Joe Monahan Blog: “Raise Retirement Age, Leave Worker Contributions And COLA Alone”; ALSO: PERA Task Force Recommendations; Study Shows There Is NO Immediate Crisis

On Thursday, August 14, 2019, political blogger Joe Monahan on his blog “New Mexico Politics With Joe Monahan” published his take on the findings of the Governor’s Public Employees Retirement Association Solvency Task Force recommendations. Since being release, the Task Force recommendations have been assailed in social media and by PERA retirees. The Monahan blog article is entitled: “Commentary Corner; Parsing PERA: Raise The Retirement Age And Leave Worker Contributions And Cost Of Living Increases Alone.”

Below is the opinion article with the link to Mr. Monahan’s blog. It is followed by the PERA Solvency Task Force Preliminary Recommendations, an excerpt from a study relating to government pension programs and followed by Commentary and Analysis.

MONAHAN POST

The sky is falling again in Santa Fe. The Governor’s Public Employees Retirement Association Solvency Task Force bought into the argument that the PERA fund is destined to go broke and make homeless thousands of retired state workers. But many of those retirees, fighting the more austere proposals to “shore up” the retirement fund, are pushing back, calling the task force recommendations “fake news.” Among them is retired APD sergeant and PERA watchdog Dan Klein:

PERA was only 70% solvent during the 2007 fiscal collapse and we survived it just fine. The proposal to make the fund 100% solvent in 25 years is unnecessary. How do we know this? Because pension experts have studied the issue and told us. This report, The Sustainability of State and Local Government Pensions, by Lenny (bank of England), Lutz (Federal Reserve Board of Governors) and Sheiner (Brookings institute) destroys the PERA argument that the sky is falling and we must be 100% solvent.

PERA has a myriad of funds under one umbrella for a variety of local and state government workers. The funds for state government workers and firefighters need adjusting because the benefits going out don’t match what’s going in. However, 72 percent of PERA’s anticipated needs over the next several decades is currently covered. Not exactly a crisis. There is no current threat to anyone’s retirement check and you are hard-pressed to see a time there would be.

Task force proposals to eliminate or reduce the 2 percent COLA–the annual cost of living adjustment that doesn’t kick in until a retiree is retired for seven years–and raising employee contributions to the funds–already in double digits–would discourage superior candidates from joining the government and are fiscally unnecessary.

THE BEST FIX?

The best fix? Setting a minimum retirement age as they do in other states is prudent but it isn’t an option mentioned by the Governor’s task force.

Currently most new state workers must put in 30 years to get a full retirement check. But there is no age requirement to retire. If the Legislature set a minimum age of 58, it would do much to strengthen PERA. Firefighters, police and corrections officers could have a minimum of 52 before being allowed to collect. That means no more fortysomethings collecting checks for forty years.

In Colorado state workers who began employment after January 1, 2011 can retire at age 58 with 30 years service but not before. They can retire at any age with 35 years of service. NM state employees can retire at any age with 30 years of service. Police and firefighters can exit once they have 25 years on the job. In the age of longer lifespans, that is no longer realistic.

After enacting age reform for new hires, the Legislature could then authorize a cash infusion into PERA from the huge surpluses accumulating from the oil and gas boom. That money will compound over the decades giving the funds even more breathing room.

BAD TIMING

In an era of extreme income inequality and record NM surpluses is it really time to force state employees–most of them modestly paid–to fork over even more of their paychecks to make a fund 100 percent solvent for a generation not even working yet?

The bottom lines: House Speaker Egolf needs to kill ill-advised retirement austerity measures. As for the task force, can they please stop yelling “Boo!”? Save the fake theatrics for Halloween.

E-mail your news and comments to jmonahan@ix.netcom.com

http://joemonahansnewmexico.blogspot.com/

PERA SOLVENCY TASK FORCE PRELIMINARY RECOMMENDATIONS

Following are the PERA Solvency Task Force Preliminary Recommendations as released by the Governor’ s Deputy Chief of Staff Diego Arecon who chairs the Task Force:

“• Fulfill the requirements of Governor Michelle Lujan Grisham’s January Executive Order including placing PERA on a path to pay off its $6 billion unfunded liability by the year 2043.
• Provide for sustainable, “profit sharing” Cost of Living Adjustments for current and future PERA retirees based on investment returns and funded ratio.
• Guarantee a minimum COLA of 0.5% and a maximum COLA of 3% based on investment returns/funded ratio. Once PERA achieves full funding of 100% the maximum COLA increases to 5%.
• Begin to address disparity in funding levels among PERA Divisions by exempting State Police and Adult Correctional Officers from proposed contribution increases.
• Protect lower income employees and retirees by exempting employees making less than $25,000 from proposed contribution increases and providing a 2.5% COLA to retirees with pensions of less than $25,000 and 25 years of service to include disability retirees.
• Result in an immediate $700 million reduction in PERA’s unfunded liability.
• Replace prior PERA proposals to freeze COLAs for 3 years with a 2%, simple COLA, pausing only the compounding factor, to be paid annually for the next 3 fiscal years. Simple COLAs will be paid for by a one-time appropriation of $76 million. PERA will administer a 13th check to retirees annually for 3 consecutive years.
• Provide incentives for employees to continue working by removing the cap on earning service credit.
• Eliminate the current 7 year wait to receive a COLA upon retirement and restore it with the 2-year calendar period.”

UNDERFUNDED PERA PENSION PLANS IDENTIFIED

On April 27, 2017 a presentation was made to the PERA governing board on the current status of asset valuations and projected liabilities. The report includes 23 pie charts and graphs that effectively reveals the current and projected status of all the pension plans PERA administers and pending shortfalls.

The pie charts disclose what will be paid into the pension programs by government employers and employees, income from investments and what will be paid out in benefits from 2016 to 2046 with one chart projecting to 2066.

The link to the April 27, 2017 PERA presentation with all the graphs and pie charts is here:

http://www.nmpera.org/assets/uploads/home-banner/april-2017-board-meeting-public-packet.pdf

A few of the pie charts and graphs in the presentation are worth highlighting:

The pie chart on page 7 reflects that on June 30, 2016 Actuarial Accrued Liability for PERA is $19,474,241,000.

The pie chart on page 12 reflects the present Value of Benefits as $21,951,183,972 managed by PERA and invested with a funding ratio of Assets to Accrued Liability of 75.3%. The goal is to have a 100% funded liability by 2046.

The graph on page 19 reflects the assets to pay expected benefits and Market Value of PERA Market Value with no contributions to have a Zero return in 2026.

The graph on page 18 provides projections PERA expected total benefit payments including current employees, future members and retirees.

Significant funding shortfalls are reported on page 24 as being 7.99% of State General pensions and 13.87% for Municipal Fire Pension programs. The graph on page 25 reflects contribution shortfalls of State General and Municipal Fire up and until 2066.

According to the report the municipal fire department pension plans have the most serious problem of under-funding of almost twice that of the State General Pensions.

The number of fire department retirees and law enforcement retirees combined is only a small fraction of the largest majority of State General pension retirees.

NEED FOR 100% SOLVENCY QUESTIONED

A very common and major point of criticism of the Task Force recommendations and PERA management is the fact that it is only recently that the PERA pension fixes of 2013 have not worked and that PERA must be 100% funded as to future projected liabilities. As was pointed out by Dan Klein in the Monahan article:

PERA was only 70% solvent during the 2007 fiscal collapse and we survived it just fine. The proposal to make the fund 100% solvent in 25 years is unnecessary. How do we know this? Because pension experts have studied the issue and told us. This report, The Sustainability of State and Local Government Pensions, by Lenny (bank of England), Lutz (Federal Reserve Board of Governors) and Sheiner (Brookings institute) destroys the PERA argument that the sky is falling and we must be 100% solvent.

The link to the full 70-page July 14, 2019 white paper analysis entitled “The Sustainability of State and Local Government Pensions: A Public Finance Approach” written by Jamie Lenney, Bank of England, Byron Lutz is here:

https://www.brookings.edu/wp-content/uploads/2019/07/lenney_lutz_sheiner_MFC_Final.pdf

The study explored the fiscal sustainability of U.S. state and local government pensions plans. The study examined if under current benefit and funding policies state and local pension plans will ever become insolvent, and, if so, when. The results of the study suggest that, under low or moderate asset return assumptions, pension debt can be stabilized as a share of the economy with relatively moderate fiscal adjustments. The study concluded there is no imminent crisis.

Portions of the introduction of “The Sustainability of State and Local Government Pensions” are worth noting in that that it summarize the very technical economic analysis:

State and local government pension plans are immensely important economic institutions in the United States. They hold nearly $4 trillion in assets; their annual benefit payments to retirees are equal to a bit more than 1½ percent of national GDP; over 10 million beneficiaries rely on these payments to sustain themselves in retirement.

In recent years, attention has focused on the plans’ large unfunded liabilities; one academic recently estimated that obligations of public pension funds exceed their assets by nearly $4 trillion. … The magnitude of these unfunded liabilities has generated widespread concern; indeed, public pensions are often viewed as being in a state of crisis, with the threat of default looming.

But it has been understood [for the last 60 years] the existence of unfunded liabilities does not necessarily imply that a plan is unsustainable, in the sense that it will require outside funding to avoid default. Fully unfunded, pay-as-you-go (PAYGO) pension systems can be fiscally sustainable. Moreover, unfunded pension liabilities are a form of (implicit) debt and in today’s low-interest rate environment, public debt may have no fiscal cost – i.e. rolling over public debt indefinitely may require no adjustments to taxes or expenditures.

We ask if, under current policies and funding levels, state and local pension plans are fiscally sustainable over the medium and longer run and if not, what changes are needed? To answer this question, we calculated the annual cash flows of state and local pensions. We find that pension benefit payments in the US, as a share of the economy, are currently roughly at their peak level and will remain there for the next two decades. …

Using a variety of sustainability measures, we find that, under low or moderate asset return assumptions and in aggregate for the U.S. as a whole, pension debt can be stabilized with relatively moderate fiscal adjustments. Notably, there appear to be only modest returns to starting this stabilization process now versus a decade in the future: Neither the level at which debt stabilizes as a share of the economy nor the contribution change needed to achieve stabilization increase much when the start of the stabilization process is pushed ten years out.

Overall, our results suggest there is no imminent “crisis” for most pension plans.”

After the introduction, the study goes on to discuss in very great detail the varying mythologies and mathematical formulas to analyze long tern sustainability of government pension programs.

