A Minnesota bill that would have cut cost-of-living adjustments for retirees in the Minnesota Teachers Retirement Association and Minnesota State Retirement System, both of St. Paul, was vetoed Tuesday by Gov. Mark Dayton.
Under the bill, the retiree cost-of-living adjustment for the $20.4 billion teachers pension fund would have been halved, to 1%; while the adjustment for the $22 billion SRS would have been trimmed to 1.75% from 2%.
The bill had also included cutting the teachers plan's long-term assumed rate of return to 8% from the current 8.5%, which would then have matched the state retirement system's return assumption. But a proposal by MTRA to increase its employer contribution rate 1 percentage point to 8.5% was omitted from the bill passed by the state House and Senate on May 22.
Mr. Dayton in a letter to legislators said the COLA cuts, without “shared commitments” from employers and current employees, led him to veto the bill. He said the pension bill “contains only one piece of the overall sustainability plans, placing sole responsibility for reducing plan liabilities on current retirees. It is not fair, and I cannot agree to it.”
Mr. Dayton said any pension bill introduced in the next legislative session, in 2017, would require such shared participation for him to sign it.
The bill pared the MTRA employer contribution stipulation because “it became clear that money would not be made available this year” for employers to make the added contributions, according to a news release on the teachers pension fund's website. That employer rate increase would have been offset by an increase in the state aid formula for schools.
State Rep. Tim O'Driscoll, who chairs the Legislative Commission on Pensions and Retirement, said in the news release that the original package would have required “heavy financial lifting.”