ST. PAUL - A plan to rescue Duluth from its retirement benefit woes flew through the Minnesota Senate, but an expanded proposal to help other communities - that face $4 billion in deficits - is facing tougher times.
Senate Taxes Chairman Tom Bakk, DFL-Cook, said there were too many questions for his committee to pass a bill Tuesday, so he held up action for another week.
Senate Majority Leader Larry Pogemiller, DFL-Minneapolis, said he was concerned the bill would allow cities, counties and school districts to invest money via banks and private insurance firms. He preferred them to be limited to using the state investment board.
Duluth brought the problem to legislators' attention with a $300 million deficit in its retirement benefits fund - mostly because the city provides health care coverage to retirees, but did not adequately fund the benefits.
Earlier this year, the Legislative Auditor's Office reported that local governments across the state have $4 billion in deficits. Governments with the worst problems are in northeastern Minnesota.
ADVERTISEMENT
The Duluth bill, which awaits House action, allows the city to use the State Investment Board but not private businesses.
State investments earn far more interest than state law allows local governments to earn. If the statewide bill were approved, all local governments could earn the higher rates. However, only a few governments offer Duluth-style retiree health care benefits, so not all governments would take advantage of the measure.
The proposal would not cost the state.
Even the bill's sponsor, DFL Sen. Don Betzold of Fridley, said there were risks involved in allowing governments to invest with banks and insurance companies.
Steve Johnson of the Minnesota Bankers' Association countered that banks are highly government-regulated and examined, making them safe. Thirty to 50 Minnesota banks could handle retirement fund investments, he added.
Bakk said he is concerned that investments could go bad and local government leaders will "ask the state to make things whole."
Some House leaders said they prefer to deal with all communities' retirement problems in one bill and have held up the Duluth proposal until a statewide plan such as Betzold's reaches them.
Davis works for Forum Communications Co., which owns the Herald.
