Gov. Heineman Calls for Long-Term, Sustainable Retirement Funding Solution

Proposed Funding Shift Would Cost Taxpayers More Than $500 Million (Lincoln, Neb.) Veto Message (pdf)- Today, Gov. Dave Heineman vetoed LB 553e, which addresses projected pension shortfalls for some retirement plans in the short-term, but creates substantial long-term sustainability issues. The Governor is proposing passage of the short-term solution for the retirement plans of public school employees, state patrol employees and judges contained in LB 553e, while investing time and thoughtfulness in a study to developing a long-term, sustainable and comprehensive retirement policy for the state that is responsible to the taxpayer. Gov. Heineman returned the bill to the Legislature today without his signature, stating that while he agrees with the short-term solution in the bill, the proposed long-term changes also contained in the bill, are unwise and unwarranted at this time. The Governor noted that shifting the long-term funding of these retirement plans further from the employee and onto the state will cost state taxpayers more than $500 million over the next 25 years. In his letter, the Governor states, “I object to the provisions of LB 553 that shift from our traditional balanced approach of having the employee, the employer school district, and the state taxpayers address the problem equitably. Specifically, while the bill retains the current participant teacher contribution rate at 9.78%, it increases the state taxpayers’ contribution rate from 1% to 2% – which is a 100% increase that will cost the state approximately $20 million each year.” This $20 million annual increase is in addition to the current $20 million annual state contribution. The Governor is calling on the Legislature to pass the short-term solution contained in the bill which changes the amortization method, while allowing time to do an open and comprehensive interim study of the under-funded school retirement system. The study should thoroughly examine the long-term implications of the retirement system and develop a comprehensive retirement policy for the state. In his letter, the Governor added that more than just the school lobbyists need to be involved in a long-term solution, stating, “The Nebraska State Education Association, the Nebraska Council of School Administrators, and the Nebraska Association of School Boards support this legislation.  However, the bill does not present comprehensive, long-term solutions to the defined benefit pension plans.  In addition to the school lobby, the taxpayers should also have a seat at the negotiating table to develop transparent long-range solutions.”