Burgum’s proposed pension bailout must be tied to real reforms

It’s not the sexiest political topic, so you might be forgiven if you’re unaware of North Dakota’s chronic problems with underfunded pensions. But the problems are real, and while Gov. Doug Burgum proposes addressing the issue with a cash infusion from the state’s reserves, that bailout needs to be coupled with real reform.

Because while politicians in our state have been promising to address pensions for a while now, nothing much is changing.

North Dakota’s two largest pensions are the Public Employees Retirement System (PERS) and the Teachers Fund For Retirement (TFFR).

Neither of these pensions are anywhere close fully funded, and that’s been the case for a while.

Back in 2012 an audit of PERS showed the pension had just 65 percent of the funds it needed to meet projected liabilities.

The TFFR was just 61 percent funded according to a separate audit.

That year, during his budget address ahead of the 2013 legislative session, then-Gov. Jack Dalrymple touted a fiscal plan that would put the state’s pension plans “on path to complete actuarial soundness.”

We don’t seem to have actually found that path.

A 2017 audit found that PERS actually worse off than it was in 2012, at just 62.7 percent funded. An audit of the TFFR, meanwhile, showed the fund little improved at just over 63 percent funded.

Which brings us to Burgum’s executive budget proposal, which he presented to lawmakers this week at their organizational session in Bismarck.

“The proposed budget directs $265 million from the SIIF [Strategic Investments and Improvement Fund] to the pension fund to help address its current $1 billion unfunded liability and ensure that it can continue to cover its obligations to retired team members,” read a statement from the governor’s office. “By taking this action and adopting corresponding policies recommended by an interim committee, the pension will be fully funded in only 18 years.”

The pension fund represent real obligations to real people. Public employees who were promised, as a part of their compensation, a source of revenue for their retirement years. We cannot pull the rug out from under them, so if a more than quarter-billion dollar pension bailout is what’s needed in the here and now, that’s some medicine we’ll just have to swallow.

But the bailout must be tied to real reforms which put these funds on a better fiscal trajectory.

In past legislative sessions, such proposals were defeated by the powerful lobbyists who represent public workers, most notably the folks at North Dakota United. It’s been easier for politicians to eschew that fight in favor of bailouts which, while they fill the potholes in the pension, do little to fix the structural problems which create them in the first place.

North Dakota workers need to be transitioned to a pension system defined contributions as opposed to defined benefits. The latter, though a more generous compensation for public workers than the former, creates long-term liabilities which are simply unsustainable.

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