DINELLI COMMENTARY AND ANALYSIS

After drinking 40 cups of coffee to stay awake to read the “The Sustainability of State and Local Government Pensions”, the biggest take away is that there is no imminent “crisis” for most pension plans and they have operated in the red for decades and are sustained by the constant cash flow of employer and employee contributions, investment returns and cash infusions. “Unfunded liability” which is what all the fuss is about, represents the difference between assets on hand and future retirement benefits owed. The operative word is “future” and 23 and 40 year economic projections are always highly speculative when dealing with the volatility of the markets and returns on investments.

PERA’S goal is to reach 100% funding of liabilities by 2043. The New Mexico PERA pension program has 75.3% of funded liability in current funding assets to future liability making it one of the strongest pension programs in the country. The two major pension funds that are currently problematic are shortfalls of 7.99% of State General pensions and 13.87% for Municipal Fire Pension programs. Contribution shortfalls of State General and Municipal Fire are up and until 2066. PERA management has failed to articulate in clear terms all the options available to insure PERA will reach a 100% funding ratio by 2043.

Notwithstanding, PERA Pension reform must again be undertaken. The difference is the New Mexico Legislature has time to address the PERA pension system and the sky is not falling as Joe Monahan puts it. The legislature can make adjustments like increasing age of retirements, change the formula to calculate retirement, make increases in contributions and infuse state funding into the pension funds, but only those that are underfunded which currently the municipal fire fighters fund and the general worker fund. Better management of the pension funds and increasing returns on investment are always relied upon to pay for benefits. At a minimum, the PERA Pension plans are solvent for at least 23, if not more years.

The financial problems PERA is experiencing can be directly related to the type of pensions offered to government employees as well as what many PERA retirees feel has been mismanagement of the pension funds. Governor Michelle Lujan Grisham no doubt knows that the Task Force recommendations antagonize upwards of 90,000 government employees.

Each time PERA reform includes the elimination of Cost of Living Adjustments (COLA) as a way of making the PERA fund 100% solvent, the entire city, county and state government workforce becomes alienated. Advocating the elimination of COLA adjustments will have serious political consequences simply because retirees vote. Hitting people in the pocket books who live on fixed income is one way to guarantee hostility at election time.

Last year, candidate for Governor Michelle Lujan Grisham said she would oppose cuts to benefits, including any reduction in the annual inflation-related pension adjustments that retired state workers and teachers receive. According to a campaign spokesperson at the time:

“She does not believe that New Mexico needs to eliminate our defined benefit system for current or future educators and state employees and opposes any reduction in cost-of-living adjustments.”

The PERA Task Force Recommendations are in total opposition and conflict sharply with the Governor’s position when she was running for Governor. This fact is surprising seeing as she appointed the Task Force. The Chair of the Task Force is her Deputy Chief of Staff who should have known better than to release the recommendations without more thought, more detailed analysis with findings and justifications on each one of the recommendations. What is very troubling is the Task Force itself was top heavy with public safety stake holders and union officials who have absolutely no background or experience in economics, finance and pension plans.

Joe Monhan’s suggested fixes need to be taken seriously. Revenues from the oil and gas boom could in all likely reduce the $6.1 unfunded liability within a 5 to 10-year span. Such infusions of funding would no doubt benefit no less than 90,000 PERA workers not to mention their family’s over many more years. While the State is experiencing a windfall in increased revenues, the New Mexico Legislature should use a portion, not all, of the surplus revenues to increase funding to the PERA funds that are currently underfunded, currently the municipal fire and general worker funds to the tune of $4.1 Billion.

Another option that should be seriously considered is restructuring pensions along the lines of increasing the age of retirement and increasing the number of mandatory years of work before retirement. The PERA pensions plan and age of retirement could be designed to coincide with the Federal Social Security program and take into account a person age befor being able to retire and a 35-year government service history of a person’s pay. Pensions can be based on the full employment history average as opposed to paying a pension on a person’s high 3 years of pay.

The New Mexico Legislature needs to consider pension reform during a special session where a solution can be hammered out without the distractions of a general session. The New Mexico legislature should consider pension reform in the form of including “defined contribution plans” in one form or another to be offered to future government employees, increasing employer and employee contribution plans under the defined benefit plans and modifying the multipliers and increasing years of service or age before retirement.

The first thing that should be done is for the legislature to set aside the recommendations of the PERA Pension Fund Task Force. What are needed are outside experts in finance and pension funds to make recommendations to the legislature on what can and should be done to save PERA, presuming it really does need saving. The Governor should form a working group of actual experts and go from there to find real solutions.

For related www.petedinelli.com blog articles on PERA see:

Dan Klein: Governor’s PERA Task Force Chairman Promotes Public Safety Unions Agenda And Own Agenda; Also: Task Force Recommendations And Underfunded Plans Identified

Governor’s PERA Solvency Task Force “Pokes The Bear”; Dissolve Task Force And Form Working Group

PERA Pension Plan Investments Continue To Falter; Gov.’s PERA Solvency Task Force Top Heavy With Public Safety Reps

Governor’s Domestic Terrorism Summit Called “Road Map” For 2020 Legislative Session; More Proposals; It Could Happen Here

On August 6, 2019 Democratic Governor Michelle Lujan Grisham announced a “Domestic Terrorism Summit”. She invited top state law enforcement officials and legislative leaders from both political parties. The call for the summit was in reaction to the August 3 mass shooting in El Paso, Texas that killed 22. The goal of the summit was to come up with precautions against domestic terrorism.

New Mexico has the highest percentage of Hispanic residents in the nation. The 21-year old arrested for carrying out the El Paso attack killing 22 reportedly wanted to target people of Mexican descent. Lujan Grisham expressed her concern about the influence of ideologies of white supremacy and racism and said “I would expect that we are going to do more to know about our hate groups in the state and what can we do”.

The Governor suggested that New Mexico needs to keep a closer track of hate groups. It was announced that part of the summit would include a closed-door briefing from the Federal Bureau of Investigations(FBI) officials. The Governor suggested that gun-related legislation would be drafted based on recommendations of the summit in advance of next year’s 30-day session.

In a statement announcing the summit, Lujan Grisham had this to say:

“It is too easy for dangerous, violent and mentally ill individuals to obtain an instrument of mass death in this country, and hateful rhetoric can directly lead to destructive and heinous acts. … In New Mexico, we will be on the [fore front] … and I look forward to this discussion.”

PRE-SUMMIT PROPOSALS

In announcing the summit, the Governor suggested background checks that could apply to sellers of guns and said:

“In these horrific, horrific situations, I’m seeing members of our state and folks around the country talk about background checks that could apply to sellers. … Then we can track the movement of firearms.”

https://www.abqjournal.com/1353501/seeking-safety-new-mexico-considers-checks-on-gun-sellers.html

The Governor also suggested she wanted to discuss new strategies for responding to youths who exhibit signs of anger.

On gun control, Lujan Grisham said she wanted the Legislature to take up again the proposals for “red-flag” legislation that makes it easier to take guns away from people who may be suicidal or seeking violence against others. A “red flag” bill passed the New Mexico House in the 2019 session but it was never voted on by the State Senate.

https://www.abqjournal.com/1350004/lujan-grisham-to-convene-nm-domestic-terrorism-summit.html

AUGUST 13, 2019 DOMESTIC TERRORISM SUMMIT

The Domestic Terrorism Summit was convened on August 23, 2019 at the Santa Fe capital. The summit was closed to news media because it involved sensitive law enforcement discussions with a confidential and sensitive briefing from the Federal Bureau of Investigations (FBI).

After the briefing from the FBI and others the governor said there was no reason to believe New Mexico is at greater risk of future mass shootings than any other state. The Governor did suggest that “hyper-charged political rhetoric” and shortcomings in key areas could put the state at risk for domestic terrorism attacks.

Two areas of concern are law enforcement data sharing and mental health services. During the after-summit press conference, state officials and some county sheriffs vowed to get to work on better data-sharing immediately. With respect to mental health service, the Governor said “This is a state that is still woefully unprepared when it comes to behavioral health.”

After the summit, the Governor held a press conference and announced a number of measures to be considered and added to the 2020 thirty-day legislative session that begins in mid January.

Those measures include:

1. Toughen hate crime penalties. The criminal penalty for those convicted of hate crimes would be increased. Under current law, if a criminal defendant is proved to be motivated by the victim’s race, religion, age, gender or sexual orientation, the jail sentence can be enhanced by one year.

2. Expand the State’s mental health system. This has been a major priority of the Governor given her longstanding positions on mental health over the years.

3. Create a new anti-terrorism law enforcement unit. This no doubt will be the responsibility of the Department of Homeland security to to implement and coordinate state wide law enforcement efforts.

4. Improve data-sharing about potential threats. The Governor directed her state Homeland Security and Emergency Management Department to start enrolling all 33 county sheriffs in a data-sharing program so that individuals deemed a potential risk could be flagged and monitored.

5. Extending background checks on private gun sales to sellers of firearms.

https://www.abqjournal.com/1353849/anti-terrorism-summit-shines-light-on-nm-vulnerabilities.html

What was noticeably absent from the proposals was that no ban on assault weapons was proposed. Assault weapons are the weapons of choice of the domestic terrorist. This does not mean no attempt will be made to ban assault weapons during the 2020 legislative session. What also was absence was any discussion on funding from the legislature to carry out the new proposals. It is more than likely the sheriff’s departments throughout the state will need resources to implement the universal background system.

New Mexico Attorney General Hector Balderas, who attended the summit, had this to say:

“I think we all recognize the growing threat level deserves consideration. … If you have a very, very dangerous individual – that the penalties at least be proportional to the amount of terror and potential harm for communities. So we have identified some areas in the statue that probably need to be looked at.”

https://www.kob.com/albuquerque-news/nm-lawmakers-discuss-hate-groups-extremism-at-anti-terrorism-summit/5457508/?cat=500

The Governor did make it clear that she will not call a “special session” before the 2020 session as was proposed by Speaker of the House Brian Egolf. Speaker of the House Egolf attended the summit and afterwards said: “We now have a road map for what we’ll do in the next session.”

NEW MEXICO SLIGHTLY AHEAD OF THE CURVE

During the 2019 legislative session, two gun control bills passed and were signed into law by the Governor. Those measures were background checks on all gun sales and a law prohibiting the possession of guns by convicted domestic abusers. The background check law was strenuously opposed by Republican lawmakers and most New Mexico sheriffs. The Republicans initiated a lawsuit to have the courts set the background checks legislation aside. Some elected County Sheriff’s went so far as to say they would not enforce the laws prompting the Attorney General to issue a stern warning that they were required to enforce the law. New Mexico also limits who can carry firearms on school grounds to trained security personnel.

New Mexico County Sheriffs have been working with Democrat State Representative Daymon Ely, D-Corrales, on a compromise “red flag” legislation he sponsored in the 2019 legislative session. The legislation would have allowed courts to order the temporary taking of guns from someone deemed an immediate threat. It passed the House of Representatives during this year’s 60-day session but it failed to make it through the Senate before the 2019 legislative session ended. Opponents of the red flag bill say it failed to include adequate legal safeguards to protect the rights of gun owners.

