LINCOLN — The Nebraska Legislature's expected routine approval of a financial fix to teachers' pension plans turned into a long and sometimes angry debate Tuesday.
Lawmakers sparred over the long-term sustainability of state retirement plans, exchanging charges of fiscal irresponsibility and claims that meddling by Gov. Dave Heineman had caused the prolonged debate.
Opponents called for a more serious look at alternatives to defined benefit retirement plans, which are the standard for school teachers and state employees but have been largely abandoned by private businesses.
In the end, lawmakers gave 34-0 final approval to a bill requiring teachers and the state to pay more to close a $108 million gap in pension funding. The state's share would be $20 million a year.
The bill now heads to the governor's desk for his approval or veto. A spokeswoman for Heineman declined to comment.
Heineman did not include any money in his proposed budget to close the pension gap, so his approval of a bill that calls for $20 million a year in state spending appears uncertain.
Legislative Bill 553 was billed as a “balanced approach” that required concessions by teachers, school districts and the state. The bill was primarily aimed at closing the funding gap in the separate pension plans for Omaha teachers and teachers elsewhere in Nebraska.
Under LB 553, current teachers would continue to contribute 9.78 percent of their salary to retirement, a rate enacted in 2011 that was supposed to drop back to 7.28 percent. New teachers will also pay the higher contribution.
Future cost-of-living increases for pension beneficiaries would be capped at 1 percent, rather than the current 1.5 percent for Omaha teachers and 2.5 percent for teachers elsewhere in the state.
In exchange, the state would increase its contribution to the pension plans from 1 percent of compensation to 2 percent, which amounts to about $20 million annually. School districts would also pay more since their contribution is 101 percent of what employees pay.
The bill also raised, from 15 to 20 hours a week, the minimum workweek required for a school employee to participate in the retirement plan.
State Sen. Jeremy Nordquist of Omaha, chairman of the Legislature's Retirement Systems Committee, said the state is legally required to finance the pension plans.
He said it would be irresponsible if the Legislature did not pass the bill with an emergency clause, which would make it effective immediately on approval by the governor. The measure requires teachers hired after July 1 to pay the higher retirement contributions.
But the bill initially fell five votes short of the 33 necessary to enact the emergency clause. Eight senators voted “no” and nine others were “present but not voting,” which is another way of opposing a measure.
After Nordquist asked that the vote be reconsidered, the debate was on.
He was joined by Sens. Danielle Conrad, Steve Lathrop and Heath Mello in pushing for the emergency clause. Without that clause, the state's contribution next year would be $52.7 million instead of $20 million.
Bills passed without an emergency clause go into effect three months after the end of a legislative session, or about Sept. 6, meaning teachers hired for the upcoming school year would not be paying the higher contribution rate.
Proponents said the state would lose the higher contributions for retirement plans from most new teachers hired for the next school year.
“You're messing around with $50 million,” Lathrop said. “I don't know who's running the show and who's encouraging you to do it. ... Are you trying to get a star on your card? Because this is fiscally irresponsible.”
That was a reference to Heineman, whom Lathrop and others accused of stirring up opponents to scuttle the bill.
But two lawmakers opposed to the bill, Sens. Jim Smith of Papillion and John Hansen of North Platte, denied they were acting under orders from Heineman.
“That's insulting to me,” Smith said. “I work very hard at trying to think for myself.”
Smith said he opposed the bill because proponents were not taking seriously the need to look at alternatives.
Two years ago, he introduced a bill and co-sponsored a study to look at switching pensions in Omaha and other local governments to defined contribution plans, similar to 401(k) plans now common in the private sector.
He said the state should also study a switch to a hybrid “cash balance” retirement plan utilized by most state workers. Such plans include employee contributions but guarantee a minimum rate of growth.
The state's cash balance plan guarantees a 5 percent return, while the defined benefit plan for teachers assumes an annual 8 percent return, which opponents called unsustainable.
“We're moving down the path of unfunded pension plans. We've going to have to do something different,” Smith said. “Instead it's same old, same old.”
Nordquist said alternatives have been explored but they are fiscally impractical.
A recent study, he said, indicated that switching to a cash balance plan for teachers would require a $300 million to $500 million upfront investment, which the state cannot afford.
He said a switch would also remove the new employees' contributions that finance the continuing obligation of defined benefit plans.
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