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House approves COLA increase block bill

House approves COLA increase block bill

Dustin Hurst
February 20, 2010
Dustin Hurst
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February 20, 2010

The full Idaho House approved Rep. Dennis Lake's, R-Blackfoot, bill to block a cost-of-living-adjustment (COLA) increase of 1 percent for retirees of the Public Employment Retiree System of Idaho (PERSI). The bill has been the subject of controversy this week in the House because of the House State Affairs Committee's swift course reversal to approve the cost-of-living block Thursday, only a day after rejecting it on Wednesday.

The bill was immediately sent to the Senate and assigned to the Senate Commerce and Human Resources Committee. If the Legislature does not act to stop the increase, it takes effect on March 1, 2010.

Despite objections of House Democrats, Republicans suspended normal rules for procedure and held debate on the bill. Lake told lawmakers that the bill is a necessary measure to be prudent with state finances and that while Idaho's retirement systems is ranked as one of the 10-best in the nation, the block must take place to keep its good fiscal standing.

For legislators, the divide came on differences of opinion about who to trust in forecasting the future of the economy. PERSI investments have underperformed in the past several years, often returning a yield of 4.42 percent. The PERSI board said it based the COLA increase on expected returns on investment of 7.75 percent, a figure which Republicans felt was too optimistic.

"If you believe PERSI investments will improve, you also believe the economy will improve in the next year," said Lake. He urged lawmakers to take the safe route and vote against the increase.

Rep. Elfreda Higgins, D-Garden City, argued for lawmakers to grant the increase, based upon the predictions of the PERSI board. Higgins said that because the board uses experts in financial fields to speculate investments, the House would be wise to listen to the recommendation.

"The Legislature has always taken the board's recommendation," said Higgins.

Rep. Lynn Luker, R-Boise, argued that because the cost-of-living actually dropped by 1.48 percent in the previous year, the board should have agreed on a decrease in the benefit, though it was unable to do so because that practice is prohibited. Luker warned lawmakers of the permanence of their actions upon future budgets, saying, "We can't take COLA back."

Rep. Fred Wood, R-Burley, offered pointed testimony in support of denying the increase.

"Over a long period of time, the fund is not stable," said Wood. He was also critical of legislators' calls to rely on experts for decision making. "I don’t think there is an expert in the world that can predict the future," Wood said.

Assistant Minority Leader James Ruchti, D-Pocatello, offered some reconciliatory remarks to lawmakers, saying that neither side is necessarily wrong, but instead have a difference of opinion about the future of the state. Ruchti said he feels the economy has a "bright future" and that his vote would reflect his optimism.

Rep. Russ Matthews, R-Idaho Falls, objected to Ruchti's notion, saying that fiscal restraint and prudence would lead to better results for the state.

"I'm voting for a bright future of Idaho, too," said Matthews.

The measure passed the House on a 48-19 vote. Rep. Tom Trail, R-Moscow, and Rep. Donna Boe, D-Pocatello, each crossed party lines on the vote, though Boe's move was an attempt at an uncommon legislative procedure that would have allowed for further deliberation in the House. The attempt was overruled by Speaker of the House Lawrence Denney, R-Midvale, because the move is prohibited after day 35 of the legislative session.

(Note: The House State Affairs Committee hearing on the bill was a heated one. Click here to read about it on IdahoReporter.com.)

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