IT COULD EASILY HAPPEN HERE

What happened on August 3, 2019 in El Paso, Texas with the targeting people of Hispanic descent could very easily happen in Las Cruces, Albuquerque and Santa Fe, and probably in any other major city or town in New Mexico. State Police Chief Tim Johnson acknowledged this fact when he said after the summit New Mexico needs better communication to help prevent mass shootings and said:

“I know we work closely together on many other things. … This one is very important based on what happened recently and the trend that’s going on around our country. I know New Mexico has had some incidents of this, maybe on a smaller scale. We’ve been fortunate enough not to have one on the scale of El Paso.”

https://www.kob.com/albuquerque-news/nm-lawmakers-discuss-hate-groups-extremism-at-anti-terrorism-summit/5457508/?cat=500

The gunman in the August 3, 2019 in El Paso shooting planned and carefully selected the Walmart store because it was filled with Hispanic families and shoppers from Mexico. The El Paso shooter lived and drove from a suburb near Dallas, Texas to El Paso to carry out his mass slaughter. Authorities reported that they found a “manifesto” purportedly written by the shooter perhaps even in the hours before the shooting attack. His social media activity showed support and sympathy for Trump’s white nationalist agenda. According to one report, the shooter allegedly professed his white nationalist ideology and his belief that Texas is under a “Hispanic invasion” and advocating building Trump’s border wall.

COMMENTARY AND ANALYSIS

Governor Lujan Grisham was totally justified in expressing her concern about the influence of ideologies of white supremacy and racism in New Mexico and said “I would expect that we are going to do more to know about our hate groups in the state and what can we do”.

By all reports, the domestic terrorism summit was a success given the proposals that were announced. State officials and some county sheriffs who attended the summit vowed to get to work on better data-sharing immediately. As Speaker of the House Brian Egolf said: “We now have a road map for what we’ll do in the next session.”

There are other legislative proposals that should be considered by the 2020 New Mexico Legislature that could help curtail domestic terrorism and gun violence. The New Mexico legislature should consider:

1. Repeal the New Mexico Constitutional provision that allows the “open carry” of firearms. This would require a public vote. There is no doubt such action would generate heated discussion given New Mexico’s high percentage of gun ownership for hunting, sport or hobby.

2. Ban in New Mexico the manufacture, sale and distribution to the general public of semi-automatic firearms, AR-15 style rifles, assault weapons, semi-automatic pistols, semi-automatic shotguns and weapons to the general public in New Mexico.

4. Prohibit in New Mexico the sale of “ghost guns” parts. Ghost guns are guns that are manufactured and sold in parts without any serial numbers to be assembled by the purchaser and that can be sold to anyone.

5. Require in New Mexico the mandatory purchase of “liability insurance” with each gun sold as is required for all operable vehicles bought and driven in New Mexico.

6. Enact red flag legislation for a violence restraining order and allow for an “extreme risk protection process” to temporarily prohibit an individual deemed by a judge to pose a danger to self or others, from purchasing or possessing firearms or ammunition and allow law local law enforcement to remove any firearms or ammunition already in the individual’s possession.

7. Restrict and penalize firearm possession by or transfer to a person subject to a domestic violence protection order or a person, including dating partners, convicted of a domestic violence misdemeanor.

8. Allocate funding to the school systems and higher education institutions to “harden” their facilities with more security doors, security windows, and security measures and alarm systems and security cameras tied directly to law enforcement 911 emergency operations centers.

Former United States Congresswoman Michelle Lujan Grisham knows full well he United States Congress needs to enact reasonable and responsible gun control measures and ban assault weapons. While in congress, she aggressively supported stop gun violence legislation. Unless congress acts we can expect more mass shootings at soft targets such as schools, movie theaters, malls, department stores and major public events like concerts and at state fairs. The mass shootings will again be followed by the predictable cycle of news coverage, more outrage, more nighttime candle vigils, more funerals, more condolences, more rhetoric demanding action. In the end, nothing will be done, congress will not take action and more mass shootings will occur, there will no reasonable gun control legislation and assault weapons will be available to whoever wants one.

Until the United States Congress acts, New Mexico Governor Michelle Lujan Grisham and the New Mexico State Legislature are wise to do all they can and enact as many state laws to prevent gun violence in the State and to combat domestic terrorism. The Domestic Terrorism Summit was a good start for the 2020 New Mexico Legislative Session.

“Grand Canyon Divide” Between Republican And Democratic Parties On Gun Control; 59% Of Public Support Assault Weapon Ban And 81% Support Background Checks; Background Checks Not Enough

The on line publication Mother Jones has compiled a database of mass shooting from 1982 to the present. The data base is broken down by location, date, summary of the facts, the number of fatalities, and the number of injured. The Mother Jones data base list 114 mass shooting that have occurred from August 20, 1982 to the August 4, 2019 Dayton, Ohio shooting of 9 killed and 27 injured. You can review the entire Mother Jones data base here:

https://www.motherjones.com/politics/2012/12/mass-shootings-mother-jones-full-data/

From 1995 to June 13, 2019 the United States has had 97 mass shootings. 11 of the largest mass shootings in American history have now taken place in the United States in just the last few years. The mass shooting with semiautomatic guns in the include: Orlando, Florida (49 killed, 50 injured), Blacksburg, Va. (32 killed), San Ysidro, Cal (21 killed), San Bernardino, (14 killed), Edmond Oklahoma (14 killed), Fort Hood (13 killed), Binghamton, NY (13 killed) Washington, DC (12 killed), Aurora, Colorado (12 killed), Sandy Hook Elementary School, Newtown, Conn (21 children and 6 adult staff members killed) Las Vegas, Nevada with at least 59 dead and at least 515 wounded, the Parkland/Stoneridge High School shooting that resulted in 17 children’s deaths and now El Paso, Texas, 22 killed and Detroit Michigan, 9 killed.

A list of the worst mass shootings in the United States in just the last 4 years has been compiled by the Los Angeles Times. You can read the facts and details of each one of those mass shootings at the below Los Angeles Times story link:

https://www.latimes.com/world-nation/story/2019-08-03/united-states-mass-shootings

The August 3, 2019 the mass shooting at El Paso, Texas where 22 people were shot and killed and 26 were seriously injured was done by a man armed with a military style assault rifle. The August 4, 2019 mass shooting in Dayton, Ohio where 9 were killed was done by a shooter in body armor wearing a mask and carrying a military style assault rifle and extra magazines. A National outrage has ensued after both shootings with renewed demands for gun control.

TRUMP PROCLAIMS SUPPORT FOR BACKGROUND CHECKS AGAIN

On Friday, August 9, 2019 President Trump indicated that he supported new legislation on “intelligent” background checks for gun purchases after the El Pao and Dayton shootings and said to reporters at the White House before leaving for vacation:

“On background checks, we have tremendous support for really common-sense, sensible, important background checks … [the issue] isn’t a question of NRA, Republican or Democrat. … We will see where NRA will be, but we need meaningful background checks … We don’t want people who are mentally ill, people who are sick, having guns.”

Trump added that he had spoken with the head of the National Rifle Association and touted his “great relationship” with the gun rights group, despite his apparent willingness to break from it on gun legislation. Trump noted that the NRA “… supported me very early and that’s been a great decision they made — we have Justice Kavanaugh, we have Justice Gorsuch, and they feel very strongly about the Second Amendment” referring to the two justices he nominated and that were confirmed by the US Senate to the Supreme Court.

https://www.npr.org/2019/08/09/749773855/trump-says-he-supports-intelligent-background-checks

If Trumps support of background checks and talking to the NRA sounds familiar, it’s because it is. Trump has reneged on his promises of background checks and gun control before after talking with the National Rifle Association (NRA).

https://www.abqjournal.com/1349664/trump-says-he-wants-stronger-gun-checks-but-reneged-in-past.html

On February 21, 2018, President Donald Trump met in the White House with over 40 people including the teenage survivors of the Marjory Stoneman Douglas High School shooting that killed 17 as well as the parents of those children killed in other school shootings. Trump also met with victims of the Las Vegas mass shootings where he promised gun control measures. In the meetings, demands were made that politics needs to be set aside and solutions found to stop the scourge of gun violence in the United States.

One suggested solution was to strengthen background checks to keep guns from the violent and the mentally ill. President Trump told the groups his administration would also look very strongly at background checks. After the Trump meetings at the White House with the victims, Trump came out in opposition to background checks. The NRA opposed any gun control provisions arguing the problem is not with guns but the criminals who are using the guns and law-abiding citizens’ rights under the second amendment should never be infringed upon.

Each time Trump has met with and talked with the NRA officials, Trump has done an about face and has done absolutely nothing. The NRA spent more than it ever did on the 2016 on election, more than $36 million. Trump by far was the largest beneficiary, with the NRA spending more than $21 million to help him with $9.6 million on ads and other pro-Trump materials, and another $12 million attacking Hillary Clinton.

https://www.nbcnews.com/news/us-news/nra-sticking-trump-breaks-own-record-campaign-spending-n665056

US SENATE MAJORITY LEADER SENATOR MITCH MC CONNEL

The House of Representatives passed a bill in February of this year that would strengthen background checks on gun sales, but US Senate Majority Leader Senator Mitch McConnell has so far refused to allow the bill to be voted upon by the Senate.

Senate Majority Leader Mitch McConnell refused to call the Senate back to Washington for an emergency session to address recent mass shootings. Mc Connell claimed in an interview with Louisville radio station that gun control measures will be on the table when Congress reconvenes in September. McConnell specifically mentioned background checks, a measure that has failed to gain much ground in the Senate and is strongly opposed by the National Rifle Association.

TRUMP VERSUS THE DEMOCRATS

President Donald Trump does not support the ban on assault weapons. Trump has indicated he supports a federal “red flag law”, which would allow police to take away someone’s guns if there’s some proof of a risk of violence and mental illness and universal background checks, but has backtracked before after talking to the NRA.

All 2020 Democratic presidential candidates endorse some version of an assault weapons ban, a policy favored by a majority of Americans polled on the issue, with some candidates also advocating for a voluntary federal buyback program. For the most part, they promote Democratic themes like universal background checks and assault weapons ban paired with a ban on high-capacity magazines.

