Analysis of the New Mexico PERA Pension Solvency Task Force’s Preliminary Recommendations
© Dreamstime.com

Policy Study

Analysis of the New Mexico PERA Pension Solvency Task Force’s Preliminary Recommendations

The changes are significant and positive steps for PERA, but leave some systemic challenges—namely actuarial methods and assumptions—unaddressed.

New Mexico Gov. Michelle Lujan Grisham’s Public Employees Retirement Association’s Pension Solvency Task Force released preliminary recommendations and related actuarial analyses for a set of policy approaches that improve PERA’s solvency by eliminating over $6 billion in unfunded liabilities over the next 25 years. The changes, proposed earlier this month, are significant and positive steps for PERA, but leave some systemic challenges—namely actuarial methods and assumptions—unaddressed.

Several months back, financial experts urged policymakers to prepare for potential scenarios that could endanger the health of the state’s pension plan. The task force has done so by exploring recommendations that include increased contribution inflows, adjusting cost-of-living (COLA) provisions, and implementing other policies to improve PERA’s financial health, as detailed in this brief.

If New Mexico legislators decide to implement the task force’s recommendations, PERA would no doubt be better funded and have more assets to spare than under the status quo. State policymakers should also consider other options for PERA beyond the task force’s proposals to prevent missed actuarial assumptions, lengthy amortization schedules, and other current practices from further increasing unfunded liabilities.

Analysis of the New Mexico PERA Pension Solvency Task Force’s Preliminary Recommendations

Anil Niraula

Anil Niraula is a policy analyst at Reason Foundation.

Andrew Abbott is a quantitative analyst with Reason Foundation’s Pension Integrity Project.

Leonard Gilroy is vice president of government reform at Reason Foundation, a nonprofit think tank advancing free minds and free markets. He also serves as senior managing director of the Pension Integrity Project at Reason Foundation, which assists policymakers and other stakeholders in designing, analyzing and implementing public sector pension reforms.