NOTE: As provided in LFC policy, this report is intended for use by the standing finance committees of the legislature.  The Legislative Finance Committee does not assume responsibility for the accuracy of the information in this report when used in any other situation.



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F I S C A L I M P A C T R E P O R T





SPONSOR: Taylor, JG DATE TYPED: 02/21/01 HB 908
SHORT TITLE: Increase Legislator & Lt. Governor Retirement SB
ANALYST: Burch


APPROPRIATION



Appropriation Contained
Estimated Additional Impact
Recurring

or Non-Rec

Fund

Affected

FY01 FY02 FY01 FY02
**$500.0 Recurring General Fund



(Parenthesis ( ) Indicate Expenditure Decreases)



** Potential minimum impact; please see Fiscal Implications Section of this report.



Relates to Appropriations in The General Appropriation Act House Bill 2 and Senate Bill 98

Conflicts with Senate Bill 652



SOURCES OF INFORMATION



LFC files

Public Employees Retirement Association

State Personnel Office



SUMMARY



Synopsis of Bill



House Bill 908 amends Section 10-11-41 NMSA 1978 to increase the annual pension amount of legislators and the lieutenant governor who served after December 31, 2000 from $250 to $1,000 multiplied by the number of years served.



Significant Issues



In 1995, the New Mexico Supreme Court ruled that retirement benefits for which legislators may be eligible under the legislative retirement plan do not constitute legislative compensation; accordingly, the plan does not violate Article IV of Section 10 of the New Mexico Constitution. As shown in Tables 10 and 11 of pages 4 and 5 of the attachment on a Legislative Management report of the National Conference of State Legislators, other states provide retirement plans for legislators. The attachment compares the plans of the five contiguous states to New Mexico.





FISCAL IMPLICATIONS



The bill proposes to increase legislative/lieutenant governor retirement benefits by 300 percent, but does not provide for a corresponding increase in contributions from the members of the plan. Consequently, in accordance with Section 10-11-43 NMSA 1978, the state would be required to "contribute amounts sufficient to finance the membership of members under state legislator member coverage plan 1 on an actuarial reserve basis." Each member currently makes annual contributions of $100 to PERA for their retirement.



The range of state contributions required (per the Legislative Retirement actuarial report issued in December 2000) based on current law is between $144.0 to $235.0. This range reflects the difference in liabilities calculated for active members under two scenarios. The lower end of the range assumes an active member population consisting of only those legislators who currently have paid for service (77 persons). The upper end of the range assumes an active member population that includes all current legislators (112 persons).



It is the PERA actuary's understanding that any past or present state legislator not already participating in the plan may at any time decide to become a participant of the plan and purchase service credit in accordance with the statute and PERA rules. Only the obligations associated with participants reported as of June 30, 2000 were measured for purposes of this valuation. In total, there are 77 active members who have paid for service, 35 active eligible members, 57 inactive members and 84 retired members for a total of 253 members.



Given the trend in participation (9 newly active members from 1999 session to 2000 session), the amount needed this year, based on current law, may reasonably be expected to include 9 additional active members.



The estimated amount of employer contributions needed in FY01 based in this assumption is: $167.0. House Bill 2, the General Appropriation Act, contains a $167.0 general fund appropriation to fund the state's share.



PERA provided examples of a member's pension under the following scenarios:



Proposed Benefit Current Benefit

20 x $1,000 = $20,000 annually 20 x $250 = $5,000 annually



Proposed Benefit Current Benefit

14 x $1,000 = $14,000 annually 14 x $250 = $3,500 annually



PERA reported that it does not know how much it will cost to finance the enhanced benefit contained in House Bill 908 on an actuarial reserve basis since no actuarial study was requested for this change. Since the benefit is a 300 percent increase, we may assume that the minimum cost to the general fund needed to keep the retirement plan on an actuarial reserve basis may be between $432.0 and $705.0. Since the members are not being required to increase their contributions and the enhanced retirement benefit may increase membership, the amount required from the general fund may be even higher.



