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.

Governor Gregoire is slated to sign the last of the bills from the 2012 Supplemental Legislation Session in the next couple of weeks.

Next week, April 23rd, Gregoire will sign the two supplemental capital budget bills (SB 5127 & SB 6074) at Tacoma Community College.

The following week on May 2nd, Gregoire will sign the operating budget (HB 2127), the K-12 health benefits bill (SB 5940), the balanced state budget bill (SB 6636), pension reform (SB 6378 ) and various other bills passed during the special session.

Governor Gregoire does have the power to veto all or portions of any of the bills before her. After these bills are signed, the 2012 supplemental session will officially come to a close. This ceremony will mark the last signing ceremony for Governor Gregoire who will is not seeking reelection this November.

It is day 30 of the special legislative session, which means lawmakers have until midnight tonight to come to agreement on a budget deal to get of town by the deadline. Speculation has begun on whether this is possible with such a short time-frame.

Yesterday the House Ways & Means Committee and Senate floor action were scheduled to take up reform bills and the budget needed to get done by tonight, however, they never happened because budget leaders met in closed-door meetings throughout the day with Governor Gregoire attempting to hash out a deal. By late last night it was clear they still had a ways to go.

This morning the Tacoma News Tribune (TNT) is reporting that a third special session looks likely due to the limited amount of time left. Even if they reach an agreement today, the amount of paperwork involved in formalizing a deal is too great.

“Negotiators left for the night shortly before midnight and Governor Gregoire told reporters they had made progress. They had also slid backward from a point earlier in the evening when a deal looked closer at hand, she acknowledged. ‘That’s typical in negotiations.'”

The TNT is reporting that Gregoire is refusing to talk about calling another special session. “That’s the problem with special sessions and a reason lawmakers are still here on Day 30,” she said. “As soon as they learn they have a fresh 30 days on the clock, there isn’t the pressure to make things happen. Nobody will convince me to talk about a special session until we absolutely have to.”

Senate Ways & Means has scheduled a meeting for this afternoon at 1:30 and House Ways & Means which was supposed to take up reform bills yesterday was relieved of those bills this morning and they placed on the 2nd Reading Calendar in Rules Committee. The 2nd Reading Calendar enables lawmakers to pull bills from the Rules Committee to the floor for a vote.

These actions show there is movement, however, as the TNT reported, there may not be enough time due to the amount of paperwork that is required to be processed before a budget deal is finalized.

Stay tuned…

It is day 29 of the 30 day special legislative session and lawmakers are back in Olympia after a one day break for the Easter holiday.

Late last week on Friday lawmakers inched closer to a deal after tense debate in the Senate Ways and Means committee and on the Senate floor. Ways & Means moved two “reform” bills (SB 5940 and SB 6636) thought to be the key issues determining whether the legislature will end on time.  A third reform bill (SB 6378) was moved from the Rules committee to the Senate floor for possible action.

The three big reform bills are:

1. SB 5940: Legislation aimed at equalizing health insurance premiums for teachers and school district employees
2. SB 6636: An amendment to the state constitution requiring a balanced budget
3. SB 6378: Ending special early retirement incentives for state employees.

After moving out of Ways & Means the bills went to the Senate floor. There they both passed and were sent to the House Ways & Means Committee. SB 6378 did not have the votes to get off of the Senate floor Saturday but is scheduled for a vote today, Monday.

The House Ways & Means committee is scheduled to meet at 3pm today to consider their versions of the first two bills above. They are:

1. HB 2827– Improving state budgeting and planning by requiring a balanced state operating budget for the current biennium and developing a process for balancing the budget over a two-biennium period.
2. HB 2829 – Addressing public school employees’ insurance benefits.

In terms of the state budget, it looks like the Democrats and Republicans are inching closer to an agreement. According to The Washington State Wire, “Senate Republican budget-writer Joe Zarelli, R-Ridgefield, and House Ways and Means Chairman Ed Murray, said legislative players are only $22 million apart – really nothing in a $31 billion budget.

However, on Saturday the Olympian questioned whether there are the votes to pass a budget. “There still are questions about whether Senate Republicans, who are demanding passage of reform bills before they vote on the budget, have votes for their ideas in the House. “I’m a farmer and I’m a Republican; I’ve got to be an optimist,” said Sen. Mark Schoesler, the GOP’s floor leader, as he headed out the door for Ritzville for the Easter holiday. “We certainly have structurally gotten ourselves pretty close – as far as mechanically moving stuff through” the process, Senate Ways and Means chairman Ed Murray, D-Seattle, said of the prospect of finishing by Tuesday night. “We have some agreements that have to be struck. Hopefully we can get there.”

Lawmakers have until midnight tomorrow, Tuesday, April 10 to pass a budget. If they cannot come to agreement Governor Gregoire has two options. She can call them back into another special session, or implement across the board cuts.