Lawmakers supporting a bill to address a $108 million deficit in state pension funds for teachers were surprised recently when they came up short of the 33 votes needed to pass the bill.The bill eventually passed, after a motion to reconsider and several hours of additional debate.
The vote was 34-0, with 15 not voting.
LB 553, introduced by Sen. Jeremy Nordquist of Omaha, closes the pension funding gap by reducing retirement benefits for teachers hired after July 1st of this year.
Under the bill, all school employees will continue paying more of their salaries towards their retirement -- 9.78 percent as opposed to the 7.37 percent they would have paid after 2017.
The bill also increases the state’s contribution from 1 percent to 2 percent of benefits, which translates to an additional $20 million per year.
Nordquist said the bill is necessary for the state to meet its legal obligation to fully fund the pension plan. Without it, he said, the state would have to pay $53 million into the system by July 1st.
“We’ve made these promises to these public employees,” Nordquist said.
He attributed the pension deficit to “the worst market performance since the Great Depression.”
Several senators accused those voting against the bill the first time around of playing politics with the state’s financial future.
“You’re messing around with $50 million,” said Sen. Steve Lathrop of Omaha, addressing the bill’s opponents.
Sen. Danielle Conrad of Lincoln said a vote against the bill is a vote against a balanced budget.
Sen. Heath Mello of Omaha, who chairs the Appropriations Committee, said if the bill didn’t pass it would be the first time in Nebraska’s history that the state did not meet its pension obligation.
He warned that if the state did have to take $53 million out of the general fund this year to pay retiree benefits, there wouldn’t be much left for other legislative priorities.
Those who initially voted against the bill argue that the pension plan should be restructured to reduce the state’s financial obligation.
They would prefer a defined contribution plan -- similar to a 401(k) -- in which a set return on investment is not guaranteed.
Sen. Beau McCoy of Omaha, who voted against the bill the first time around before later switching his vote, asked Nordquist if the pension plan could be adjusted to save the state more money.
Nordquist replied that it could at a later time but that the current bill represents the only plan to address the pension shortfall.