The Legislature must address Montana pension debt
You may believe that Montana is debt free following actions by the legislature earlier this year to pay off state debt. It is great that we passed legislation to pay off over $100 million of state bonded debt, but there is another debt obligation rarely discussed but costing us dearly.
Unfortunately, Montana has accumulated over $4.8 billion in pension debt over the past twenty years (in 2003 our pensions were fully funded with no debt). This debt is equivalent to over $4,300 for every man, woman, and child in Montana. Pension liabilities have accrued for a variety of reasons, but the main culprit is that the assumed rate of return on investments has been less than what the actuary estimated over the past 20 years. The bad news about Montana pension debt is that it falls on the employer, in this case Montana taxpayers. We have a choice: establish a game plan to pay off the debt or continue to refinance the debt over and over until it is unmanageable. The current cost of lost earnings to Montana taxpayers is $350 million per year! This is a massive cost to bear as it is equivalent to more than 10% of the state’s annual general fund expenditures.
HB226 and HB569 implement measures to assure these liabilities don’t continue to grow and become an even larger burden to our state by providing a path that assures these liabilities are paid over 30 years. The bills do this by adjusting the state’s employer contribution annually and adding $400 million. Although this is a significant investment, we believe that not addressing this liability now, while we have a once in a lifetime surplus, would be short sighted.
While it’s disappointing that these significant liabilities have not been addressed over the past 20 years, now is an ideal time to provide a permanent resolution. Although we would rather deploy some of our surplus revenue in a different way (providing services, lowering taxes, improving infrastructure), paying down pension debt now is far better than perpetually refinancing increasing pension liabilities repeatedly over 30 years. We must not leave this generational debt to be dealt with by our children and grandchildren. Rather, we must address the debt now while we are in a time of abundance.
Public debt is a burden on the economy. Currently Montana taxpayers who are not the beneficiaries of these pensions are adding over $130 million per year above state employer and employee contributions, and we are still falling behind. Most of us have at one time or another wrestled with debt, and we discovered that too much debt ties us down and limits our options in life. It is no different in the public sector. Encourage your legislative representative to support these important measures to provide a permanent fix on pension debt by calling the Montana legislature at 406-444-4800.