News Release: Pension Reform Hearing in Nebraska Legislature
NEWS RELEASE from the Platte Institute
Contact: Adam Weinberg
TODAY: Hearing on Omaha and Lincoln Pension Reforms
Legislation Would Effectively Cap the Growth of Pension Debts
LINCOLN, NE (February 7, 2017) — Jim Vokal, Chief Executive Officer of Platte Institute, will testify before the Nebraska Retirement Systems Committee in support of Sen. Mark Kolterman’s Legislative Bill 30. The hearing will be held TODAY on Tuesday, February 7, 2017 at 4:30 p.m. in State Capitol room 1507.
Vokal is also a former Omaha City Council member who focused on city pension issues while in office. Here is a link to Vokal’s testimony.
LB30 would include Omaha and Lincoln in previous municipal pension reforms the state passed in the 1980s requiring smaller municipalities to move away from traditional defined benefit pension systems. The reforms have succeeded in keeping most municipal pension systems in Nebraska in good standing.
That is not the case in Omaha and Lincoln, though. Over the past 20 years, Omaha has seen the funding level of its pension plans fall precipitously from almost 100% funded, to the current situation of being less than half funded. According to research by the Reason Foundation, Omaha’s pension debt stands at $1.99 billion based on the market value of its liabilities.
While Lincoln’s pension debt is smaller (about $190 million), the financial crisis has exposed that its public safety pension system has the same vulnerabilities that led to the growth of Omaha’s pension debt and the city’s eventual bond rating downgrade. For its most recent year, Lincoln had one of the worst rates of return in the country at -2.76%.
Pension debts accrue when defined benefit pension plan investments underperform, or are underfunded. The resulting difference must be paid by taxpayers before other public services like public safety, road repairs, and snow removal. By enrolling new employees in cash balance plans as LB30 prescribes, the risk of adding more pension debt in Omaha and Lincoln is greatly diminished.
“If taxpayers in Nebraska’s two largest cities are going to be protected from a future of paying even higher taxes for fewer public services, and further bond rating downgrades, then the Legislature must now demand Omaha and Lincoln have the same pension requirements most other Nebraska cities have had since the 1980s,” said Jim Vokal.
“Cash balance and defined contribution pension systems, with their proper accounting and investment assumptions, have helped the other municipalities to avoid major pension debts. Assuring these standards for good financial stewardship in our cities was the Legislature’s responsibility in 1983, and that responsibility still exists today,” said Vokal.
The Platte Institute advances policies that remove barriers to growth and opportunity in Nebraska.