You may recall that the amendment removing the tax delinquency penalties in E2SHB 1105 was sponsored on the floor by a Republican representative. Thankfully, it was fixed in the Senate. Because, had it lasted, it would’ve cost the counties upwards of $28 million based on 2018 figures.
But now, another representative hung another amendment on a different bill on the House floor. When the House passed their operating budget on Friday evening, HB 1390 was amended into the budget document. HB 1390 was introduced earlier in session but was not passed out of committee after a February 18 hearing. The bill provides for a one-time 3% cost of living increase (COLA) to PERS 1 and TRS 1 retirees. Presumably, the bill had not already been included in the budget because it will cost the state over $45 million for the biennium.
According to the House Bill Analysis, the basic retirement allowance of a member of Plan 1 of the Public Employees’ Retirement System (PERS Plan 1) or the Teachers’ Retirement System (TRS Plan 1) is equal to 2 percent of the member’s average final compensation, calculated on the member’s highest consecutive two years of compensation, for each year of service.
Retirement benefits in the PERS Plan 1 and TRS Plan 1 are available to members after 30 years of service at any age, with 25 years of service at age 55, and with five years of service at age 60. The original Plan 1 design in both systems did not contain a benefit feature annually adjusting retirees’ benefits, though several ad hoc retiree benefit adjustments were created by the Legislature prior to 1995.
Between 1995 and 2011, PERS Plan 1 and TRS Plan 1 retirees’ benefits could be eligible for an annual increase from a benefit generally referred to as the Uniform Cost of Living Adjustment (COLA), or Uniform COLA. The Uniform COLA was enacted in 1995 to replace a number of prior COLAs and was a fixed dollar amount multiplied by the member’s total years of service.
The dollar amount of the Uniform COLA was about $1.88 per year, meaning that a member with 25 years of service would receive an additional $47 per month each year, and the Uniform COLA itself would have increased by 3 percent per year on July 1. Members did not have a contractual right to future increases to the Uniform COLA, and those increases ceased with the repeal of the Uniform COLA in 2011.
In 2018, the Legislature provided a one-time increase of 1.5 percent that was applied to PERS Plan 1 and TRS Plan 1 on July 1, 2018, up to a maximum increase of $62.50 per month.
While we are sympathetic to the plight of those retirees who testified in support of HB 1390, their reasons for wanting the bill are the same reasons we are forced to oppose it. In short, costs continue to rise, and income/revenue does not rise commensurately.
If the bill passes, local governments who fund retirement benefits for PERS 1 retirees will see their costs increase by over $22 million this biennium according to the State Actuary. Of course, no funding was added to the House budget to offset those costs.
The Senate budget does not include the companion bill in their proposal. It is our hope that we will be successful in preventing this cost increase from making it into the final version of the operating budget that will pass both houses some time toward the end of April. We will continue to work toward that goal.