According to commentator German Lopez with VOX, an American news and opinion website:

“Even the most ambitious of the [Democratic] candidates’ gun control proposals don’t go far enough to seriously dent gun violence. America leads the developed world in gun violence, with gun death rates nearly four times that of Switzerland, five times that of Canada, 35 times that of the United Kingdom, and 53 times that of Japan. The core problem is the US simply has way too many guns and too much access to firearms, letting just about anyone obtain a weapon to carry out a mass shooting or more typical types of gun violence, whether suicides or homicides.”

https://www.vox.com/2019/8/7/20756698/democratic-presidential-candidates-gun-violence-mass-shootings

PUBLIC SUPPORTS GUN CONTROL ON ASSAULT WEAPONS

“A Huffington Post/ YouGov poll found half of Americans surveyed say that members of Congress should take action to reduce mass shootings, a while just one-third say that shootings cannot be reduced through legislation. By an even broader margin, 60% to 25%, Americans say it’s possible to enact new gun regulations while still maintaining the right to bear arms.

Some 81% of Americans say they favor requiring background checks for gun buyers as part of an effort to stop mass shootings. Just 8% are opposed. A 59% majority say they favor banning “assault weapons,” with only about 23% opposed.

Background checks have overwhelming support among both Democrats, who back them 90% to 5% and Republicans who back them 83% to 9%.

An assault weapons ban sees Democrats again overwhelmingly supportive, 86% in favor, 9% opposed, and Republicans close to evenly divided, 39% in favor, 42% opposed.

“[Background checks were] nearly universally popular, even in polls that aren’t taken in the immediate aftermath of a mass shooting. … The Washington Post’s polling director, Scott Clement, points out, most other polling in the past few years finds at least 50% support for banning assault-style weapons. Another post-shooting poll, from Morning Consult, also found significant backing for a ban.”

https://www.huffpost.com/entry/mass-shooting-assault-weapons-ban-poll_n_5d4c81d5e4b01e44e4777fea

REPUBLICAN PARTY AND DEMOCRATIC PARTY PLATFORMS ON GUN CONTROL

The Republican Party and Democratic Party platforms on gun control reflect a “Grand Canyon” divide that separates the two parties, very much like between Trump and all Democrats running for President. Below are Republican and Democratic Party platforms that reveal the stark contrast:

NATIONAL REPUBLICAN PARTY PLATFORM ON GUN CONTROL

Right to obtain and store ammunition without registration

“We uphold the right of individuals to keep and bear arms, a right which antedated the Constitution and was solemnly confirmed by the Second Amendment. We acknowledge, support, and defend the law-abiding citizen’s God-given right of self-defense. We call for the protection of such fundamental individual rights recognized in the Supreme Court’s decisions in District of Columbia v. Heller and McDonald v. Chicago affirming that right, and we recognize the individual responsibility to safely use and store firearms. This also includes the right to obtain and store ammunition without registration. We support the fundamental right to self-defense wherever a law-abiding citizen has a legal right to be, and we support federal legislation that would expand the exercise of that right by allowing those with state-issued carry permits to carry firearms in any state that issues such permits to its own residents.”

Source: 2012 Republican Party Platform , Aug 27, 2012

Open more public land to hunting

“Republicans … strongly support an individual right to own guns, which is explicitly protected by the Constitution’s Second Amendment. Our Party honors the great American tradition of hunting and we applaud efforts by the Bush Administration to make more public lands available to hunters, to increase access to hunting clinics and safety programs for children and adults, and to improve opportunities for hunting for Americans with disabilities.”

Source: 2004 Republican Party Platform, p. 74 , Sep 1, 2004

No frivolous gun lawsuits, no gun licensing

“We believe the 2nd Amendment and all the rights guaranteed by it should enable law-abiding citizens throughout the country to own firearms in their homes for self-defense. We applaud those seeking to stop frivolous lawsuits against firearms manufacturers which is a transparent attempt to deprive citizens of their 2nd Amendment rights. We oppose federal licensing of law abiding gun owners & national gun registration as a violation of the 2nd Amendment and an invasion of privacy of honest citizens.”

Source: 2004 Republican Party Platform, p. 74 , Sep 1, 2004

Will protect right to bear arms

“We defend the constitutional right to bear arms. We oppose federal licensing of law-abiding gun owners and national gun registration as a violation of the Second Amendment and an invasion of privacy of honest citizens. Through programs like Project Exile, we will hold criminals individually accountable for their actions by strong enforcement of federal and state firearm laws, especially when guns are used in violent or drug-related crimes.”

Source: Republican Platform adopted at GOP National Convention , Aug 12, 2000

LINK TO SOURCE:

https://www.ontheissues.org/celeb/Republican_Party_Gun_Control.htm

NATIONAL DEMOCRATIC PARTY PLATFORM ON GUN CONTROL

“With 33,000 Americans dying every year, Democrats believe that we must finally take sensible action to address gun violence. While gun ownership is part of the fabric of many communities, too many families in America have suffered from gun violence.

We can respect the rights of responsible gun owners while keeping our communities safe. We will expand background checks and close dangerous loopholes in our current laws, hold irresponsible dealers and manufacturers accountable, keep weapons of war—such as assault weapons—off our streets, and ensure guns do not fall into the hands of terrorists, domestic abusers, other violent criminals, and those with severe mental health issues.”

SOURCE: 2016 Democratic Party Platform

“We recognize that the individual right to bear arms is an important part of the American tradition, and we will preserve Americans’ Second Amendment right to own and use firearms. We believe that the right to own firearms is subject to reasonable regulation. We understand the terrible consequences of gun violence; it serves as a reminder that life is fragile, and our time here is limited and precious. We believe in an honest, open national conversation about firearms. We can focus on effective enforcement of existing laws, especially strengthening our background check system, and we can work together to enact commonsense improvements–like reinstating the assault weapons ban and closing the gun show loophole–so that guns do not fall into the hands of those irresponsible, law-breaking few.”

Source: 2012 Democratic Party Platform , Sep 4, 2012

Reauthorize assault weapons ban, close gun show loophole

“We will protect Americans Second Amendment right to own firearms, and we will keep guns out of the hands of criminals and terrorists by fighting gun crime, reauthorizing the assault weapons ban, and closing the gun show loophole, as President Bush proposed and failed to do.”

Source: The Democratic Platform for America, p.18 , Jul 10, 2004

Strengthen gun control to reduce violence

“Democrats passed the Brady Law and the Assault Weapons Ban. We increased federal, state, and local gun crime prosecution by 22 percent since 1992. Now gun crime is down by 35 percent. Now we must do even more. We need mandatory child safety locks. We should require a photo license I.D., a background check, and a gun safety test to buy a new handgun. We support more federal gun prosecutors and giving states and communities another 10,000 prosecutors to fight gun crime.”

Source: 2000 Democratic National Platform as adopted by the DNC , Aug 15, 2000

SOURCE: https://www.ammoland.com/2016/07/democrats-choose-gun-control-for-2016-party-platform/#axzz5wVB9S79j

COMMENTARY AND ANALYSIS

It is shortsighted or too idealistic to believe that universal background checks will decrease mass shootings in the United States. One of the biggest problems is the availability of the guns and rifles preferred by the mass shooter: assault weapons. It is clear from review of the party platforms only the Democratic Party wants to ban assault weapons, including AR-15 style semi-automatic rifles, that have been used to perpetrate the most lethal mass shootings in U.S. history, especially over the last 4 years.

Based on the review of the biggest mass shootings in the United States, assault style weapons are the preferred weapons of choice to murder as many innocent men, women and children as possible within seconds using high capacity magazines. Assault weapons do not belong in the hands of private citizens but belong on a battlefield in the hands of the military and perhaps law enforcement.

After so many mass killings, it is difficult to refute that something needs to be done about semi-automatic and automatic guns such as the AR-15, assault style weapons or the types used in all the mass shootings and that are the weapons of choice for mass murderers.

It’s clear the NRA controlled congress, especially the Republican Senate, does not want, nor is it willing to take, any action on gun control. Republican US Senate Majority Leader “Massacre” Mitch Mc Connell of Kentucky now says he will allow bi-partisan legislation enacted in the US House of Representatives advance to the Senate floor for a vote but only after the congressional break. It is doubtful it will pass the NRA Republican control United State Senate.

The United States Congress should enact a comprehensive gun control legislation including:

1. A ban the manufacture and sale of all assault weapons to the general public and regulate existing assault weapons under the National Firearms Act of 1934, and initiate a federal gun buyback program.

2. Implement universal background checks on the sale of all guns.

3. Close the “Charleston loophole” or “delayed denial” where federally licensed dealers can sell guns if three business days pass without FBI clearance.

4. Call for the update and enhancement of the federal National Instant Criminal Background Check system (NCIS).

5. Institute mandatory extended waiting periods for all gun purchases.

6. Implement mandatory handgun licensing, permitting, training, and registration requirements.

7. Impose limits on high capacity magazines.

8. Prohibit firearm sale or transfer to and receipt or possession by an individual who has: (1) been convicted in any court of a misdemeanor hate crime, or (2) received from any court an enhanced hate crime misdemeanor sentence.

9. Institute mandatory child access prevention safe storage requirements and prohibit the sales of handguns with “hair triggers”.

10. Provide more resources and treatment for people with mental illness.

11. Enhance accountability of federally licensed firearms dealers.

12. Implement micro stamped code on each bullet that links it to a specific gun.

13. Produce ‘x-mart guns’ with Radio Frequency Identification (RFID) or biometric recognition (fingerprint) capability.

14. Limit gun purchases to 3 or 4 per year to reduce supply and demand, trafficking and straw purchases.

15. Prohibit open carry of firearms.

16. Digitize Alcohol, Tobacco and Fire (ATF) gun records.

17. Require licensing for ammunition dealer.

CONCLUSION

There are many components to America’s mass shooting epidemic. We need more mental health treatment facilities, more parental involvement, better educational systems, early childhood intervention to prevent child abuse and to identify and get help and counseling to emotionally and violent children and more to secure our schools.

The enactment of universal background checks is a baby step in a very long journey to end mass shootings with assault weapon. What is needed at a minimum on federal level are prohibitions and the ban of the manufacture, sale and distribution to the general public of semi-automatic firearms, AR-15 style rifles, assault weapons, semi-automatic pistols, semi-automatic shotguns and weapons that ensure the most murders in the shortest amount of time.

Until the United States congress does something to enact reasonable and responsible gun control measures and ban assault weapons, we can expect more mass shootings at soft targets such as schools, movie theaters, malls, department stores and major public events like concerts and state fairs. The mass shootings will again be followed by the predictable cycle of news coverage, more outrage, more nighttime candle vigils, more funerals, more condolences, more rhetoric demanding action. In the end, nothing will be done, congress will not take action and more mass shootings will occur, there will no reasonable gun control legislation and assault weapons will be available to whoever wants one.

