Senators override veto; school retirement plan changes adopted

Lawmakers successfully overrode a veto May 14 of a bill that makes changes to the state’s school retirement plans.

LB553, introduced by Omaha Sen. Jeremy Nordquist, creates a new tier of reduced benefits for employees under the School Employees Retirement System (SERS) who begin work for the first time on or after July 1, 2013.

Senators had passed the bill May 7 on a 34-0 vote. In his veto letter, Gov. Dave Heineman said the bill does not represent a sustainable long-term solution and called for a thorough study of alternative solutions.

“This bill does not present comprehensive, long-term solutions to the defined benefit pension plans,” he said. “The taxpayers should also have a seat at the negotiating table to develop transparent, long-range solutions.”

Nordquist filed a motion to override the veto, saying the school retirement plan’s liability is an obligation of the state that must be addressed.

“No matter what we do to this plan going forward, [the liability] will still be there,” he said. “If we skip out on our pension obligation, there’s the possibility that it will affect the credit rating of the state and all of the school districts who pay into the retirement plan.”

Omaha Sen. Steve Lathrop supported the motion to override, saying that sustaining the veto would mean using the state’s cash reserves to address the problem.

“We cannot stick our head in the sand on this,” Lathrop said. “[If we don’t override the veto,] we will have to spend $98 million over the biennium for no reason.”

O’Neill Sen. Tyson Larson opposed the motion to override the veto. He said the bill would not address fundamental issues with the school retirement plan.

“If we don’t address this with real sweeping change, we’re going to continue to have this problem five or 10 years down the road,” he said.

Senators voted 32-1 to override the governor’s veto. Thirty votes were needed. The bill goes into immediate effect.

The new benefits tier will take into account a five year salary average to determine benefits instead of the three year average used currently. The maximum cost-of-living adjustment will be 1 percent instead of the current 2.5 percent adjustment figure. The changes will not apply to members of SERS prior to July 1, 2013.

The bill also makes a series of other changes to the plans, some of which include:
• the state statutory contribution rate will be increased from 1 percent to 2 percent of total compensation of all school employees beginning July 1, 2014;
• the amortization method in the School Employees Retirement Act will be changed from level dollar to level percentage of salary beginning July 1, 2013;
• eligibility for membership in the school retirement plan will be changed from 15 hours per week to 20 hours; and
• the sunset will be eliminated from the school budget and lid exclusions for expenditures above the Class V employer contribution rate of 7.37 percent and the school employer contribution of 7.35 percent.

LB553 also incorporates provisions from three other bills introduced by Nordquist.

LB554 applies the provisions of LB553 to all Class V school employees hired after July 1, 2013.

LB305 changes the amortization method in the Nebraska State Patrol Retirement Act from level dollar to level percentage of salary beginning July 1, 2013.

LB306 changes the amortization method in the Judges Retirement Act from level dollar to level percentage of salary beginning July 1, 2013.