The Nebraska Legislature reversed itself and approved a pension funding bill Tuesday, after supporters warned that failing to do so would cost taxpayers more money.
The bill is sponsored by Sen. Jeremy Nordquist, chairman of the Retirement Systems Committee. It is designed to make up for a funding shortfall in pension plans, primarily for teachers. Some teachers would contribute more, new employees would get less generous pensions, and the state would contribute an additional $20 million a year under the compromise plan.
The plan needed 33 votes to take effect immediately. But when a vote was taken just before noon, it received only 27. When senators returned from lunch, they debated whether or not to change their minds.
Supporters of the bill argued that the pensions are a contract obligation, and if the state didn’t approve the compromise, it would wind up owing $50 million next year without getting any concessions. Sen. Danielle Conrad of Lincoln said that would eat up any money for discretionary projects senators want to undertake. "So what goes first? The water study? The tax cuts? What goes first? ‘Cause those are questions we’re going to have to be prepared to answer. And if you can’t answer those today, you are not meeting your duties in voting against LB553, or not voting for LB553," Conrad said.
Some senators questioned the need to pass the bill. Among them was Sen. Beau McCoy of Omaha, who questioned Nordquist about it. "Could this change wait to be made until 2017, senator – what you’re proposing in LB553?"
"Sen. McCoy, we could wait for the next 30 years and not make these changes, but we would have over that time period a $3.6 billion obligation to pay. That would be the cumulative total," replied Nordquist.
Critics say the state needs to consider moving away from defined benefit retirement plans to defined contribution or hybrid plans. Sen. Jim Smith of Papillion warned that the bill won’t necessarily solve the pension funding problem long term. "I feel it is our responsibility as legislators to work to protect the retirement funds of our public workers," Smith declared. "But it is also our responsibility, colleagues, to ensure that the funding obligations of such plans do not break the backs of future generations. Our state’s population is aging, and a growing portion of that population is now employed by a government entity. Therefore maintaining a sound public retirement system is only going to continue to become more and more challenging."
Senators decided to revote, and passed the bill on a vote of 34-0. Theys then moved on to debating the overall state budget.