One thing is for certain: Given the divide between Republicans and Democrats on gun control and reflected in their platforms and by their candidates for President, there will be no gun control measures enacted and signed into law until a Democrat is elected President in 2020. Until the Democrats take control of both the House of Representatives and control of the United States Senate with a 61 or more Senate majority, meaningful gun control legislation and the ban on assault weapons is “dead on arrival” in the Republican controlled United States Senate.

Dan Klein: Governor’s PERA Task Force Chairman Promotes Public Safety Unions Agenda And Own Agenda; Also: Task Force Recommendations And Underfunded Plans Identified

On February 19, 2019, Governor Michelle Lujan Grisham announced a “solvency task force” for the Public Employee Retirement Association (PERA) pension program. The 19-member task force included PERA officials, labor union leaders, retiree representatives and others. The committee was tasked with providing recommendations to Governor Lujan Grisham by August 30, 2019. The task force was to make recommendations on contributions and payouts and a plan will be presented to the 2020 New Mexico legislative session.

On August 8 , 2019, the Solvency Task Force released its recommendations to eliminate the $6.1 billion unfunded liability in New Mexico’s pension system for municipal, county and state workers known as the Public Employees Retirement Association commonly referred to as PERA.

DAN KLEIN COMMENTARY ON GOVERNOR’S PERA TASK FORCE

Dan Klein is a retired Albuquerque Police Sergeant after 20 years of public service. He has been a small business owner in the private sector now for 15 years. His business is USA Locators. Mr. Klein has been a reporter for both on line news outlets the ALB Free Press and ABQ Reports. Mr. Klein is a fully vested PUBLIC Employee Retirement (PERA) retiree receiving a PERA Pension for his service as a police officer with APD. He has submitted the following guest column to this blog for publication. Following the Dan Klein column are the related topics “PERA SOLVENCY TASK FORCE PRELIMINARY RECOMMENDATIONS” and “PERA PENSION PLANS AND UNDERFUNDED PLANS IDENTIFIED IN 2017” and related blog articles at the end.

(NOTE: The opinions expressed in this opinion article are those of Dan Klein and do not necessarily reflect those of the www.petedinelli.com blog).

“Imagine, you go to your doctor, Governor Michelle Lujan-Grisham (MLG) in this case, and present to her your symptoms. Your pension fund in the Public Employees Retirement Association (PERA) is still sick even after Senate Bill 27 was passed in the 2013 legislative session. Doctor MLG refers you to an “expert” to fully diagnose and recommend how to fix your illness. Except in this case the “expert” is not an expert in anything related to pensions. The governors’ expert is her Assistant Chief of Staff Diego Arencon, whose background is that of a career Albuquerque Firefighter, an Albuquerque Fire Department Union president and Fire lobbyist.

Apparently, Governor MLG didn’t think that a pension expert was necessary to diagnose and treat the $15 billion-dollar PERA pension illness. Quackery continues to reign supreme at PERA.

Mr. Arencon immediately appointed his own “experts”. Stacking the PERA Task Force with firemen and police officers who also have ZERO knowledge of how a pension fund operates. Fire and police represent less than 10,000 PERA members, yet they had seven votes on this task force. Retired Public Employees, represent 40,000 PERA members but they received only one vote. AFSCME represents 25,000 PERA members they also received one vote. It’s obvious Diego Arecon stacked this task force with friends who would blindly follow him.

This stacked task force was exposed to Governor Michelle Lujan Grisham but she turned a blind eye. This is certainly not the way for her to start her tenure as governor.

I confronted Diego Arencon about stacking this task force. He denied it but offered no reason why public safety needed seven votes, while Retired Public Employees of New Mexico (RPENM) and American Federation (AFSCME) received only two votes.

Then Mr. Arecon decided to only hold two public meetings! All other task force meetings were closed to the public. No formal record was kept as to what was said by the Task Force members and witnesses. Governor Lujan Grisham and Attorney General Balderas were both contacted regarding this blatant disregard for public testimony, which is affecting 90,000 New Mexico families. Again, the silence from the Governor and the Attorney General was deafening. Is this the change we voted for in 2018? In complete disclosure, I voted for both Attorney General Balderas and Governor Michelle Lujan Grisham.

It comes as no surprise that Mr. Arencon’s rubber stamped task force presented a plan to fix PERA that would force all PERA members to share the pain. He calls it the “shared risk” plan. But the problems at PERA don’t require shared risk, nor shared pain. The problems at PERA are very specific, but Diego Arecon intentionally refused to address them.

In 2017 PERA Executive Director Wayne Propst, in his annual report to the PERA Board, presented three graphs. You can review the entire April 27, 2017 PERA presentation with all the graphs and pie charts is here:

http://www.nmpera.org/assets/uploads/home-banner/april-2017-board-meeting-public-packet.pdf

The graphs show that Senate Bill 27 worked for all of the funds within PERA, with the exception of two, Fire and State Workers. Arencon was a fireman and as a lobbyist he worked with legislators who represent State Workers. These PERA graphs show that by 2043 all PERA funds are 100% solvent, except Fire and State Workers. Those two funds, representing half of PERA membership, dive to below 40% solvency by 2043 and to 0% solvency by 2066!

I called PERA Executive Director Wayne Propst and asked why Fire and State Workers pension funds are heading into insolvency. Propst response was that Fire and State Workers funds provide benefits that their contributions can’t pay for. Propst stated that when a pension fund is in trouble it comes down to benefits being paid and not enough contributions being received. It’s that simple.

Fire and State Workers funds are the real problem afflicting the PERA fund. Their benefits are too rich for their contributions. This must be fixed or PERA will continue to falter. By refusing to address this obvious issue, Mr. Arencon has tethered all the solvent PERA funds to the corpses of Fire and State workers. By not fixing them they will ultimately drag all of PERA into the abyss of insolvency.

Prior to the task force first meeting I asked Diego Arencon if he was going to take testimony regarding the sickness that is destroying the State Workers and Fire funds. Mr. Arencon’s reply was shocking. “I will not pit funds against each other” he said thereby killing any chance for a real solution to PERA’s problems The PERA patient is on the operating table but Dr. Diego Arencon refused to cut the cancer out.

Arencon believes that everyone in PERA should suffer, to bail out the sick Fire and State Workers funds.

This is insanity!

This task force just continues the dysfunction that we have witnessed at the PERA Board and the PERA Executive staff who are still under investigation by the Attorney General and State Auditor. Instead of being honest about the problems and taking serious testimony from pension experts around the nation, we get more agenda driven shenanigans from people we trust, and the governor trusted to fix PERA.

I hope Governor Grisham and the legislature toss into the trash the recommendations of this blatantly slanted task force. They purposely dodged the one issue they knew would fix PERA, which is making adjustment to the Fire and State Workers plans.

If any recommendations from this task force are approved by Governor Grisham and the legislature, I will guarantee that in two years PERA will be back screaming about how the fund is still going insolvent. What will they do then?

Governor Lujan Grisham and the New Mexico Legislature, how about putting people in charge of fixing PERA who aren’t under investigation, who are pension experts and who don’t come with an agenda?

My recommendation is simple, the governor instructs the legislature [interim committees] to start taking public testimony from pension experts, with a focus on the illness in the Fire and State Workers Funds, but with an eye on rewriting the entire PERA statute. This will take months, possibly an entire year. In the 2021 legislative session the [ legislative interim committees] can present proposals to the legislature and governor.

This is the only way to honestly fix PERA.”

DAN KLEIN
PERA RETIREE

PERA SOLVENCY TASK FORCE PRELIMINARY RECOMMENDATIONS

Following are the PERA Solvency Task Force Preliminary Recommendations as released by the Governor’ s Deputy Chief of Staff Diego Arecon who chairs the Task Force:

“• Fulfill the requirements of Governor Michelle Lujan Grisham’s January Executive Order including placing PERA on a path to pay off its $6 billion unfunded liability by the year 2043.

• Provide for sustainable, “profit sharing” Cost of Living Adjustments for current and future PERA retirees based on investment returns and funded ratio.

• Guarantee a minimum COLA of 0.5% and a maximum COLA of 3% based on investment returns/funded ratio. Once PERA achieves full funding of 100% the maximum COLA increases to 5%.

• Begin to address disparity in funding levels among PERA Divisions by exempting State Police and Adult Correctional Officers from proposed contribution increases.

• Protect lower income employees and retirees by exempting employees making less than $25,000 from proposed contribution increases and providing a 2.5% COLA to retirees with pensions of less than $25,000 and 25 years of service to include disability retirees.

• Result in an immediate $700 million reduction in PERA’s unfunded liability.

• Replace prior PERA proposals to freeze COLAs for 3 years with a 2%, simple COLA, pausing only the compounding factor, to be paid annually for the next 3 fiscal years. Simple COLAs will be paid for by a one-time appropriation of $76 million. PERA will administer a 13th check to retirees annually for 3 consecutive years.

• Provide incentives for employees to continue working by removing the cap on earning service credit.

• Eliminate the current 7 year wait to receive a COLA upon retirement and restore it with the 2-year calendar period.”

PERA PENSION PLANS AND UNDERFUNDED PLANS IDENTIFIED IN 2017

There are 5 major PERA Pension Plans administered by PERA:

State Employees General
State Police and Corrections
Municipal Employees General
Municipal Police
Municipal Fire

On April 27, 2017 a presentation was made to the PERA governing board on the current status of asset valuations and projected liabilities. The report includes 23 pie charts and graphs that effectively reveals the current and projected status of all the pension plans PERA administers and pending shortfalls. The pie charts disclose what will be paid into the pension programs by government employers and employees, income from investments and what will be paid out in benefits from 2016 to 2046 with one chart projecting to 2066.

The link to the April 27, 2017 PERA presentation with all the graphs and pie charts is here:

http://www.nmpera.org/assets/uploads/home-banner/april-2017-board-meeting-public-packet.pdf

A few of the pie charts and graphs in the presentation are worth highlighting:

The pie chart on page 7 reflects that on June 30, 2016 Actuarial Accrued Liability for PERA is $19,474,241,000.

The pie chart on page 12 reflects the present Value of Benefits as $21,951,183,972 managed by PERA and invested with a funding ratio of Assets to Accrued Liability of 75.3%. The goal is to have a 100% funded liability by 2046.

The graph on page 19 reflects the assets to pay expected benefits and Market Value of PERA Market Value with no contributions to have a Zero return in 2026.

The graph on page 18 provides projections PERA expected total benefit payments including current employees, future members and retirees.

2016 PERA Total Contribution Rates are reflected in a pie chart on page 20 as follows:

12.28% Employee Contribution Rate
3.61% Employer Normal Cost Contribution
11.67% Employer Unfunded Accrued Liability Amortization Rate

Significant funding shortfalls are reported on page 24 as being 7.99% of State General pensions and 13.87% for Municipal Fire Pension programs. The graph on page 25 reflects contribution shortfalls of State General and Municipal Fire up and until 2066. According to the report the municipal fire department pension plans have the most serious problem of under-funding of almost twice that of the State General Pensions. The number of fire department retirees and law enforecent retirees combined is only a small fraction of the largest majority of State General pension retirees.

