LINCOLN — Public school teachers statewide say they are alarmed at a legislative proposal led by Nebraska Gov. Jim Pillen to change how much the state annually puts into its school retirement plan.

Legislative Bill 645, introduced by State Sen. Beau Ballard of Lincoln at Pillen’s request, would create stepped-down contribution levels from the state to the school retirement plan, depending on the actuarial funding level of the pension plan. The state currently gives 2% of the payroll for school employees statewide each year — about $50 million.

Ballard’s bill would maintain that funding level if the plan drops below 92% funded. It is currently 99.9% funded and growing, funded at about $16.3 billion as of July of last year. The goal is to divert the contribution amount to other education-related investments, including school finance reform.

If the pension plan is fully funded, the state would not contribute to the plan unless it drops below 100%, which would adjust depending on the level of funding.

The pension plan includes all eligible public K-12 school employees except those from Omaha Public Schools, the state’s largest public school district, who are covered under a different plan.

School employees give 9.78% of their salaries toward the pension fund, and local school districts match 9.88% of their employee salaries.

The Nebraska State Education Association, which represents more than 26,000 public school teachers, raised alarm about the legislation shortly after it was introduced, stating in a call to action to members that it could “raid” pensions and undermine the plan’s financial health.

“The 2% state contribution is more than a budgetary item,” the NSEA wrote. “It is a cornerstone of the secure retirement that Nebraska’s educators have worked so hard to protect.”

The estimated payroll for teachers in Nebraska, as of July 1, 2024, was $2.5 billion annually. That means the plan took in $543 million in direct contributions — about $50 million from the state, $245 million from employees and $248 million from school districts in the most recent year.

A plan in ‘jeopardy’

Tim Royers, president of the union, said a chief concern is that the state and teacher contribution levels today were negotiated 12 years ago, when the plan was about 75% funded and the plan faced a $108 million shortfall that, under law, the state had to fill.

Instead, school employees stepped in to fill more than 80% of the hole, which was part of negotiations with lawmakers, including the Nebraska Retirement Systems Committee that Ballard now chairs and representatives from the NSEA, Nebraska Council of School Administrators, Nebraska Association of School Boards and Nebraska Rural Community Schools Association.

The end result, which passed over a governor’s veto, included maintaining employee contributions near 10% and increasing the state contribution level from 1% to 2% of employee payroll. Employee, employer and state contributions were previously set to come down to lower levels in 2017.

The requirement for weekly hours worked to qualify for the plan also increased from at least 15 hours to 20, and new employees received reduced benefits, such as smaller cost-of-living adjustments.

John Heineman, the president of NSEA-Retired who has 38 years of teaching experience in speech, theater and physical education, nearly all with Lincoln Public Schools, said members are “up in arms” because of the success of the 2013 deal.

“My pension is going to be very secure, but those entering in the state of Nebraska are put at risk by this lack of support for our teachers across the state,” Heineman, the 2000 Nebraska Teacher of the Year, said.

“It’s not broken — don’t fix it,” he said of the retirement plan. “Keep it strong. Keep it attractive to teachers.”

Bailey Smith, who is in her ninth year of teaching, and second year at Eustis-Farnam Public Schools teaching second grade, echoed Heineman that as a teacher near the start of her career, she doesn’t think too much about retiring, other than it being a goal for the future.

“Then this all comes out and it’s like, ‘Wait a minute, I do want to retire,’” Smith said of the legislation. “All of a sudden it seems like this is in jeopardy.”

Intent of the legislation

The governor wants to move the annual $50 million the state puts into the school pensions plan toward stabilizing year-over-year state funding to K-12 school districts, which could, in turn, increase teacher pay and support school districts that have lost state aid funding as property valuations increase.

Kenny Zoeller, director of the governor’s Policy Research Office, said that to call the proposal a “raid” is “disingenuous and, frankly, a flat-out lie.” He stressed that the funds would go toward education investments and not to the state’s $432 million projected budget shortfall.

Ballard and Zoeller said there was never an intention to dip into the retirement fund. Instead, Ballard, Pillen and Zoeller said the bill was about starting a conversation about the future of its needs as the plan nears 100% funding.

“This was meant to show, ‘Hey, this is what we’re paying now, can we stair step down?’” Ballard said.

“We’re not going in and clawing out money they have contributed to the fund,” Ballard added. “I don’t want teachers to lose any retirement funding.”

The state will give 2% of employee pay this year, no matter if Ballard’s bill passes.

Ballard said he is reading and listening to the concerns of hundreds of educators who are reaching out to him and said his chief goal is “keeping teachers whole.”

