LINCOLN, Neb. (AP) — Nebraska Gov. Dave Heineman issued his first veto of the session on Monday, rejecting an increase in the state’s contribution to underfunded teacher and school employee retirement plans.
Heineman argued that the additional state funding was unsustainable, but said he’d sign an embedded short-term fix if lawmakers passed it as a standalone measure. He called on lawmakers to conduct a six-month review of how to make Nebraska’s public employee retirement system for teachers, state troopers and judges more sustainable, so they can address it next year.
The changes are designed to trim a $108 million, two-year gap in state pension funding.
“This is one that really needs further study,” the Republican governor said. “I want to understand the full, comprehensive nature of the challenges we face,” noting he was concerned about the potential long-term cost for state taxpayers.
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Bill sponsor Sen. Jeremy Nordquist, of Omaha, said he will file a motion to override the veto, saying it was a compromise, since teacher and school district contributions have increased 28 percent since the economic downturn hit the state four years ago. Employees are now required to put nearly 10 percent of their pay into the retirement plan, he said.
In his veto message, Heineman pointed to estimates that the state’s increased contribution — from 1 percent to 2 percent — would cost taxpayers more than $500 million over the next 25 years. The employee contribution would remain the same.
“The bill does not present comprehensive, long-term solutions to the defined benefit pension plans,” Heineman said.
He also took issue with assumptions that the plan will see 8 percent yearly investment returns. Heineman said the study should include the cost of a more realistic rate of return — 6 percent or 7 percent — so lawmakers and the public can better understand the system’s liabilities.