The bad news for the state’s largest pension program — the Public Employees Retirement Association (PERA) — got worse on Tuesday (Oct. 23) when its executive director told members of a committee at the Roundhouse that PERA’s unfunded liability increased by $1.2 billion in the past year.

“The increase was not unexpected,” Wayne Probst told the Investments and Pensions and Investment Oversight Committee. “Unfortunately, the increase is greater than anticipated.”

Last year, the unfunded liability — or, in plain English, the amount of money needed over time to make up the difference between incoming contributions and outgoing benefits to retirees — has risen from $5 billion to $6.2 billion. In the last three years, the unfunded liability has nearly tripled (it was $2.3 billion in mid-2009).

“The increase was driven primarily by poor investment performance in fiscal year 2012,” Probst said of the various stocks and bonds the $11 billion budget PERA handles for government employees who range from police officers to fire fighters to workers at state agencies.

PERA’s problems are indicative of public employee unions across the country that find themselves in a squeeze due to demographics of an aging population, an economic downturn and in some cases, guaranteed benefits that have proven overly generous.

“The patient is in critical condition,” Probst said, calling for PERA members, the state legislature and the governor to OK a series of reform proposals that Probst said would “get that patient off life support.”

“This is a monumental issue,” said Rep. Don Bratton (R-Hobbs) as committee members from both parties talked about the necessity of making financial adjustments to the PERA fund in the upcoming 60-day legislative session. “The longer we wait, the bigger the problem and the numbers are going to get,” Rep. Bratton told Capitol Report New Mexico after the meeting.

“We’re tired of this hamster wheel,” state Sen. Tim Keller (D-Albuquerque) said. “If we don’t address this, we will get nothing.”

Here’s a look at the recommendations the PERA Board has made to help tackle the problem:

The recommendations are just that — recommendations that have to be approved first by PERA members before going to lawmakers.

“It’s not an instaneous fix,” state Sen. George Muñoz (D-Gallup) said after the meeting that included the chairman of the Government Accounting Standards Board (GASB). “They want to see fixes and Moody’s [the national ratings agency] wants to see fixes to pension funds.”

But are these proposals enough to get the PERA fund safe and sound? After all, the pension fund operates on an expected 7.75 percent annual return — an optimistic figure given the state of the economy.

Here’s Sen. Muñoz on that: