(The Center Square) – New Mexico’s unfunded pension liabilities represent a 15.7% share of personal income, the fifth-highest share in the nation, according to a recent report.
The reportcompiled by The Pew Charitable Trusts, compared states based on the financial health of state-administered retirement programs, public employee health care benefits and post-employment benefits.
“For most states, unfunded pension liabilities are the largest of the three major long-term liabilities that weigh on their future finances, ahead of unfunded retiree health care benefits for public employees and the outstanding debt,” the report said. “While still large, the gap between what states have collectively set aside and what they owe in public pension benefits has narrowed after the financial market surge in fiscal year 2021.”
Overall, states owed a total of $1.25 trillion in retirement benefits at the end of fiscal year 2019, the last year before the pandemic, according to the report. That total has fallen to less than $1 trillion by fiscal year 2021, thanks in part to government stimulus programs and high returns on investments.
New Mexico’s pension obligations stand at $14.2 billion in 2019, according to Pew.
Paul Gessing, president of the Rio Grande Foundation, a free enterprise think tank, worries that these unpaid perks could stifle the state’s economy.
“Every time you take money out of the private sector and put it into government, it’s going to hurt the economy,” Gessing told The Center Square in an interview.
In 2021, New Mexico lawmakers passed a bill to reform one of the state’s retirement programs, the Education Retirement Board (ERB). Senate Bill 42 increasing taxpayer contributions to the ERB without also increasing employee contributions.
SB 42 made the Rio Grande Foundation’s list of “worst bills” passed in the 2021 legislative session because it failed to make the ERB solvent, Gessing said.
He added that he was also concerned about the politicization of state pension accounts, which could hamper the fund’s investment performance. For example, Gessing pointed to ERB’s decision to strip private prisons in 2020.