Branstad vetoes pension contributions, prolongs steps towards solvency6/24/2013
DES MOINES – Iowa Gov. Terry Branstad vetoed a bill that would pump an additional $91.3 million of taxpayer dollars into an insolvent pension system for retired peace officers.
The appropriation expedited a pledge from the state to provide a two percent increase in funding to the Peace Officers’ Retirement, Accident, and Disability Pension System for the next six years until it is close to being fully solvent.
Branstad’s veto doesn’t fail to make good on the state’s promise but, instead, keeps the funding rate at 2 percent a year, said Martin Deaton, director of the administrative services for the Division for the Iowa Department of Public Safety.
“It put it back the way it was,” Deaton said. “No harm, no foul. That’s the way it was.”
Deaton declined to comment on the overall impact, if any, of Branstad’s veto.
As the state promised to increase its funding, employees eligible for the pension agreed to bump their contributions from 9.35 percent in fiscal year 2011 to 11.35 in fiscal year 2015, according to state figures.
The responsibility for funding the pension system shortfalls should fall on the shoulders of the workers covered under the system and not the state’s taxpayers, Branstad said in his veto message.
The pension plan lost an estimated $7.3 million in investment returns during the 2012 fiscal year, upping its unfunded liability to $187.3 million. That’s an increase of 70 percent from five years ago. The unfunded liability is the amount of dollars the pension system lacks in covering the retirement payments it has promised workers.
The fund paid pensions to 549 retired police officers and another 41 who were fired but had deferred benefits. Another 570 working officers are vested in the program but have not yet retired.
To qualify, members must have 22 years of service and be 55 years or older. They receive just more than 60 percent of their average final salary, plus an additional 3 percent for each year they work beyond 22 years.
“Iowa needs a comprehensive long-term, sustainable plan for making up the shortfall in these retirement funds,” he said in his statement.