For related ww.petedinelli.com blog articles on PERA see:

Governor’s PERA Solvency Task Force “Pokes The Bear”; Dissolve Task Force And Form Working Group

PERA Pension Plan Investments Continue To Falter; Gov.’s PERA Solvency Task Force Top Heavy With Public Safety Reps

Governor’s PERA Solvency Task Force “Pokes The Bear”; Dissolve Task Force And Form Working Group

On February 19, 2019, Governor Michelle Lujan Grisham announced a “solvency task force” for the Public Employee Retirement Association (PERA) pension program. The 19-member task force included PERA officials, labor union leaders, retiree representatives and others. The committee was tasked with providing recommendations to Governor Lujan Grisham by August 30, 2019. The task force was to make recommendations on contributions and payouts with a plan to be presented to the 2020 New Mexico legislative session to reform the PERA retirement system.

https://www.abqjournal.com/1282402/governor-creates-task-force-to-study-pension-issues.html

GOVERNOR’S PERA SOLVENCY TASK FORCE PRELIMINARY RECOMMENDATIONS

On August 8 , 2019, the Solvency Task Force released its recommendations to eliminate the $6 billion unfunded liability in New Mexico’s pension system for municipal, county and state workers known as the Public Employees Retirement Association commonly referred to as PERA.

Following are the PERA Solvency Task Force Preliminary Recommendations as released by the Governor’ s Deputy Chief of Staff Diego Arecon who chairs the Task Force:

“• Fulfill the requirements of Governor Michelle Lujan Grisham’s January Executive Order including placing PERA on a path to pay off its $6 billion unfunded liability by the year 2043.

• Provide for sustainable, “profit sharing” Cost of Living Adjustments for current and future PERA retirees based on investment returns and funded ratio.

• Guarantee a minimum COLA of 0.5% and a maximum COLA of 3% based on investment returns/funded ratio. Once PERA achieves full funding of 100% the maximum COLA increases to 5%.

• Begin to address disparity in funding levels among PERA Divisions by exempting State Police and Adult Correctional Officers from proposed contribution increases.

• Protect lower income employees and retirees by exempting employees making less than $25,000 from proposed contribution increases and providing a 2.5% COLA to retirees with pensions of less than $25,000 and 25 years of service to include disability retirees.

• Result in an immediate $700 million reduction in PERA’s unfunded liability.

• Replace prior PERA proposals to freeze COLAs for 3 years with a 2%, simple COLA, pausing only the compounding factor, to be paid annually for the next 3 fiscal years. Simple COLAs will be paid for by a one-time appropriation of $76 million. PERA will administer a 13th check to retirees annually for 3 consecutive years.

• Provide incentives for employees to continue working by removing the cap on earning service credit.

• Eliminate the current 7 year wait to receive a COLA upon retirement and restore it with the 2-year calendar period.”

PERA PENSION PROGRAM SERIOUSLY UNDERFUNDED

PERA is the legislative created and state regulated retirement association for all state, county and municipal government employees. PERA pays pensions to more than 40,000 retirees and also has about 50,000 active members who are working and paying into the system. There are 5 major PERA Pension Plans administered by PERA: State Employees General, State Police and Corrections, Municipal Employees General, Municipal Police and Municipal Fire. The pension plans cover state police, firefighters, judges, prosecutors, public defenders and many, many more state, city and county government employees. PERA manages a $15 billion pension fund and investment income helps pay pensions owed.

The educator retirement system, known as ERB is separate from PERA and has more than 59,000 active employees and roughly 47,000 retirees.

On June 12, 2019, the New Mexico Legislature’s Investments and Pensions Oversight Committee were warned that PERA is not on track to hit the target for investment returns this year. PERA’S goal is to reach 100% funding of liabilities by 2043. Unfunded liability represents the difference between assets on hand and future retirement benefits owed. PERA Executive Director Wayne Propst told the legislative committee that PERA thus far this year is missing the investment target by 2.25% points. Further, the committee was told that investment gains this year might come in at 3% to 5% and not the standard 7.25% target used by many pension plans throughout the United States. The committee was warned it could have a serious impact on the long-term financial projection for PERA. According to Propst, a 5% return would be enough to reduce the projected funding ratio in 2043 from 74% to 69%.

During the 2018 election, candidates for Governor Democrat Michelle Lujan Grisham and Republican Steve Pierce had major differences on how to deal with PERA. You can read more about the differences at this link:

https://www.abqjournal.com/1203841/candidates-differ-on-state-pensions.html

TASK FORCE PROPOSALS

At the August 8, 2019, the Solvency Task Force recommendations were elaborated on as follows:

REQUIRING PUBLIC EMPLOYEES AND THE AGENCIES THEY WORK FOR TO PAY MORE INTO THE RETIREMENT SYSTEM.

Under this recommendation most employees, especially new employees, would be required dedicate more of their paychecks to the retirement plan. Their employers would also be required to pay more. Employer and employees would pay an additional 2% of the employees’ salary, with the increased contributions phased in over four years. The recommendations do not contain how much the increased contributions would cost the state and local governments.

REDUCE THE COST-OF-LIVING ADJUSTMENTS AVAILABLE TO RETIREES OVER THE NEXT THREE YEARS.

For the next three years, the current 2% cost-of-living adjustment that retirees receive in their pensions would be suspended. Instead, a lump sum at the end of each year equal to 2% of their annual pension would be paid. According to the Task Force, this would save the PERA pension system money because it avoids the compounding effect, in which each 2% increase builds on the previous year’s 2%.

ABANDON THE ANNUAL 2% RAISES THAT RETIREES NOW GET IN THEIR PENSIONS AND INSTEAD ESTABLISH A PROFIT-SHARING MODEL.

After the first three years a move to a profit-sharing model for the annual cost-of-living adjustments would be made. The adjustment would generally fluctuate between 0.5% and 3% each year, depending on the performance of the retirement system’s investments and its overall financial health.

EXEMPTIONS.

Under the proposals, low-income retirees, State Police officers and correctional officers would be exempt from some of the changes. No satisfactory justification was offered as to why State Police and correctional officers should be exempt from any changes.

100% FUNDED BY 2043

According to the Task Force, based on projections by actuaries working for the task force, the new pension system modifications eliminate the $6.1 billion unfunded liability within 25 years. Under the recommendations and based on the median projection by actuaries the funding ratio of the retirement would climb from the 70% this year to 100% in the year 2043.

PROJECTED IMPACT OF RECOMMENDATIONS

According to one news report, the financial impact of the recommendations would be:

A $700 million immediate reduction in pension plan’s unfunded liabilities if recommendations are approved by the legislature.

A $76 million one-time appropriation legislature would be asked to make to fund the cost-of-living adjustments in first three years.

It will take 34 years before the estimated year by which the pension system’s funded ratio would reach 100% or the year 2043.

https://www.abqjournal.com/1351641/nm-pensions-could-see-sweeping-changes.html

The Task Force proposals are preliminary recommendations and are subject to approval by the New Mexico Legislature.

EXPECTED OPPOSITION

On August 8, 2019 dozens of retirees packed into a committee room at the Santa Fe State Capitol to listen to the PERA Task Force Presentation. Many retirees were highly critical and vocal of the proposals arguing that 6 years ago they had already given up some of their pension benefits in 2013 legislative session that dealt with pension reform. It was pointed out by the retiree speakers that retirees depend on their annual cost-of-living increases to keep up with inflation and other price increases. One retiree put it this way:

“To skim from the bottom of the pot, there’s nothing left. … We don’t make a lot of money. Please, leave our cost of living alone.”

Leandro Cordova, a former Taos County manager who now works for the New Mexico Association of Counties, who is also a member of the task force, said the recommendations for increased employee and employer contributions would reduce the take-home pay of employees and increase costs for taxpayers.

SUPPORT FOR THE PROPOSAL

A number of municipal firefighters said the recommendations are a reasonable way to keep the pension fund solvent. They noted that the pension benefits would be better, in some cases, under the recommendations. Retirees, for example, would have to wait only two years, not seven, to start receiving their annual cost-of-living adjustments. One argument made was if investments are strong and the health of the pension funds improves, the profit-sharing component of the proposal would boost the annual raises above the 2% retirees typically get now. Yet another argument made was that employees could also receive increased pension benefits, retiring at their full salary or more, if they worked long enough.

Senator George Muñoz, a Gallup Democrat and member of the task force, said lawmakers should proceed cautiously on the recommendations. One very and important critical point made by Senator Munoz is that it is unrealistic to expect investment returns alone to generate the revenue needed to turn around the pension system.

DEFINED CONTRIBUTION PLANS VERSUS DEFINED BENEFIT PLANS

A “defined contribution” pension plan is a type of retirement plan where employers, employees, or both regularly make contributions to the plan and future employee retirement benefits are based on the dollar amount of contributions made and the final value based on “investment growth”. A defined contribution plan does not guarantee a specific benefit to be paid in the future. With a defined contribution plan, individual employees assume all of the investment risk involved.

The most common type of defined contribution plan is the 401(k), where employees contribute a portion of their earnings and invest their money so it grows over time. In the private sector, it is common with defined contribution plans for employers to offer to match a portion of employee contributions, but most of the burden of funding 401(k)s falls at the individual employee level. With defined contribution plans, most associated administration fees are passed on to the employees who participate.

A “defined benefit” pension plan is a type of retirement plan in which an employer promises a specified pension payment a month and for years. The amount paid to an employee is predetermined by a formula based on the employee’s earnings history, tenure of service and age. The defined pension plans usually also rely on investment income generated by contributors to the plan before a person retires.

PERA PLANS ARE DEFINED BENEFIT PLANS

Most if not all of PERA’s pension plans it administers are “defined benefit” plans as opposed to “defined contribution” plans. The pension payout is based on a formula that accounts for factors such as length of service, age, and earnings history. With the “defined benefit plan”, the state, county or municipality government entity promises the government employees a specific payout upon retirement and guaranteed for life with cost of living adjustments made each year. Further, a PERA retiree can designate a spouse as a beneficiary and the spouse can be paid the pension for the rest of their life. PERA is responsible for making sure there’s enough money to pay employee benefits as scheduled, and PERA assumes all of the investment risk involved in the plan.

Under the PERA system, the formula used for a very large portion of retirees is 25 years of total service multiplied by 3 for each year of service applied to the average high 3 years of a person’s annual pay. A person’s age can also allow a person to retire before the age of 67, but it reduces the benefits where the total years of service is less than 25 years.

