DES MOINES — Iowa’s public employee pension funds face billions of dollars in unfunded liabilities, and some state lawmakers plan to address the problem in next year’s legislative session.
The 10-member Public Retirement Systems Committee spent more than four hours Wednesday hearing from pension fund administrators, city officials, and public employee representatives, The Des Moines Register reported.
Pension costs for local governments are being closely monitored by credit rating agencies, said Scott Sanders, finance director for the city of Des Moines. Such costs can affect how much cities must pay to borrow money.
“There is a great amount of concern. The unfunded liability becomes a discussion point every time we issue debt. It is coming more and more to the forefront,” Sanders said.
Increased costs to fund pensions for police and firefighters have caused some cities to cut elsewhere, said Gretchen Tegeler, executive director of the Taxpayers Association of Central Iowa. For example, Des Moines has reduced library hours and property taxes are higher, West Des Moines hasn’t staffed a new fire station for the past three years, and Urbandale has seen tax increases for three consecutive years, she said.
The state’s biggest public pension program, the Iowa Public Employees’ Retirement System, has more than 343,000 members and about $25 billion in assets after solid market results over the past year. But its unfunded actuarial liability last year was about $5.9 billion up from an unfunded $2.66 billion in 2008.
IPERS assumes a 7.5 percent average annual return on its investment. But over the past 30 years, the pension fund has actually averaged a return of 9.57 percent annually, said Donna Mueller, IPERS’ executive director.
The Municipal Fire and Police Retirement System of Iowa, known as the 411 system, which is used by 49 larger Iowa cities, has about $2 billion in assets. As of July, the pension fund had an unfunded liability of about $657 million.
Sen. Tom Courtney, a Burlington Democrat and chairman of the pension committee, expects a bill will be introduced in the Legislature’s 2014 session to make changes in the pension programs, but the details are yet to be decided.
“I don’t want to cut our police and firemen pensions, and I don’t want to increase their contributions. So we need to take a really hard look at this,” he said.
Any changes should be carefully considered and bipartisan, said Rep. Dawn Pettingill, R-Mount Auburn, who shares chairmanship duties with Courtney.
“I think we have been very responsible, and I don’t want any knee-jerk reactions,” Pettengill said.
Some states have reduced benefits for future employees or increased required contributions from workers. A few have gone to a new plan that shifts part of the risk to employees by combining the pension with a 401k type plan.