Stirrings of Pension Reform in Montana

Pension obligations’ strains on state budgets have made pension reform a priority for state policy makers across the nation. Over the last couple of years, states from Utah to Rhode Island have implemented pension reforms once considered politically nigh-impossible. Montana may soon join the ranks of states with pension shortfalls where fiscal reality trumps politics as usual.

Last week, Montana legislators heard testimony from pension experts who painted a bleak picture of the current situation. Taken together, the state’s pension plans are only 64 percent funded.

David Draine of the Pew Center for the States said, “If not addressed, Montana’s growing pension debt of $4.3 billion will threaten public workers’ salaries and benefits and will crowd out essential state services.” He added that to pay off the $4.3 billion debt — equivalent to about half the state’s annual budget — all at once would cost every Montana household $10,600.

Gary Buchanan, co-owner of an investment firm in Billings and former chairman of the State Board of Investments, said, “Pension shortfalls should be direct reductions against any surplus,”  and criticized the state’s actuarial assumption of average 7.75 percent annual investment returns as “totally unrealistic.”

Of course, this is just a hearing, but the fact that Montana lawmakers are having this discussion is encouraging.

For more on public pensions, see here.