminated over a five-year period beginning July 1, 2018 through June 30, 2023.  Members who retire at age 62+ with 30 years of service would retain the more favorable early retirement benefit provisions available to them under current law.  For members not eligible for 62/30 provisions, the proposed change once fully implemented would reduce early retirement benefits by approximately 18% for members retiring at age 60, by 11% for members retiring at age 62 (TRA’s average retirement age), by 8% for members retiring at age 63 and by 6% for members retiring at age 64.  Reductions for members retiring before age 60 would be more significant, ranging from 19% at age 59 to 33% at age 55.
  • Contribution rates: Increases employEE contribution rates from 7.5% to 7.75%, beginning July 1, 2022.  Increases employER rates from 7.5% to 8.75% phased in over six years, 2017-2023). 
  • Deferred augmentation: Reduce augmentation from 2% to 0% for vested deferred members who terminate employment and elect to leave their contributions with TRA.  The elimination of augmentation would occur for future years of deferral beginning July 1, 2018.
  • Refund interest rate: Lowers interest rate paid on refunds from 4% to 3%.
  • Investment return assumption: Lowers TRA’s investment return assumption to 7.5% along with all other pension plans.  Also lowers to 7.5% the interest TRA charges members and employers for repayment of refunds, various leave payments, and omitted contributions.
  • Amortization period: Extends TRA’s amortization period by 10 years from 2037 to 2047.  Most other plans’ amortization periods are also extended to 2047.

Courtesy of MN TRA

A pro-rich, anti-government services bill

The House State Government Finance Committee approved the omnibus pension bill (HF 565) by a voice vote this morning and referred the bill to the House Ways and Means Committee.  Rep. O’Driscoll said the bill would likely be held in Ways and Means until global budget targets are agreed to.  Before approving the bill, the Committee approved an amendment to take TRA out of the pension bill as well as remove $5 million in annual state aid for the St. Paul Teachers Retirement Fund Association and $4.5 million in annual state aid for the PERA Police and Fire.  O’Driscoll said the state aid was being removed because it violates the House’s current budget targets.

Julie Bleyhl, AFSCME Legislative Director, testified on behalf of the 20 organizations that make up the Public Employee Pension Coalition and indicated that the group supports a pension package with funding.

TRA’s Executive Director Laurie Hacking testified and emphasized the need to have a pension bill this year to address financial problems.  She stated that while the bill met the TRA board’s goal of financial stability, the bill did not meet the other goals of maintaining the recruitment/retention value of pensions and shared commitment.  Hacking pointed out that under the proposed bill, members (active and retirees) would bear 87 percent of the cost of the reforms (66 percent by actives and 21 percent by retirees).

Jodee Buhr, representing Education Minnesota stated that the organization supports the TRA proposal and supports being part of the bill.  She indicated that Education Minnesota continues to be at the table with other stakeholder groups to worked toward an equitable solution.

Courtesy of TRA Communications

House Government Operations Committee OKs pension bill

The House Government Operations Committee approved the omnibus pension bill (HF 565) this morning on a voice vote.  TRA’s provisions remain in the bill. The bill was referred to the House State Government Finance Committee, which could meet as early as Monday at 10 am (in Room 10 State Office Bldg) to consider the bill. That Committee has not yet posted an agenda for its Monday hearing.

Rep. Tim O’Driscoll, as author of the pension bill, described the provisions of the bill and said that he did not have an amendment to delete TRA out of the bill (as was done Thursday in the Senate Finance Committee) and that there is still “work in progress” with TRA’s section of the bill.  In response to questions about funding for the bill, O’Driscoll acknowledged that there is no funding mechanism in the bill and that as the bill moves forward to other committees, he hopes pension funding will be added as part of a global agreement.  Rep. Mike Nelson stated that he could not support the bill, especially since no funding is included.

Several people testified on the bill. TRA’s Executive Director Laurie Hacking and Deputy Director Jay Stoffel testified and stated that while the bill met oboxne of the board’s four goals relating to financial stability, the bill did not meet the other goals of inter-generational equity, maintaining the recruitment/retention value of pensions and shared commitment.  Hacking pointed out that under the proposed bill, members (active and retirees) would bear 87 percent of the cost of the reforms (66 percent by actives and 21 percent by retirees).

