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Senators press administration on $29M pension loan proposal, warn of cuts if unsuccessful
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Summary
Senators pressed the finance secretary on a proposed $29 million pension loan from MPLT to cover the settlement fund minimum payment, discussed required legislation for repayment via interest withholding, and warned that failing to secure the loan could force around 30-hour work-week cuts or $20M-plus budget reductions.
Senators on the Senate Fiscal Affairs Committee on Aug. 12 questioned the administration’s plan to cover next year’s settlement-fund minimum annual payment with a proposed $29 million pension loan from MPLT and pressed for details on repayment terms and fiscal risks.
Secretary of Finance Bennett told the committee the governor’s budget assumes the administration will secure a $29 million pension loan from MPLT and said the administration supports pursuing the loan. Bennett said trustees signaled they would require legislative authority to allow withholding of interest as the repayment mechanism and that the administration expects to present legislation for that purpose. “We have already discussed and finalized the terms that would might be acceptable or most acceptable to the trustees, but one of the requirements is to have legislative withholding of the interest from MPLT as the repayment,” Bennett said.
Senators raised concerns about near-term and multiyear fiscal risks. Several members asked what would happen if the loan is not secured: Bennett responded that failing to obtain the MPLT loan would produce a $29 million gap that would have to be covered in the budget, likely requiring across-the-board cuts. Finance staff said one illustrative scenario under consideration would reduce employee hours to roughly 30 per week to preserve the settlement payment; a staff member described the alternative as “we would have to cut the budget.”
Committee members also asked about timing and alternative plans. Bennett said trustees and administration staff have met multiple times and that the administration remains engaged with MPLT; the administration also said it is pursuing audits and federal consultations to unlock other financing markets if needed. Officials said the pension-loan legislation and related trustee conditions could be resolved quickly and that, if the loan is secured before Oct. 1, the general-fund appropriation for the settlement fund would not be required. Finance warned, however, that if the loan is not secured, the budget would face a $20 million-plus cut scenario and that the legislature would need to appropriate the $29 million out of the general fund.
Counsel Bermudez and members noted legal and prudential concerns. Counsel asked whether the administration’s position was to omit the $29 million appropriation from the budget if the pension loan was assumed; Bennett said the administration proposes to be successful with the loan and would not include a separate $29 million general-fund payment if the loan is in place. Senators signaled they would continue to scrutinize the loan’s terms, the fiscal trade-offs for future years, and the Commonwealth’s audited status, which limits other market access.
Committee members invited MPLT and working-group participants to briefing meetings and asked finance staff to provide documents and to coordinate further consultations. No final vote on the pension loan or related legislation took place during the committee meeting.