(EXAMPLE: Government employee works a full 25 years and is paid an average of $50,000 each year of last 3 years of service. A multiplier of 3% is given each year of service or 75% of high three average yearly pay of $50,000 = $37,500 pension). Law enforcement officers have a separate retirement formula and can retire with 25 years of service and can be paid 90% of their high 3 years of pay.

All of the PERA pensions are funded by government employer contributions usually matching the employee contributing a portion of their earnings. Defined benefit plans are considered riskier for employers and they are more expensive to maintain. For this reasons, defined benefit plans have become far less popular in the private sector.

Under the PERA Pension plans, retirees have been given cost of living raises (COLA) that have been anywhere from 2% to 3% over the years and were considered guaranteed and paid after a few years in retirement. During the 2019 New Mexico Legislative session that ended on March 15, 2019, the legislature considered legislation that would have eliminated all cost of living adjustments or suspend the COLA for a period of years, but the legislation failed.

Governor Michelle Lujan Grisham’s 2019 – 2020 approved budget attempted to shore up New Mexico’s two major pension funds by increasing how much the state pays into workers’ retirement accounts with $13.7 million in funding.

PERA PENSION PLANS AND UNDERFUNDED PLANS IDENTIFIED IN 2017

There are 5 major PERA Pension Plans administered by PERA:

State Employees, General
State Police and Corrections
Municipal Employees, General
Municipal Police
Municipal Fire

On April 27, 2017 a presentation was made to the PERA governing board on the current status of asset valuations and projected liabilities. The report includes 23 pie charts and graphs that reveals the current and projected status of the pension plans PERA administers and pending shortfalls. The pie charts disclose what will be paid into the pension programs by both government employers and employees, income from investments and what will be paid out in benefits from 2016 to 2046 with one chart projecting to 2066.

The link to the April 27, 2017 PERA presentation with all the graphs and pie charts is here:

http://www.nmpera.org/assets/uploads/home-banner/april-2017-board-meeting-public-packet.pdf

A few of the pie charts and graphs in the presentation are worth highlighting:

The pie chart on page 7 reflects that on June 30, 2016 “Actuarial Accrued Liability” for PERA is $19,474,241,000.

The pie chart on page 12 reflects the present Value of Benefits as $21,951,183,972 managed by PERA and invested with a funding ratio of Assets to Accrued Liability of 75.3%. The goal is to have a 100% funded liability by 2046.

The graph on page 19 reflects the assets to pay expected benefits and Market Value of PERA Market Value with no contributions to have a Zero return in 2026.

The graph on page 18 provides projections PERA expected total benefit payments including current employees, future members and retirees.

The 2016 PERA Total Contribution Rates are reflected in a pie chart on page 20 as follows:

12.28% Employee Contribution Rate
3.61% Employer Normal Cost Contribution
11.67% Employer Unfunded Accrued Liability Amortization Rate

Significant funding shortfalls are reported on page 24 as being 7.99% of State General pensions and 13.87% for Municipal Fire Pension programs. The graph on page 25 reflects contribution shortfalls of State General and Municipal Fire up and until 2066.

COMMENTARY AND ANALYSIS

“Poking the bear” can be defined as provoking someone into becoming very angry and hostile and resulting in causing serious problems. In politics, it’s called “alienating your base” or core supporters to the point they campaign against you.

The PERA Governing Board meeting held last year at the CNM auditorium on University in Albuquerque during the general election race for Governor was packed with standing room only by very angry and very upset PERA retirees demanding explanations and information on the solvency of PERA pension system which was being reported as failing. The audience was extremely diverse. The audience was at times confrontational with the PERA Board members. Accusations of mismanagement of the funds were made. One PERA Board member took strong exception to the failure of the investment strategy of the funds returns and demanded more diversification of investment as just one means of reaching a 100% funding level.

Governor Lujan Grisham received a significant number of union endorsements, especially from state government unions such as AFSME. The Governor’s PERA Solvency Task Force has now “poked the bear” of 90,000 PERA contributors, retirees and their family members with their ill-advised recommendations.

Last year, candidate for Governor Michelle Lujan Grisham said she would oppose cuts to benefits, including any reduction in the annual inflation-related pension adjustments that retired state workers and teachers receive. According to a campaign spokesperson at the time:

“She does not believe that New Mexico needs to eliminate our defined benefit system for current or future educators and state employees and opposes any reduction in cost-of-living adjustments.”

There are 6 representatives from public safety out of 16 on the Governor’s PERA Solvency Task Force and include the Fraternal Order of Police, National Association of Police Organizations, New Mexico State Police Association, New Mexico Sheriffs’ Association, New Mexico Professional Fire Fighters Association, Albuquerque Fire Department Retirees’ Association. The Task Force Chair is the Governor’s Deputy Chief of Staff Diego Arencon and he is the former President of the Albuquerque Fire Fighters union who retired last year from the Albuquerque Fire Department.

Public Safety retirees such as police and fire have far more lucrative retirement benefits when it comes to less years of service required to retire and more pension benefits that they will be paid once retired. The vast majority of government employees were seriously under represented on the Task Force which caused significant amount of resentment.

It should come as no surprise that a number of firefighters appeared at the Solvency Task Force presentation in support of the changes. It is the municipal fire department pension plans that have the most serious problem with under funding pensions owed and the Chairman of the Task Force is a retired firefighter and union official.

The financial problems PERA is experiencing can be directly related to the type of pensions offered to government employees as well as what many PERA retirees feel has been mismanagement of the pension funds. Most if not all of PERA’s pension plans administered are “defined benefit” plans as opposed to “defined contribution” plans. With a “defined benefit plan”, the state, county or municipality government entity promises the government employees a specific payout upon retirement and guaranteed for life. Further, a person can designate a spouse as a beneficiary and the spouse can be paid the pension for the rest of their life.

Under the PERA system, the formula used for a very large portion of retirees is 25 years of total service multiplied by 3 for each year of service applied to the average high 3 years of pay. A person’s age can also allow a person to retire before the age of 67, but it reduces the benefits where the total years of service is less than 25 years.

One area where no recommendations were made is increasing the mandatory years of service beyond the 27 years to perhaps 30 or more years, and including public safety retirement years for firefighters and law enforcement. All of the PERA pension plans are State, County or Municipal plans funded by government employer contributions usually matching the employee contributing a portion of their earnings. Some of the plans have government contributions of 75% as opposed to 50%.

Under the PERA Pension plans, retirees have been given cost of living raises (COLA) that have been anywhere from 2% to 3% over the years and were considered guaranteed and paid after a few years in retirement. Reductions in the COLA has always been a major source of mistrust and hostility, if not contempt, by some 40,000 retirees.

Governor Michelle Lujan Grishman no doubt knows that the Task Force is “poking the bear” with upwards of 90,000 government employees each time PERA reform and the elimination of Cost of Living Adjustments (COLA) are advocated as a way of making the PERA fund solvent. Advocating the elimination of COLA adjustments will have serious political consequences simply because retirees vote. Hitting people in the pocket books who live on fixed income is one way to guarantee hostility at election time.

Governor Michelle Lujan Grisham and New Mexico legislature have a looming financial crisis that needs to be resolved sooner rather than later. The Task Force recommending major changes to the PERA system to wipe out its $6.1 billion unfunded liability over 25 years is dubious at best. A 25-year payoff on a $6.1 Billion-dollar debt which includes market returns on investment is unrealistic given the volatility of the markets.

Revenues from the oil and gas boom could in all likely reduce the $6.1 unfunded liability within a 5 to 10-year span. Such infusions of funding would no doubt benefit no less than 90,000 PERA workers not to mention their family’s over many more years. There is precedent for such expenditures. During the 2019 New Mexico Legislative session that ended on March 15, 2019, the legislature allocated $13 million to help shore up the PERA pension plan. While the State is experiencing a windfall in increased revenues, the New Mexico Legislature should use the opportunity to increase funding to the PERA funds significantly more than the $13 million approved in the 2019 legislative session.

An option that should be considered is a restructuring pensions along the lines of what the Federal Social Security program does by taking into account a 35-year history of a person’s pay history and base pensions on the full employment history as opposed to paying a pension on a person’s high 3 years of pay. Social Security was never meant to be a retirement program but a supplemental program for about one third of a person’s retirement.

While there is still time before the 2020 legislative session, Governor Michelle Lujan Grisham should dissolve the current PERA Solvency Task Force, set aside it recommendations and create a working group with the New Mexico legislature, hire financial experts on pensions and investment strategies to come up with viable alternatives.

The New Mexico Legislature needs to consider pension reform during a special session where a solution can be hammered out without the distractions of a general session. The New Mexico legislature should consider pension reform in the form of including “defined contribution plans” in one form or another to be offered to future government employees, increasing employer and employee contribution plans under the defined benefit plans and modifying the multipliers and increasing years of service or age before retirement.

The Governor’s PERA Solvency Task Force has now “poked the bear” when it comes to their recommendations, especially on the Cost of Living Adjustments. It is going to be the New Mexico Legislature who will have to calm the bear down and find a final solution or suffer the consequences at election time.

The first thing that should be done is for the legislature to set aside the recommendations of the Pension Fund Task Force and find genuine outside experts in finance and pension funds to make recommendations to the legislature on what can and should be done to save PERA and to make it 100% fully funded within a short period of time.

Joe Monahan Special Report: New Mexico’s Oil Boom And What It Means For New Mexico’s Future; Include PERA Funding

On Monday, August 05, 2019, political blogger Joe Monahan on his blog “New Mexico Politics With Joe Monahan” publish a very insightful article on the Southern New Mexico oil boom. The article was entitled: “Special Report: Blog In The Basin; Historic Oil Boom Examined From The Ground And Air; Why It’s Different This Time And What That Could Mean For New Mexico’s Future.” Following is the complete article with the link to Mr. Monahans blog:

Flying low over the Permian Basin to look directly in the eye of the latest and perhaps most profound chapter in New Mexican history, it is the vastness of the oil fields that leave you awestruck. Inevitably an emotional chord is also struck. The realization, held until then in the abstract, is now crystallized. What lies below has the power to literally transform this state from being perennially last in the nation in a basket of vital social standings to a stand-out state where poverty is finally shoved into the back seat and where opportunity is a neighbor not a stranger.

The Permian, mostly in Texas but crossing the border into SE NM and especially southern Eddy County, is now the largest oil producer on the planet. Staring down at the immensity of this enterprise I thought, “Okay, now I really get it. This is how you get billion dollar state budget surpluses.”

Coincidence made the awareness even more keen. Just as our group took flight Friday from the Carlsbad terminal Exxon dropped its second quarter earnings. In just those three months the company earned $3.1 billion, a good portion of which came from the Permian.

