MINOT, N.D. — North Dakota's lawmakers have sent to Gov. Doug Burgum legislation that will close the state's defined-benefit pension for public workers.
The pension, called the Public Employees Retirement System, or PERS, currently has roughly 53,000 current and retired employees in it, including about 60% who are in local governments. The legislation, which is expected to cost $4.94 billion over the next 30 years, will keep the pension in place for workers already in the system, while transitioning new workers to a defined-contribution plan of the sort that pretty much everyone except government workers has.
It's pretty clear that the current head of the pension hates this change. "At over $4 billion dollars difference, HB 1040 is about to be the most expensive mistake in the history of the state of North Dakota," PERS executive director Scott Miller told Bismarck Tribune reporter Jack Dura.
It's also pretty clear that Miller needs to be fired. It's one thing for him to have an opinion, but the Legislature sets pension policy. This reform was passed by majorities of the people's representatives, and Gov. Burgum is likely to sign it. In his December budget address to lawmakers he called for "a responsible plan to close the defined benefit plan for prospective hires as soon as possible, and shift to a defined contribution plan."
Miller isn't on the same page with the Legislature or the governor, and that means he can't hold the position he holds. This transition is going to take decades. Our state needs someone in Miller's position who supports the policy set by the legislature and, presumably, once he signs the bill, the governor.
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I don't know Miller, and I don't begrudge him his opinion, but his job is to carry out the policy set for him, and it's not at all clear he's capable of doing that at this point. He has to go.
As for his comment about this bill being the "most expensive mistake in the history of the state of North Dakota," he's wrong. That mistake happened when our state created this defined-benefit pension in the first place.
These pensions are unsustainable. They guarantee benefits based on uncertain revenues. The rebuttal to that from supporters of the status quo is some variation of "the Legislature should have adequately funded the pension," and maybe so, but that's just another argument for transition.
Defined-benefit pensions rely on feckless politicians to eschew short-term politics in favor of a commitment to long-term fiscal stability. How often, in the history of government, has that happened?
Defined-benefit pensions inevitably need bailouts, whether it's because of market conditions, or economic downturns, or incompetent management from political leaders. The only way to keep these funds solvent is to pour more money into them, or diminish the value of the benefit to workers.
The mistake isn't making an admittedly large, and somewhat painful financial commitment to closing this pension. That's a sunk cost, unfortunately, that we're burdened with because a previous generation of North Dakota's political leaders made the mistake of starting it.
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