“This is not touching the hard-working dollars that our men and women who educate Nebraskans put into their retirement fund,” Zoeller said. “We are talking about future dollars, prospective dollars, that the state puts in, not what the employee puts in, not what the employer puts in.”

The stair-stepped formula — by kicking in more state investment when it is needed — would also help ensure the plan is healthy, Zoeller said, “so that way our teachers can enjoy this enhanced public benefit.”

‘No need to rush forward’

State Sen. Danielle Conrad of Lincoln, the longest current tenured member of the Legislature in her 11th year, said she also has heard from hundreds of teachers — rural, urban, progressive, conservative, nonpolitical, retired and active — who are “shocked” at the policy suggestion.

“There was no need to rush forward with any sort of major changes to our teacher retirement plan,” Conrad said.

Conrad and Ballard competed for chair of the Retirement Committee last month, a committee she had served on during the final years of her first stint in the Legislature, in 2013 and 2014. This is Ballard’s first year on the committee. She said lawmakers can have robust conversations and prepare for proposals but said that didn’t happen this time.

“That’s just caused so much unnecessary heartache and anguish and angst for those who are committed to public service and who are on the front lines of our great public schools,” Conrad said.

Paul Schulte, vice president of NSEA and a fourth grade teacher at Bryan Elementary in Millard Public Schools in his 26th year of teaching said the state should negotiate such changes.

He said the legislation feels like retribution for the NSEA and other public school advocates fighting laws that diverted public dollars to help cover the cost of attendance at private schools.

“It feels like we are being attacked for being diligent and putting almost two years into working within our rights as Nebraska citizens — we have the right to repeal a bill, and we did it successfully,” Schulte said.

Conrad said it’s important that pension plan progress made since 2013 isn’t undone in a “willy nilly fashion,” adding she hopes Pillen and Ballard “fully retreat from this misguided proposal” that she has already pledged to filibuster if needed. She urged teachers to continue speaking up.

“I think it’s wrong to play political games and settle political scores with promises that we’ve made to Nebraska teachers,” Conrad said.

The governor’s office and Ballard have said the only focus of their push is the funding level, not politics.

A recent actuarial study

Royers and other teachers said the state could instead — or also — work to reduce teachers’ contribution levels, which are also set in law, or increase benefits for teachers who have started since 2013 to match those of more experienced K-12 employees.

“This is an opportunity to increase take-home pay without actually having to raise [property tax] levies or do anything else,” Royers said.

Ballard and Zoeller said they’re open to possibly reducing the contribution levels for teachers. Zoeller said the governor’s “North Star” is how the state keeps the plan healthy in a way that is an efficient use of taxpayer funds.

Pillen said during his monthly radio call-in show last week that it isn’t fiscally responsible to continue contributing money to a plan when it’s at or above 100% funded. He said the plan is “very, very safe.”

Besides the Omaha school retirement plan, which is now managed by the state but funded by the school district, lawmakers annually make mandatory state contributions to judges’ retirement funds. Those pensions are mostly paid by court fees.

The judges’ retirement plan has sat at more than 100% funded for multiple years but still receives $1.4 million from the state at a level set by law.

According to the most recent actuarial study of the school retirement plan, completed in November, the retirement plan is taking in about 6.61% more in contributions than the minimum level needed under state law, before the state must kick in additional funds.

However, the study cautions that the additional funds might be needed and “should not be viewed as an unnecessary or excess contribution” because future contributions or investments could dip below projections.

Before Ballard’s bill could take effect, a new actuarial study would need to be completed to assess the impacts of any changed contribution levels.

Conrad said it would be “foolish” to rush ahead without clearly understanding the possible impacts of the new presidential administration on market returns or volatility.

‘Open door to compromise’

Smith said public schools are about giving every student the opportunity to learn regardless of learning abilities, background or demographics. She said being a safe person for some children who might need that support most “is just probably the privilege of a lifetime.”

“I don’t take lightly that you play, especially in elementary school, that you play such a very vital role in these children’s education and their childhood,” Smith said.

Retirement is supposed to honor that dedication, she said, and help teachers “move on with your second step of life.” She said the legislation feels like it’s cutting into that agreement.

Royers said he and others tried to negotiate behind closed doors before drawing public attention to the proposal, but they still hope to find a path forward.

Ballard said he’s willing to work with the NSEA on the work-in-progress legislation, too.

“This is an important opportunity, given the health of our retirement system, I don’t want to squander that opportunity with infighting and bickering and people holding their grounds,” Royers said. “We will continue to be an open door to compromise and working with them.”

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