Pension bill in limbo as legislative session progresses

Teachers, firefighters and other public employees who plan to retire have a stake in a political showdown at the State Capitol.

Minnesota's public employee pension funds have been strained as baby boomers retire and people live longer and would eventually run short of money to support retirees without changes to how they're funded. The state Senate has already unanimously passed a measure, broadly supported by stakeholders, to lower cost-of-living adjustments, increase employee and employer contributions, reduce benefits and raise the state contribution which would immediately reduce pension fund liabilities by $3.4 billion.

"The bill truly reflects shared sacrifices from all parties," Gov. Mark Dayton, a DFLer, wrote in a Tuesday letter to GOP House Speaker Kurt Daudt, urging the House to approve the bill soon.

Republicans insist they will do so: "It's not in danger. It's not something we're delaying," said Rep. Tim O'Driscoll, R-Sartell, who helped craft the measure.

But other recent attempts by the state's political leaders to settle the pension system's unfunded liabilities have been tripped up by political maneuvering or disagreements, leading Dayton to veto pension-reform legislation in both 2016 and 2017. Dayton expressed concern that this year's measure would become a "vehicle to add mischief" as he and lawmakers look to finish up this year's work.

With five weeks left in the legislative session, House Republicans added clarity Thursday to their own plans for spending the state's projected $329 million budget surplus. Among the major highlights, Republican want a little over $100 million to go to tax relief and another $100 million to go to fixing roads and bridges statewide, and an additional $30 million for public schools. Most of that would go to school safety and mental health programs.

"We're not proposing a huge amount of tax relief," said Daudt, R-Crown.

The House GOP proposal did not specifically include the $27 million that the pension plan calls for in 2019. But O'Driscoll said he is confident it will pass this session. "The House does have its timeline to take care of business," he said.

Senators have unanimously approved the reform proposal that was three years in the making. But the House has not acted on the measure this session, which devotes more state money to pensions and cuts some employee benefits.

In 2017, legislators tied the pension plan, which Dayton wanted, to a proposal he opposed that would have blocked cities from raising the minimum wage or enacting paid sick-time laws. The previous year, Dayton said the pension reform was unfair and put the burden on retirees.

The 2018 bill has "95 percent of the same content" as the 2016 plan Dayton vetoed, O'Driscoll said. Nonetheless, he said he is pleased the governor is on board this year.

State officials are feeling pressure from credit rating agencies that consider unfunded pension liabilities when setting the state's credit rating.

"The rating agencies are already raising concerns, and we've assured them the best we can that we think we're going to take care of it this session," Dayton said. "If we don't, we jeopardize our fiscal rating."

If the reform does not pass this year, the cost to retirees and taxpayers will continue to grow, said Jay Stoffel, executive director of the Teachers Retirement Association. He said he was concerned to see that the House did not specifically include the pension money in its budget numbers.

As part of their spending framework, House Republicans proposed an $825 million public works bonding package that puts another $25 million toward school safety. The governor has championed a $1.5 billion bonding bill.

The GOP spending proposal did not include $33 million Dayton requested for repairs to the Minnesota Licensing and Registration System, known as MNLARS. Daudt said there's not much confidence in the administration's plans to fix the system.

While the spending targets do not specify money for pension reform, Daudt said he expects it will be funded.

Dayton highlighted a few new spending priorities Thursday. He called on the Legislature to give another $35 million to the state's Rural Finance Authority, which loans money to farmers to support their operations. And he said the state should allocate nearly $9 million to encourage private landowners to sell their timber to Minnesota mills to help with a timber shortage.

Jessie Van Berkel • 651-925-5044