Babauta chose immediate need over prospective one

Gov. Juan N. Babauta has approved a bill exempting the Public School System from higher retirement contributions in the hopes of averting the rate hike’s immediate impact on education.

In a Nov. 22 transmittal letter to the Legislature, Babauta said he had signed House Bill 14-369 into law after considering its impact on the education of students and on future retirees.

The bill, which would exempt PSS from an increase in the rate of employer contribution to the Retirement Fund for the next five years, becomes Public Law No. 14-98.

“The Legislature, in passing this measure, has presented a choice between creating a negative impact on the education of our students and creating a negative impact on future retirees,” Babauta said.

He noted that if H.B. 14-369 were not signed into law, the Retirement Fund would be able to impose an immediate 13-percent increase in personnel costs for PSS. This would significantly reduce the funding available to education.

On the other hand, the enactment of H.B. 14-369 would reduce the resources allocated to the Retirement Fund over the next five years. This will have a negative impact on the Fund’s ability to reach the legally mandated goal of achieving full funding by 2020.

“The negative impact on PSS and, consequently, the education of our school children is immediate, while the negative impact on the Retirement Fund is only prospective. The Retirement Fund, though opposed to this measure, has indicated that it will still be able to pay all retirees’ benefits without interruption even if this measure is enacted. Accordingly, I have decided to sign this bill into law,” Babauta said.

Furthermore, the governor urged the Legislature to consult the Retirement Fund board regarding the amendment of the Oct. 1, 2020 deadline for full funding of the retirement system. According to Babauta, a new deadline will reduce the need to increase the employer share contribution.

The Legislature should also request the Fund to delay the implementation of the new employer share contribution and make a recommendation for a new full funding date, Babauta said.

Babauta also asked the lawmakers to consider increasing employee share contribution, rather than the employer share contribution.

Currently, Class I members pay 6.5 percent and Class II members 9 percent of their gross pay.

“It is more equitable that all government employees increase their contribution to their retirement than that all taxpayers increase their contribution to the government employees’ employment,” Babauta said.