Others’ Opionion: Putting off reform is a risky decision

Published 10:24 am Monday, June 20, 2016

The Mankato Free Press

Distributed by Tribune Content Agency

Minnesotans have the longest life expectancy in the continental United States. That’s generally regarded as a positive. In the realm of pension planning, however, long lives mean higher costs, and that means more money has to be found.

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A new projection has the state’s pension costs in coming decades rising $1.4 billion over previous projections.

But pension reform is among the many areas of futility in the recent legislative session. Lawmakers managed to pass only a minor reform bill — and Gov. Mark Dayton ultimately vetoed it, adding pension reform to the 2017 agenda.

The vetoed legislation would have done relatively little to address the billion-dollar problem. But a wait-’til-next-year approach is risky. Other states, notably Illinois, New Jersey and California, are wrestling with far more significant shortfalls because they waited too long to deal with a problem they could see coming.

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The vetoed bill pared back a cost-of-living adjustment for one year, a projected savings of $81 million. That’s a rounding error to $1.4 billion, but it’s not an insignificant sum either. The bill also would have reduced the assumed rate of return the pension fund can earn on its investments from 8.5 percent to 8 percent. Even the lower figure is probably too optimistic. As one GOP senator told the Star Tribune, invoking the name of a legendary investor: “Even Warren Buffett only assumes a 7 percent return. I don’t think our fund managers are as smart as Buffett.”

There were more significant proposals offered by the Teachers Retirement Association and the Minnesota State Retirement Systems, proposals that both increased government contributions to the pension funds and reduced cost of living increases.

Those more comprehensive ideas went nowhere, and Dayton deemed the smaller measure unfair (because it merely dinged retirees) and only a slight fiscal improvement.

Those are fair criticisms. It’s also fair to doubt that the 2017 Legislature will be any more effective at agreeing on solutions to complex issues than the 2016 Legislature was. A minor improvement is better than no improvement, and waiting for a big fix on pensions seems as likely as expecting Minnesotans to start dying younger.