“It’s a wild ride,” longtime Carlsbad Mayor Dale Janway told me. “Exxon recently held a Board of Directors meeting here. Who would have thought?”

NAVIGATING THE BOOM

Carlsbad, a half hour drive from the fields, is ground zero for the NM portion of the boom. 2018 estimates put its population at 29,000, the largest in history. But Janway says local water usage indicates it is much higher.

The tight-knit community and its political leadership is not unlike a juggler with a dozen plates in the air, trying to keep them spinning and not crashing to the ground.

On the plus side, the job market is so robust a Taco Bell is already offering the $15 an hour wage being sought as the federal minimum by many Democrats. Some restaurants have had to abbreviate their hours because potential employees have been lured to the Permian. Truck drivers there can earn well north of $30 an hour.

The real estate market in Carlsbad is soaring. Locals are able to sell their homes and build new, upscale digs, like those dotting the scenic and soothing banks of the Pecos River that runs threw the city and which we boated on with community leaders.

Developer Valerie Murrill says she is getting ready to build more apartments. Others are too.

“Man camps,” small housing units strung together, have sprouted up across the city to meet the heavy demand to house the young men who work the fields.

Calling into direct question the contention that the Permian Basin boom is just another in a century long line that will end in a bust, the Hyatt and Hilton chains are now building hotels on Main Street. Exxon and Conoco are establishing permanent Carlsbad headquarters.

That is the crucial and historic difference. Like past booms this one will no doubt level off but it is not going bust–not anytime soon.

INSIDE THE BOOM

At the local Bureau of Land Management (BLM) headquarters, swamped with applications for drilling permits and other regulatory issues on the state’s federal lands that host much of the boom, I met with four experts. One helped me understand things this way:

Joe, imagine a layer cake with 27 layers. That’s the Permian. This large number of oil layers to frack is very unusual. Each one will be tapped for the oil it holds.

“How long will this go on?” I ask. Cautious not to be too specific, the BLM manager replies: “For years.”

You can throw out the conventional wisdom prevalent in many quarters in Santa Fe that the immense wealth being accumulated by the state needs to be mostly hoarded and used to preserve the failed status quo when the inevitable bust comes.

The reluctance to deal with the new paradigm is somewhat understandable. A hundred years of boom and bust gets into the political DNA. But the state’s political leadership will soon be unable to push away the challenges of dealing substantially with this epic event. You can only save so much. As Robert Defer, CEO of the Carlsbad Chamber of Commerce, put it to me:

So you save. Fine. But what do you do about being 49th or 50th in the nation?

A TURN IN THINKIN

It was fascinating to see that turn in thinking in this traditionally conservative region. The unbridled capitalism that is on the loose and shaking up their economy and society seems to have invigorated the risk appetite of the SE business and political community.

Even the little guy is getting in on the act. A food truck belonging to the Chubby Burrito chain parked on one of the busy oil field roadways alerts potential customers that they accept debit cards, credit cards as well as cash.

The Carlsbad leaders we spoke with took to heart that simplistic notion that “it takes money to make money.” It is playing out before them in ways never seen in NM and it has them looking through the lens of opportunity, not the poverty mentality that has been a state mainstay.

Again, that’s different from the past. Uncertainty remains part of the picture but fear of failure has been replaced with the fear of missing out. As Eddy County Commissioner Susan Crockett said over lunch at the Carlsbad Country Club:

What worries me is that we do not provide the proper infrastructure–the roads, the housing the education and other necessities and amenities, We could end up keeping the oil but the people move across the border to Pecos, TX.

GOP state Senator Gregg Fulfer of Jal, an energy industry veteran, frets over possible regulatory overreach, citing a bill introduced at the last legislative session to slap a statewide moratorium on fracking because of environmental concerns. The bill went nowhere but he said “it sent a shudder” through the industry.

ENVIRO IMPACT

We asked the BLM officials about the environmental aspect of the boom. They report that the land that the drilling pads are on is eventually reclaimed and restored to its original condition. The huge amounts of wastewater created by the the fracking process is not a major problem especially now that new state regulations encourage recycling. A cottage industry valued in the billions has popped up to handle the recycling.

There is work to be done on methane and natural gas flares that contribute to climate change. The MLG administration is working on new rules and the oil industry is not resisting. We did not meet any climate change deniers during our visit.

A PRAGMATIC VIEW

Some of our readers come at this boom from the perspective of climate, saying that encouraging oil and gas production is inherently wrong because of the climate crisis caused by fossil fuels. We come at it from a pragmatic view, that the Permian oil boom is here for the foreseeable future. It is not a moral failing to advocate for having the resulting monies put to work to reverse our high rate of poverty and our very low child well-being ranking. In other words, to change the course of state history.

DAREDEVIL ROADS

Many of you have heard about what amounts to an emergency on state roads in and out of the Permian. Their rapid deterioration from heavy use and the unsafe driving sparked by the oil field frenzy have led to a dramatic escalation in fatalities—at least several each week. When I asked anyone in Carlsbad about the boom it was always among the top concerns.

One afternoon Carlsbad banker Jay Jenkins and I braved some of the worst stretches. We cruised in his SUV absorbing shocks from the washboard like roads also riddled with potholes. It wasn’t long before an 18 wheeler that meant business came barreling down a narrow two lane unstriped roadway. Much of the lanes were chipped away leaving it more like one and a half lanes. No problem for that trucker. He created a wider lane out of the dirt berm, forcing a third of his trailer onto it as Jenkins jerked to the right to make more way for him and to ensure the oil patch did not become our final resting place.

That experience was repeated throughout the tour with speeding welders in pickups and other workers trying to navigate now decaying roads that were built for leisurely drives of the last century not for the pressure packed business of extracting black gold from the largest producing oil fields on planet Earth.

WANTED: ROAD RELIEF

Eddy County Commissioner Ernie Carlson is determined to resolve the road woes as is GOP state Rep. Cathrynn Brown who is seeking specific funding for the most dangerous stretches. And the legislature has passed a several hundred million dollar road bill that will begin to bring relief.

But Carlson says Eddy County needs a dedicated stream of revenue from the state as the boom stretches into the next decade. He warns:

We need to get back some of our taxes from this boom that is going up to Santa Fe so we can address the road danger. That is good for our citizens, the energy business and the entire state. Otherwise, we are going to jeopardize the opportunity this once-in-a-lifetime event represents.

Carlson is a long ago Democrat turned Republican, a semi-retired chief financial officer who sports a CPA title along with Ostrich cowboy boots. He is representative of the new thinking in some conservative circles regarding the boom, arguing that missing the opportunity to turn around the state with an education investment is as important as not recklessly squandering the newfound treasure. He says:

You can’t budget for when you think the sky is falling. You’ve got to budget and invest for the opportunity that is right in front of you. For New Mexico and Eddy County that time is now.

NO MAGIC WAND

The Permian is not a magic wand. The employment it offers is confined to the region and suitable for a select group. The direct economic impact will be largely confined to Eddy and Lea Counties. That’s why the immense surplus being accumulated in Santa Fe is so critical. The Governor and the legislature will be challenged to effectively deploy those funds to benefit the entire state, especially in delivering an educational system that reaches all and that will be key to changing the poverty culture that has held us back.

It will be the next generation of students funded by this boom who can begin to resolve the dilemma of dangerously dysfunctional families, who can be taught to adapt to a more entrepreneurial culture and who can be made employable here or most anywhere. Those oil fields can be their field of dreams.

The last legislative session had some promising starts but those in Santa Fe who would stuff the hopes and dreams of the coming generation into the savings mattresses still don’t get it. For them we recommend a long, contemplative flight over the booming Permian Basin to rethink their position.

THE BOTTOM LINES

Thanks to Carlsbad Mayor Dale Janway and his assistant Kyle Marksteiner for a productive and intense tour of the region. Thanks also to Valerie Murrill for the lodging; to Jay Jenkins for the daredevil chauffeuring; to pilot James Ballard and Chandler Aviation for the flight over the Permian; to Carlsbad City Administrator Michael Hernandez for assisting with photos and to all of those in Eddy County who took the time to inform us for this report.

E-mail your news and comments to: (jmonahan@ix.netcom.com)

A CONTRARY VIEW

On Tuesday, August 06, 2019, Joe Monahan in his blog published the following reaction to his article on New Mexico’s Oil Boom And What It Means For New Mexico’s Future:

Former ABQ Mayor Jim Baca, who is also a former director of the federal Bureau of Land Management, took a contrary view from ours:

This is all headed for a disaster in terms of climate change. If the Permian indeed is the biggest producer on the planet, then we should be ashamed. Climate change is real. Fossil fuels are making it happen. Yes, the money is good, but the Feds and state are letting the oil and gas go for a song. I was the last Commissioner to raise royalties and the feds have never done so. It is almost criminal. Joe, you need to write on the bigger picture. You spent time with the cheerleaders but not with the scientists who say time is running out. And it is.

The link to “New Mexico Politics With Joe Monahan” is as follows:

http://joemonahansnewmexico.blogspot.com/

E-mail your news and comments to: (jmonahan@ix.netcom.com)

DINELLI COMMENTARY AND ANALYSIS

One looming financial crisis where the new revenues from oil and gas development should be used is to wipe out the $6.1 billion unfunded liability in New Mexico’s pension system for municipal, county and state workers. The unfunded liability represents the difference between assets on hand and future retirement benefits owed. There are over 40,000 retirees that now draw pensions from PERA, and about 50,000 employees who are working and paying into the system.

Governor Michelle Lujan Grisham’s 2019- 2020 approved budget attempted to shore up New Mexico’s two major pension funds by increasing how much the state pays into workers’ retirement accounts with $13.7 million in funding. A PERA Task force appointed by Governor Michelle Lujan Grisham is recommending major changes to the PERA system to wipe out its $6.1 billion unfunded liability within 25 years based on projections by actuaries working for the task force. Some of those changes include getting rid of cost of living adjustments to retirees, mandating an increase in employer and employee contributions and reliance on market investment returns. A 25 year payoff on a $6.1 Billion dollar debt is unrealistic given the volatility of the markets. Revenues from the oil and gas boom could in all likely reduce the $6.1 unfunded liability within a 5 to 10 year span. Such infusions of funding would no doubt benefit no less than 90,000 workers not to mention their family’s over many more years.

For more on the PERA Task Force recommendations see:

https://www.abqjournal.com/1351641/nm-pensions-could-see-sweeping-changes.html

No matter who you believe, Joe Monahan or Jim Baca, or even both, New Mexico financial fortunes are about to change. Only time will tell if our New Mexico elected leaders will show the courage to take advantage of it and set aside their own personal agendas for the benefit of all New Mexico.