FARMINGTON — The fate of about 67 city employees may rest on the decisions made by the New Mexico Legislature during their 2013 session beginning Jan. 15.
Officials say proposed changes to the Public Employees Retirement Association - PERA - policies are needed to secure the financial longevity of retirement funds in the long term.
Those plans could force some of the state's most experienced employees to retire.
"The concern is on an operational level," said City Manager Rob Mayes.
According to the city's data, there are an estimated 67 employees on the so-called retirement bubble.
Eighteen of those employees are public safety workers six from the Farmington Fire Department and 12 from the Farmington Police Department.
Although the city will not take a significant financial hit if the employees were to all retire at once, the damage to the city's operations could be significant, Mayes said.
"Obviously they are our more experienced, higher ranked people," he said. "It's 18 people who are in leadership and management."
Police Chief Kyle Westall is on the bubble while Fire Chief Terry Page is not, he said.
"All of our upper command in the police department is on the list," Mayes said. "It's very concerning for public safety."
The city's other departments do not appear to be losing so many management personnel, although City Attorney Jay Burnham is on the list, he said.
Councilman Dan Darnell says that action to repair the state's retirement fund is necessary.
"We know it's going to be insolvent if we don't take action," he said. "You don't want to wait until it gets there."
But the plan should not harm cities, he said.
"All of your experience is gone, and it's not just losing employees," Darnell said. "It can't be that big of a shock, but we know that something has to be done. If the legislature passes something radical, we're looking at a lot of people leaving."
PERA's Board of Trustees recently proposed a new plan featuring steps to implement a graduated cost-of-living adjustment eligibility period.
The plan will take effect on June 30, 2014 if it is approved.
It gives public employees incentives to retire as soon as they are eligible rather than waiting.
Although PERA's investment returns improved during fiscal year 2012 and the first quarter of fiscal year 2013, officials say they are not relying to market performance to drive a recovery.
A PERA report from July 30, 2012 showed that the organization's unfunded liability increased by $1.2 billion, from $5 billion to $6.2 billion, and its funded status declined from 70.5 percent to 65.3 percent.
An unfunded liability is the shortfall between the amount of money needed to pay for all current and future benefits and the money in the fund.
According to PERA's Oct. 23 presentation, the retirement fund is expected to reach 100 percent funded status by 2042 if the policy reform proposal is adopted.
A provision in the state constitution may also be complicating the situation.
New Mexico is the only state in the country that has made pension benefits a property right for PERA members and for retired teachers. The constitutional provision limits the changes to benefits that can be made.
Article XX, section 22 of the New Mexico Constitution outlines policy related to public employees and education employees retirement trust funds, and protects each system's retirement funds and benefits from misuse and abuse.
Clause C of the section gives the boards of each fund "sole and exclusive power," over the money and prevents the state legislature from making laws that increases benefits paid by the system without enough funding available.
Clause D gives retirement plan members a "vested property right," to the funds once they become eligible for retirement.
Earlier this year Santa Fe lawmakers passed a resolution requiring the PERA Board and the Investment and Pension Oversight Committee to pay off PERA's $6.2 billion unfunded liability by June 30, 2014. The resolution also called for the board to create plans to reach long-term fund solvency.
For Farmington's elected officials and staff, the next few months will likely be a waiting game.
According to Scott Scanland, the city's lobbyist in Santa Fe, about a quarter of the legislature will be brand new.
"They're coming off of a very contentious election cycle," he said. "It was the most expensive election in (state) history. The survivors, I think, are coming up with some very hard feelings."
The proposed changes to the retirement plan can be viewed at www.pera.state.nm.us.