LINCOLN — Nebraska’s teachers union will no longer oppose a governor-backed bill to tweak the state’s school retirement plan, partly due to an amendment that could also benefit teachers.
The Nebraska State Education Association formally shifted its stance this week, two months after urging caution and encouraging teachers statewide to speak out against Legislative Bill 645, which was introduced by State Sen. Beau Ballard of Lincoln at Gov. Jim Pillen’s request.
The bill would create stepped-down contribution levels from the state to the school retirement plan, depending on its actuarial funding level. As of July 1, the plan was 99.9% funded.
If passed, LB 645 would drop the state’s annual contributions toward the retirement plan based on statewide school employee payroll. Once the plan reaches 100% funding, the state would no longer automatically contribute year over year.
A Feb. 13 amendment from Ballard proposes similar changes to teacher and other employee contributions depending on actuarial funding, which could save teachers money each month, helping lead to the changed NSEA position.
“I think this is a win-win,” Ballard said of the amendment. “In my opinion, this is the teachers’ money. It’s a real-world take-home pay increase for teachers.”
The amendment would also limit the modified state contribution levels to three tiers, instead of six as in the original LB 645.
The teachers union had originally said the bill would “raid” teacher pensions, which director Kenny Zoeller of the governor’s Policy Research Office said was a “flat-out lie” because LB 645 wouldn’t touch “hard-working dollars.”
NSEA President Tim Royers, in a Feb. 20 emailed video to NSEA members addressing the Ballard amendment, credited his members for the change.
“We would not be here delivering this good news without you using your voice the way that you did, to help those lawmakers see that we need to build a better version of this bill that puts the educators of the state at the forefront of what it intends to do,” Royers said at the time.
He described the amendment as “version 2.0 of the bill.”
‘Version 2.0’ amendment specifics
The state currently contributes 2% of school employee payroll statewide to the pension plan, while employees contribute 9.77% of their salaries and school districts contribute 9.88% of their employees’ salaries.
This means that for the current fiscal year, with an estimated $2.5 billion payroll for school employees statewide, the required contributions would be:
- State of Nebraska (2%): $50.1 million.
- School employees (9.77%): $244.8 million.
- School districts (9.88%): $247.6 million.
Zoeller said that the changes for the state would free up funds for education investments and are not designed to help plug a projected budget shortfall of $457 million prior to any legislative action.
Royers has said it was OK for the state to reduce its contributions but that school employees and the teachers he represents should also be part of the conversation.
Under Ballard’s amendment, the plan would require different contributions at three levels of funding: less than 96% actuarially funded, between 96% and once the plan is 100% actuarially funded.
When the plan is 96% or more funded, but not 100%, school employee contributions would fall to 7.28% of their salaries, and the state would contribute 0.7% of school employees’ payroll.
Once the plan reaches 100% funded, the state would pull out of funding. Lawmakers would continue to need to add funding in volatile years in which legally set contribution levels aren’t enough to keep the plan afloat.
Contribution levels would revert to current levels if the plan drops below 96% funded.
Laura Strimple, a spokesperson for Pillen, repeated Pillen’s firm stance that efficiencies can be found “in all aspects of state government,” which she said includes the school retirement plan.
“With a nearly fully funded plan, the Legislature should decide how we can save taxpayer money and directly increase teacher pay,” Strimple said.
Actuaries: LB 645 adds volatility and risk
Such changes to state retirement plans require an actuarial study on possible impacts.
The study for LB 645 and its amendment was completed late last week, with actuaries writing that the changes would create more volatility and risk. The study does not specify a “yes” or “no” to whether the state could afford the changes.
The full LB 645 actuarial study
The full actuarial study on Legislative Bill 645 and its amendment is available here.
Actuaries predicted the school retirement plan, if Ballard’s amended bill became law, would be fully funded about 68% of the time, and at least 96% funded nearly three-fourths of the time.
However, the actuaries also gave a 43% chance that the retirement plan could drop below 96% funding before 2035, and a 52% chance before 2045. This would return the 2.5% payroll fee to teachers in a given year, which the actuaries wrote could catch some employees off guard.
“Given the probability of such an event, it might be prudent to ensure members are fully aware of the likelihood of such an adjustment occurring to avoid a surprise on the members’ behalf,” the study states.
Royers said the study didn’t provide all the information his union wanted about the proposal’s viability and that a new review methodology left him and his team “not quite sure, candidly, how to parse the data.”
“That’s honestly one of the main reasons why we’re coming in neutral,” Royers said Wednesday. “We want to make sure that what we’re doing is going to keep the plan sound for the next 10, 20 years, and we just don’t feel that what that study said tells us one way or another.”
Royers described the study as asking “how much oil is in the car,” yet the response was about “how the brakes are doing.”
‘Not quite there yet’
Ballard’s bill and amendment would not decrease contribution levels for school districts, but Royers said there is some “wiggle room” to bring districts to the table while benefiting the state and teachers.
Doing so could lead to property tax relief, repurposing those payroll obligations toward teacher salaries or both, Royers said, and could be a win for communities on tax relief or educators on pay increases.
Asked whether the bill could pair with a separate NSEA priority, LB 440, to cover 6 weeks of paid family and medical leave for all teachers during or after significant life events, Royers said it’s possible.
LB 440, the 2025 priority bill of State Sen. Ashlei Spivey of Omaha, would impose a 0.35% payroll fee on teachers, which school districts would also match, to cover the group benefit.
The current estimated payroll this fiscal year for all school employees (not just teachers as under LB 440) would mean the state’s 245 school districts, mostly funded through property taxes or state dollars, would need to cover about $8.8 million. This would be less if limited to teachers.
“Synergy is great when you have multiple bills, but we also recognize a bill could fail,” Royers said of the Spivey and Ballard bills. “We don’t want to build our plan around both bills passing.”
Royers said he’s confident that the NSEA, Ballard and Pillen can find a path forward on school retirement.
“We think ultimately we’ll land on a good bill,” Royers said. “We’re just not quite there yet.”