Public pension planning

Legislature eyes hike in pension contributions

New actuarial assumptions raise long-term concerns

Will hikes erase take-home pay increase promised by Gov. Mead?

Most state and public employees in Wyoming will be asked to pay more into the public pension system under proposals now before the Wyoming Legislature. The question is how much? The Wyoming Retirement System director and board chairman appeared before the Joint Appropriations Committee Friday morning to present a report looking at contribution increases equal to 2% of employee pay in each of the next two years. The increases would raise the funding ratio of Wyoming’s “Big Plan” – which covers most state, school, university, community college, and local government employees – steadily over the next 30 years, reaching 101% in 2042. Plan administrators have said over the past year that Wyoming’s Big Plan is healthy. Using current accounting rules and assumptions about contributions and investment returns, the plan funding ratio is 81.9 percent, a ratio expected to rise to about 87.1 percent by 2042. On Friday, Thom Williams, director of the Wyoming Retirement System (WRS), presented a report from state actuaries that surprised several public pension advocates because they use proposed new assumptions about investment returns. The new assumptions reduce the current funding ratio to 79.9% and show the ratio dropping below 60% by 2042. The assumptions behind these projections have not been adopted by the WRS board of directors, notes Joe Fender of the Federated Fire Fighters of Wyoming. Fender is concerned because the change of assumptions presents a strikingly different view of the fire fighters’ Plan B, too. The plan for Wyoming’s game wardens also would see its funding ratio drop from a healthy point well above 80% to about 60%. A contribution increase, coupled with the restoration to pre-2010 levels of federal payroll taxes that fund Social Security, threatens to eat up all of a 2% pay hike for public employees proposed by Gov. Matt Mead. Teachers will be hit harder, since the governor did not propose pay hikes for K-12 employees. Altogether, public employees would see take-home pay cut despite the proposed pay raises. The new actuarial projections seem harsh, especially when the WRS experienced a 12% return on investment last year. The new assumptions reduce the prediction of annual investment from 8% to 7.75%. Discussions need to focus on splitting the payroll contribution increase. It should be split evenly between employer and employee. That’s the way the system largely has managed needs for increased contributions in the past.

Gas tax hike in House Revenue

The House Revenue Committee will conduct a hearing on House Bill 60 – Highway Funding. The bill will increase Wyoming fuel taxes by 10 cents per gallon. The ESPC supports the hike. Wyoming’s gasoline and diesel fuel taxes are well below those in surrounding states. (See the Wyoming Department of Transportation 2013 budget presentation, page 9.)The fee will hit low-income residents much hard than those further up the income scale. The ESPC will propose a tax rebate or refund program to blunt the impact on Wyoming’s most vulnerable families. The hearing opens at 7:30 a.m. in room B63 in the basement of the Herschler Building.

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