DKB/prr

Attachment

TABLE 1. COMPENSATION & LIVING EXPENSE ALLOWANCE DURING SESSION, 2000

State Salary Per Diem
Arizona $24,000/year. $35/day for 1st 120 days of regular session and special session and $10/day thereafter. Members residing outside Maricopa County receive an additional $25/day for the 1st 120 days of a regular session and a special session and an additional $10/day thereafter. Set by statute.
Colorado $30,000/year. $45/day for members living in the Denver metro area. $99/day for members living outside Denver. Per diem is determined by the legislature.
New Mexico None. $136/day tied to federal rate & the constitution.
Oklahoma $38,400/year. $103/day tied to federal rate.
Texas $ 7,200/year. $118/day set by the Ethics Commission.
Utah $ 100/day. $75/day lodging allotment for each calendar day, tied to federal rate. $42/day per diem for each calendar day. (NOTE: Regular session is 45 days long.)


TABLE 2. LIVING EXPENSE ALLOWANCE DURING INTERIM, 2000

State Interim Per Diem
Arizona $35/day with prior approval of presiding officer set by statute.
Colorado Members are reimbursed for actual expenditures.
New Mexico $136/day tied to federal rate.
Oklahoma $25/day set by the legislature.
Texas Senators receive $118/day for legislative business in Travis County, not to exceed 10 days per month. Representatives receive $118/day for legislative business in Travis County, not to exceed 12 days per month. Per diem amount is determined by the Ethics Commission and the number of days is determined by the Senate Caucus and the Committee on House Administration.
Utah $42/day meals; up to $75/day for lodging.


TABLE 3. ADDITIONAL COMPENSATION FOR HOUSE/ASSEMBLY LEADERS, 1999

State Presiding Officer Majority Leader Minority Leader Other Leaders
Arizona None. None. None. None.
Colorado All leaders receive $99/day during interim when in attendance at committee or leadership matters.
New Mexico None. None. None. None.
Oklahoma $17,932 $12,364 $12,364 Speaker pro tem, $12,364
Texas None. None. None. None.
Utah $1,000 $500 $500 Whips and asst whips, $500


TABLE 4. ADDITIONAL COMPENSATION FOR SENATE LEADERS, 1999

State Presiding Officer Majority Leader Minority Leader Other Leaders
Arizona $500 None. None. None.
Colorado All leaders receive $99/day during interim when in attendance at committee or leadership matters.
New Mexico None. None. None. None.
Oklahoma $17,932 $12,364 $12,364 None.
Texas None. None. None. None.
Utah $1,000 $500 $500 Whips and asst whips, $500


TABLE 5. ADDITIONAL COMPENSATION FOR COMMITTEE CHAIRS, 1999

State Additional Compensation for Committee Chairs
Arizona None.
Colorado None.
New Mexico None.
Oklahoma $12,364 for Appropriations and Budget Committee Chairs.
Texas None.
Utah None.


TABLE 6. STATE LEGISLATORS' TRAVEL ALLOWANCE, 1999

State Mileage Access to State Autos Credit

Card

Phone Card/ Phone Allowance
Arizona 30¢/mile on actual miles. Access to motorpool for legislative trips only. No. No.
Colorado 20¢ or 24¢ if 4wd vehicle. Actual miles paid. No. No. Yes. Official state business only.
New Mexico 32.5¢/mile tied to federal rate No. No. No.
Oklahoma 32.5¢/mile tied to federal rate. No. No. $1,000 during interim.
Texas 28¢/mile set by General Appropriations bill; an allowance for single, twin and turbo engines from 40¢ to $1/mile is also given. No. Members are eligible fo rAmerican Express Cards for official use. Official state business only. House members are limited to available balance in their monthly operating accounts.
Utah 31¢/mile, round trip from home to capital. No. No. Yes. Legislative use only.



TABLE 7. CAPITOL OFFICE, DISTRICT OFFICE AND STAFFING ALLOWANCES, 1999

State Allowances
Arizona None.
Colorado $2,000/year.
New Mexico None.
Oklahoma $350/year for unvouchered office supplies plus seven rolls of stamps.
Texas Senate: $25,000/month for staff salaries. House:$9,750/month for staff salaries, supplies, stationery, postage, district office rental, telephone expense, etc.
Utah None.


TABLE 8. HEALTH, DENTAL AND OPTICAL INSURANCE BENEFITS FOR STATE LEGISLATORS,
1999

State Health Dental Optical
Arizona State pays a set amount, legislator pays remaining balance; depending on plan selected. Optional at legislator's expense. Optional at legislator's expense.
Colorado State pays a portion, legislator pays a portion; amount differs according to plan selected. State pays full amount. Dependents coverage at legislator's expense. Not available.
New Mexico Not available. Not available. Not available.
Oklahoma State pays full amount. State pays full amount. Optional at legislator's expense,
Texas State pays for legislator, legislator pays for dependent coverage. Optional at legislator's expense. Included in health coverage.
Utah State pays full amount depending on plan chosen. State pays full amount depending on plan chosen. Optional at legislator's expense.


TABLE 9. DISABILITY AND LIFE INSURANCE BENEFITS FOR STATE LEGISLATORS, 1999

State Disability Insurance Same as State Employee Plan Life Insurance Same as State Employee Plan
Arizona State pays portion and legislator pays portion for long-term disability; short-term disability available at legislator's expense. Yes. Legislator may opt to purchase up to 3 times additional life insurance above the standard $10,000 base that all state employees receive. Yes.
Colorado Not available. No. State pays full amount for $12,000 policy. Yes.
New Mexico Not available. No. Not available. No.
Oklahoma State pays full amount. Yes. Same as management employees. State pays full amount ($20,000). For optional amounts above that, legislator pays. Yes. Same as management employees.
Texas Optional at legislator's expense. Yes. Optional at legislator's expense. Yes.
Utah Optional at legislator's expense. Yes. State pays full amount for basic coverage ($18,000). Additional coverage optional at legislator's expense. Yes.


TABLE 10. RETIREMENT BENEFITS FOR LEGISLATORS, 1999

State Participation Same as State Employees Minimum Age and Service Requirement Contribution Rate
Arizona Optional. No. Age 65 with 5+ years of service; or

age 60 with 25+ years of service.

7%.
Colorado Mandatory. No. Age 60 with 5 years of service. 8% of gross salary.
New Mexico

Current

Optional. No. Age 65 with 5+ years of service;

age 64 with 8+ years of service;

age 63 with 12+ years of service; or

any age with 14+ years of service.

$100 per year for service after 1959.
New Mexico

Proposed

Optional. No. Age 65 with 5+ years of service;

age 64 with 8+ years of service;

age 63 with 12+ years of service; or

any age with 14+ years of service.

$100 per year for service after 1959.
Oklahoma Optional. No. Age 60 with 6 years of service. Optional contribution of 4.5%, 6%, 7.5%, 8.5%, 9% or 10%.
Texas Optional. No. Age 60 with 8 years of service; or age 50 with 12 years. 8%
Utah Mandatory. No. Age 65 with 4 years of service. Non-contributory.



TABLE 11. RETIREMENT BENEFITS FOR LEGISLATORS, 1999

Estimated Monthly
State 4 Years 12 Years 20 Years Benefit Formula
Arizona $333.33/month. $1,000/month. $1,667/month. 4%/year of credited service x 3 year average; maximum is 30% of member's average yearly salary.
Colorado Not yet vested. $350/month. $729/month. 2.5% x HAS x creditable service through 20 years plus 1.5% x HAS for 21 through 40 years. Maximum benefit = 80% of employee's HAS.
New Mexico

Current

$83.33/month. $250/month. $416.66/month. $250 x years of service (after 1959).
New Mexico

Proposed

$333.33/month. $1,000/month. $1,666.66/month $1,000 x years of service (after 2000).
Oklahoma $426.68 at 10%. $1,280.04 at 10%. $2,133.40 at 10%. Average participated salary x length of service x computation factor depending on optional contributions ranging from .019 to .040.
Texas Not eligible. $2,288.25/month. $3,813.75/month. 2.25% x district judge's salary (currently $8,475) x length of service.
Utah Varies. Varies. Varies. $10/month x years of service; adjusted semi-annually according to consumer price index, limited to maximum of 4%.



DKB/prr

Attachment