Legislative Retirement Math: 20 X 0 = $20,000

They work hard, but not hard enough on the actuarials

March 17, 2003 in New Mexico Politics | Comments (0)

Pensions are usually figured as a percentage of final average pay, but the pensions for New Mexico legislators can’t be figured that way because New Mexico legislators are unpaid. So they can’t argue that they’ve earned their pensions, calculated by number of years served. But they do argue they deserve them.

The voters have gone along with that sentiment, despite investigative stories showing the unpaid citizen legislators enjoying free conferences at vacation resorts or the expense reports showing that lobbyists have already spent more than $250,000 entertaining them this year.

Former legislators have been drawing small pensions for 30 years or more. It has not been a noticeable drain on the Public Employees Retirement Association system. And the voters did not penalized legislators who voted to triple their pensions in 1999, although then-Gov. Gary Johnson vetoed the bill.

The last run at enhanced legislative retirement, however, had a charming sponsor, then-Sen. Billie McKibben, R-Hobbs, who did not argue entitlement. McKibben argued the enhanced pension would buy out some of the dinosaurs — a New Mexico equivalent of term limits. “If we can get rid of one porker, it’s worth the expense,” he said.

The current sponsor, Senate Republican Leader Stuart Ingle, R-Portales, is not so confrontational, and the leadership that McKibben excoriated has changed.

Former Atty. Gen. Hal Stratton (1987-1990) challenged legislative retirement on the basis that the constitution says legislators shall not receive salary or other emoluments beyond per diem expenses. He won in district court and the Appeals Court, but the Supreme Court in a surprise decision found legislative retirement was not an emolument.

Now the legislators are trying, in round numbers, to quadruple their retirement benefits at a time when money for new programs is hard to find. Under the current bill, again in round numbers, for a one-time contribution of $10,000, a 20-year veteran on retirement, at any age, would get $20,000 a year for life.

And just as four years ago, nobody seems to know how much the new benefits will cost. Four years ago there was no fiscal impact report with the legislative retirement bill. This year there is an FIR, but it says the cost is “unknown” because the Legislature has never requested an actuarial study. This has to be deliberate.

Ingle, Bounty Hunter

Ingle has said his bill might cost $2- or $3-million a year. But not to worry. This won’t cost the taxpayers a dime, he says. The sponsor claims the whole legislative retirement program in the future will be paid by collection of an uncollected income tax.

See, the way Ingle figures it, a large number New Mexico oil and gas well owners who live out of state are not paying the state income tax on their royalties. Ingle proposes to go after the tax-dodging oil men by creating a royalty withholding tax of 6 3/4 per cent. It would be paid to the state by non-tax-evading New Mexicans. They would withhold it from their royalty checks mailed out of state and forward it, at their expense, to the New Mexico Department of Taxation and Revenue.

Clever. And it has been tried in Oklahoma, where the courts ruled it was not an unconstitutional tax on out-of-state residents but merely a means of collecting a tax that affected all equally. The idea, however, does raise some questions. Like: Why does the legislation make the withholding scheme contingent upon the quadrupled legislative retirement? If a tax is due, why not collect it? Are the legislators turning themselves into income tax bounty hunters? Note: the withholding tax bill is contingent upon the retirement bill.

What’s left over from the oil and gas witholding tax revenue after legislative retirement expenses will go to the state’s general fund. But if the scheme falls short, then the remaining legislative retirement costs will come out of the general fund. Nobody has good numbers, it seems, to prove this will or will not happen. Legislators say they deserve a pension because they work hard, but some wonder if they could have worked a little harder on the fiscal impact report for this one.

There are other provisions of Senate Bill 620 worthy of public attention. It would allow former legislators to participate in the state’s liberal Retiree Health Care insurance group by paying the premium plus an adjustment for administrative costs.

And a section would allow state and local government retirees to return to work without suspension of retirement benefits and without the current cap of $15,000 on their earnings.