Julie Bleyhl, AFSCME Legislative Director, read a statement on behalf of the 20 organizations that make up the Public Employee Pension Coalition and indicated that the group supports the governor’s pension proposal.  She pointed out that while some of the groups in the coalition support certain provisions of the proposed bill, they may have concerns with other provisions.

Education Minnesota Secretary-Treasurer Rodney Rowe stated his support for the TRA Board proposal because of its shared responsibility approach.  He voiced opposition to the proposed bill and warned that the benefit cuts in the bill would make the dire teacher shortage situation much worse. Retired Educators Association of MN President Lonnie Duberstein testified about how pensions are critical to the recruitment and retention of teachers. He said teachers are willing to accept modest wages from teaching if they can be assured of a modest retirement.

Doug Anderson, PERA executive director, indicated that while PERA supports lowering the investment assumption to 7.5 percent, its board opposes inclusion of the PERA General Plan provisions in the bill. Anderson commented that the board had reviewed the General Plan and found that it is sustainable with no changes needed at this time. Anderson indicated opposition to the bill’s proposed changes to the PERA Correctional plan but support for the PERA Police and Fire Plan changes, which are consistent with board recommendations.

Minnesota School Boards Association Government Affairs Director Grace Keliher testified that she was shocked by action taken by the Senate Finance Committee yesterday to remove TRA from the bill while the committee acted to include funding in the bill for other employer costs. She said that TRA has had several major cost increases for school districts in the past 10 years, and the latest proposal is “too much,” requiring the state to provide funding to cover the costs. Minnesota Association of School Administrators Executive Director Gary Amoroso similarly stated that additional dollars from the state are needed to cover the costs.

Jill Schurtz, SPTRFA Executive Director, testified in strong support of the bill and indicated that the St. Paul school district, retirees and actives are all supportive of the proposal.

courtesy of Minnesota TRA Communications

Pension commission OKs its staff bill on party line vote

MAY 10 – The Legislative Commission on Pensions and Retirement approved the omnibus pension bill this morning on a party line vote of 8-4. Members voting against the bill were Sen. Sandy Pappas (D-St. Paul), Sen. Dan Schoen (D-St. Paul Park), Rep. Paul Thissen (D-Minneapolis) and Rep. Mary Murphy (D-Hermantown).

The bill begins moving through other House and Senate committees starting today.

Before tboxhe bill passed, Pappas said she was disappointed there was not agreement in LCPR but indicated there is still potential to reach agreement on a bill that the governor would sign if everyone remains flexible. Pappas said most of the disagreements pertain to the TRA provisions and she is hopeful that with a few adjustments an agreement could be reached. Sen. Julie Rosen, (R-Vernon Center; LCPR chair), indicated she was willing to continue to work on the bill with the governor and feels that the commission has a good foundational bill.

Before considering a series of amendments to the bill, Thissen asked about funding to offset pension costs for state agencies and school districts. Rosen stated that as the bill moves through other committees, funding can be added, including a possible increase in the school aid formula for schools. Rosen said she and Rep. Tim O’Driscoll (R-Sartell) expected to meet with the governor on Monday regarding pensions but the meeting was cancelled.

Pappas said she has concerns about elimination of augmentation and the COLA delay, which she believes will create a rush to retire and have the unintended consequence of exacerbating the teacher shortage. She also advocated for more of a phase-in for lowering the investment assumption to 7.5 percent for TRA. Pappas criticized the 1 percent COLA proposal and the proposed increase in employee contributions, saying these measures are “too much” and do not achieve shared sacrifice.

With regard to a provision that would delay receipt of a retiree’s first COLA until the retiree reaches normal retirement age (66 for most TRA members), Pappas successfully offered an amendment to delay implementation from 2018 to 2023 for all the pension systems. She explained that members near retirement need time to accommodate the change. Rosen said she supported the amendment and it passed.

An amendment to replace the TRA provisions in the bill with proposals supported by the TRA Board of Trustees and stakeholders was offered by Pappas with support from Thissen, but the amendment failed on a party-line vote. Thissen noted that the commission usually proceeds with major pension changes only when the pension system boards and stakeholders are in agreement.

Thissen offered an amendment to remove PERA provisions from the bill since all who testified on these measures indicated opposition, including the PERA board, employees and retirees. This amendment failed on a voice vote.

Courtesy TRA Communications and Committee of Thirteen