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Legislative Audit Commission Meeting

Minutes

January 22, 2007

Members Present:

Representative Lyndon Carlson Senator David Hann
Representative Sondra Erickson    Senator James Metzen
Representative Rick Hansen Senator Thomas Neuville
Representative Aaron Peterson Senator Ann Rest
Representative Connie Ruth Senator Claire Robling

Members Absent:

Representative Torrey Westrom   Senator Richard Cohen
  Senator Warren Limmer

The Legislative Audit Commission meeting was called to order by Senator Ann Rest, Chair, at 3:03 p.m. in Room 123 of the State Capitol.  The purpose of the meeting was to release and review two program evaluation reports:  Postemployment Benefits for Public Employees and Pensions for Volunteer Firefighters.

Senator Rest recognized Jim Nobles, Legislative Auditor.  Mr. Nobles gave an overview of what was found in the Postemployment Benefits for Public Employees report.  He then introduced Jody Hauer, program evaluation project manager, to present the details of the report.  Ms. Hauer explained the state pension plan has some problems, including the following:  the state’s Postretirement Fund currently has a projected $4 billion deficit, and the Postretirement Fund’s benefit increase formula does not protect the fund and does not align benefit increases with inflation.  Some of the recommendations made by the report include that the Legislature 1) require pension plans to reflect the actual market-related value of the Postretirement Fund, 2) fully fund the Postretirement Fund and change the investment-based portion of the benefit formula, and 3) allow irrevocable trusts to fund postemployment benefits other than pensions.

At 3:40 p.m., the meeting turned to the review of Pensions for Volunteer Firefighters.  Mr. Nobles gave a brief overview of the report.  He then introduced Jo Vos, program evaluation project manager, to give the details of the report.  Ms. Vos noted that a total overhaul of the firefighter pension system is not needed.  She said the biggest concern is that volunteer firefighter pension funds should be earning higher rates of return.  The report found that less than one-third of the relief associations invested through the State Board of Investment (SBI); however, they could have earned $56 million more had they been involved in SBI’s Income Share Account from 1997-2004.  Ms. Vos explained the key recommendations of the report are that the Legislature should 1) require all volunteer firefighter relief associations to invest their pension funds through SBI and 2) require volunteer firefighter relief associations to develop investment policies that incorporate best practices.

Senator Rest thanked the OLA for their presentations, and with no further business, the meeting was adjourned at 4:08 p.m.

 

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Senator Ann H. Rest, Chair

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Shelly Watterud, Recording Secretary

Office of the Legislative Auditor ♦ Room 140, 658 Cedar St., St. Paul, MN 55155