Anyone who’s dedicated a lifetime of work for the public good should be able to retire with dignity. The firefighters, police officers, and other state, municipal, and county employees in New Mexico who work every day to make our communities stronger deserve to know that they will have the resources they need to live comfortably into old age.
Concerns raised in the NM Roundhouse suggest that the pension system for our public servants may be at risk because many of the people on the board of the Public Employee Retirement Association of New Mexico (PERA) don’t have the experience necessary to fulfill their responsibilities. PERA is in charge of an $18 billion trust fund that includes the retirement money of nearly 100,000 public employees.
Under current law, PERA board members are not required to have any financial experience, potentially putting billions of dollars at risk of mismanagement.
In 2019, Senator George Muñoz stated: “The [PERA] board is completely dysfunctional. It’s a clown show over there. They’re yelling at each other down the halls. We have to fix it.”
According to an op-ed published in the Albuquerque Journal in 2020 by a group of retirees, petty grievances and personal vendettas dominate board meetings.
As a financial advisor, I know the struggles that many public servants face when building a solid retirement plan. I also know how important it is to have someone with actual knowledge and experience to help you make the most of your hard-earned money.
That’s why we need to pass House Bill 51 this legislative season.
House Bill 51 would restructure the PERA board and require that most members have relevant finance or investment management backgrounds. This change would greatly benefit our public employees.
In a letter to the PERA board in 2019, State Auditor Brian Colon expressed grave concern about “the Board’s failure to up-hold its fiduciary responsibilities....This failure…puts our retirees and future generations of retirees at risk.”
As a fiduciary, the PERA board is legally required to put its constituents’ best interests first. If PERA is indeed failing in its fiduciary duties, that means it may not be doing what it should to safeguard the financial future of the state’s public employees. This is an issue of grave concern.
Imagine being required to trust someone who’s not a medical professional to help you treat a long-term illness or trust someone who’s not a lawyer to represent you in court. That sounds like a bad idea, right?
So is expecting public employees to trust their pensions to people who have no professional financial experience. It’s not a stretch to assume that qualified financial professionals are likely to make better investment decisions than folks with no qualifications.
The research from a report provided to lawmakers in 2019 showed that poor governance can reduce pension performance by 1-2% per year, which could cost the PERA trust fund $180-360 million dollars annually. So it’s no surprise that the PERA fund has consistently underperformed compared with peer funds according to Ismael Torres, the Legislative Finance Committee’s chief economist.
All public employees should be able to trust that if they dedicate their careers to serving their fellow citizens, they will have the resources they need to live comfortably into their old age.
House Bill 51 would change the law to require seven out of nine board members to have financial experience, would require broader geographical representation of board members, and help reduce the influence of lobbyists. It would professionalize an organization that well-informed critics say has devolved into infighting and dysfunction.
This common-sense solution was championed by the independent think tank Think New Mexico and should be passed in the current legislative session. It is the least we owe our citizens who have dedicated their lives to public service.