The multi-union collation known as the Public Employee Pension Committee (PEPC) met on Friday, September 15th to hear updates and develop an action plan for the upcoming legislative session. The Legislation Commission on Pensions and Retirement (LCPR), which the PEPC informs and is comprised of a bipartisan group of legislators to decide pension issues, has also conducted a meeting in Duluth on October 30th to hear directly from active pension participants as well as retirees. The goal of getting a broad pension bill out of the Legislature is underway.
Notwithstanding the fact that it seems like the last legislative session just ended, understanding and advocating for pension issues in this forum is critical because public unions in Minnesota are barred from negotiating pension benefits in regular bargaining. PEPC fills this vital role.
At the September meeting, the directors of the coordinated funds were present to update PEPC on market conditions and any changes that have occurred since the last session. To the question of market conditions, the directors reported roughly 8.9% of market growth, slightly above the funding assumption of 7%. At that rate, “fully funded” status will be achieved in 2033. Last year, LCPR lowered the investment assumption from 7.5% to 7%; the fund directors report that they can now make decisions with less risk, lowering the potential for future volatility.
There is a strong desire among PEPC participants to make changes that stop the continual devaluing of the pension benefit in an era of high inflation; cost-of-living caps passed in prior years mean that the value of the benefits decrease each year that inflation is above the cap. Some of the unions expressed that while public employees are asked to make sacrifices during lean times, most notably from the 2018 Omnibus Pension Bill that reduced benefits, they aren’t made whole when economic conditions improve. The value of the pension benefit has fallen dramatically in years where inflation has exceeded 7% but the benefit is capped at 1.5%.
We will keep MGEC members informed as the issue develops this session.