The Select Committee on Pension Policy (SCPP) met today, May 15, at the State Capitol to discuss session highlights and other issues. The Select Committee on Pension Policy is a committee comprised of House and Senate members, the directors of the Office of Financial Management (OFM) and the Department of Retirement Systems, active and retired member representatives and employer representatives. A complete list of members can be found here.

The past 2012 legislative session saw 21 pension reform measures, six of which were signed into law by Governor Gregoire. Among the reforms passed, the committee received comprehensive briefings from staff on the following:

Senate Bill 6378 – “Reforming the State Retirement System” – replaces Early Retirement Factors (ERFs) for new hires, specifically, PERS, TRS and SERS employees. The legislation reduces subsidized early retirement benefits for new hires – 5% reduction for each year the member retires before age 65.

SB 6378 also requires the SCPP to study high-risk job classifications in existing retirement systems, PSERS membership and Early Retirement Factors (ERFs) for school employees. This study is due to the Legislature no later than December 15, 2012.

Finally, SB 6378 codifies lower Rate-of-Return (ROR) assumptions. They are as follows:

• 7.9% s of July 1, 2013
• 7.8% as of July 1, 2015
• 7.7% as of July 1. 2017

The committee was also briefed on HB 1552 – Regarding Pension Garnishment. The legislation included, among other provisions, changes to garnishment provisions in pension statutes. Specifically, it exempts pensions from garnishment even when in possession of the retiree, or deposited in a bank account. This decision was the direct result of a recent Supreme Court decision in which the court held that pensions are not exempt from garnishment once the funds have been paid to the retiree. Their decision noted that the legislature could change their decision by adding language to current statute. Following the Supreme Court’s decision and the passage of HB 1552, Governor Gregoire equested that the SCPP study whether additional exceptions should be made to the general rule exempting pensions from garnishment, and if so, to what extent? Next steps include a decision by the Executive Committee of the SCPP to study this issue during the interim.

Along with the two studies above, the SCPP and Office of the State Actuary (OSA) will consult with the Washington State Institute for Public Policy on its pension study and the OSA will provide continued actuarial assistance and consulting to the Guaranteed Education Tuition program, among other ongoing assignments and studies.

As well as briefings on specific policy bills, staff also held a work session on “pension spiking.” Pension Spiking is an often controversial, yet completely legal, practice where final compensation of an employee has been inflated for the purpose of increasing the pension amount. This typically happens within a few years of the employee’s retirement and can result in tens of thousands of additional dollars in retirement benefits. It is a problem because it inflates the pension system resulting in increased plan liabilities, extra costs not fully funded at the time of retirement and a loss of public confidence in the retirement system. At this time the SPCC has no plan to study or take action on the issue.

With a ballooning population set to retire, and continued uncertainty in the economy, expect pensions to continue to be an issue of interest and continued reform.

 The Washington Economic and Revenue Forecast Council released updated figures today, May 11. 

Revenue collections for April – May, 2012 were $7.6 million (0.7%) lower. Cumulatively, revenue collections are coming in as predicted, only $9.6 million (0.3%) higher than forecasted.

According to the council, Washington and the Nation’s economies have been sending “mixed signals, with recent weak employment and GDP growth, but also higher disposable personal income, strong auto sales, and signs that the housing market may be stabilizing. Further, Washington’s employment growth has outpaced the modest growth expected in the February forecast, but earlier estimates were revised down, resulting in the current level of employment lower than anticipated. Housing construction was also stronger than expected in the first quarter of the year but prices remain weak. Risks in terms of oil and gasoline prices and the European financial crisis are all contributing to uncertainty in the future.

The council states that revenue collections are coming in as predicted and total collections for the past three months since the February forecast are only $9.6 million (0.3%) higher than forecasted.

For the council’s complete report visit the link below:

http://www.erfc.wa.gov/publications/documents/may12.pdf

Governor Christine Gregoire signed the 2012 operating budget and a slew of other bills yesterday, May 2nd.  The higher education sector, specifically Evergreen, received no cuts.

In a statement from State Senator Ed Murray, Chair of the Senate Ways and Means committee, “This is the first budget in four years to avoid cuts to Washington’s schools, colleges and universities. For families and students, that is great news. After the deep cuts of the past few years, I and many of my colleagues are pleased to have protected education and important services for Washingtonians who are sick, hungry or disabled…”

Governor Gregoire did veto several sections of the bill, including Section 601(7) which allowed Bellevue College to begin offering baccalaureate degrees. Currently Bellevue is allowed to offer applied baccalaureate degrees. In her veto message, Gregoire noted that “while expansion of degree programs into the state’s community and technical college system may ultimately prove to be sound public policy, such authorization through a budget proviso is the wrong approach. The Legislature endorsed the System Design Plan in 2010 for the purpose of establishing a process for the expansion of new programs and degrees where there is demand and to ensure financial sustainability. This important planning process cannot succeed if independent authorization is given in a budget proviso.”

Another veto of interest includes Section 919 of the budget bill that deals with across-the board reductions. This section would have protected certain state agencies from across the board reductions if the Governor chose to do so in the event of continued revenue decline. In her veto message, Gregoire explained that the language reduces executive flexibility because all provisoed amounts would now need to be reduced by the same percentage as separate appropriations.

For a full list of her vetoes, click here.

As well as the budget bill, the Governor signed bills relating to roll your own cigarette dispensaries (HB 2565), developing a plan for full funding of basic education (HB 2824) and relating to local sales and use tax account deposits and distributions (HB 2822), among many others.

These were the final bills to be signed from the 2012 supplemental session.