No bonding for pensions?

Cities, counties and school districts with unfunded pension liabilities would have one less tool to fund them, if a bill sponsored by Rep. Linda Runbeck (R-Circle Pines) becomes law.

HF696 would take away local governments’ ability to bond for pension and postretirement health benefits for public employees. Under current law, cities, counties and townships can use their bonding authority to pay for postemployment benefits; school districts can also do so by way of a referendum.

Runbeck said it makes sense for cities to bond for capital assets like buildings, but not to compensate for poor financial management of pensions and retiree health benefits.

“I think having the authority in statute is a green light. It means that we think this is an acceptable practice,” she said.

After some debate, members of the House Government Operations and Elections Committee laid the bill over March 1. It has no Senate companion.

Runbeck argued many private-sector employees don’t have access to the kinds of pension and post-retirement benefits provided to public employees. She said local governments that can’t fund these benefits should simply stop trying to provide them.

“We have a situation where commitments were made that are not affordable,” Runbeck said. “Our elected officials are under pressure to not do the right thing.”

Opponents worry that the bill will lead to calls for the state to bail out pension funds. Rep. Mike Beard (R-Shakopee) brought up the Minneapolis Teachers Retirement Association, whose pension liabilities were absorbed into a state-level retirement fund after it went insolvent. He said bonding might be a better option for some local governments.

“If past indiscretions have been cleaned up, and going forward they’re on a solid footing, wouldn’t that be an opportunity where bonding actually might make sense?” Beard said.

Runbeck agreed to let the committee lay the bill over after Rep. Ryan Winkler (DFL-Golden Valley) offered to help draft an amendment that would require a study of local governments’ unfunded liabilities.