SB2065

Previously, the state’s annual contribution could not exceed one-third of all contributions by local governing bodies. The act removes that cap. It requires the state to contribute what is needed to make the system actuarially sound each year, with a specific rule while the “legacy liability” remains unpaid: an actuarially determined payment sufficient to pay that older shortfall by the fiscal year ending August 31, 2055. “Actuarially” means using long-term pension estimates, not simply this year’s cash balance. Final law, 865.015(a); Previous state-contribution cap.

The legacy liability starts with the unfunded obligation valued as of August 31, 2024 using an assumed 7 percent investment return. Later calendar-year balances are reduced by contributions allocated to that debt and adjusted using the same assumed rate. More generally, the unfunded liability is the gap between estimated accrued pension obligations and the actuarial value of assets. The new return-assumption ceiling is 7 percent, or the average of the Employees Retirement System and Teacher Retirement System assumptions if that average is higher. These are valuation assumptions, not promised investment returns. Final law, 861.001(7) and (12).

The actuary must calculate the required contribution every two years using closed, layered repayment schedules: each separately recognized gain or loss has a schedule rather than continually restarting the entire debt clock. A layer’s repayment period starts 12 months after recognition. A loss layer—including the legacy liability—is spread over 15 years or until September 1, 2055, whichever is later. A gain layer is paired with the largest remaining loss layer and follows that layer’s remaining and subsequently adjusted payoff period; if no loss layer exists, the act specifies a 15-year-or-September-2055 schedule starting in the fiscal year beginning 12 months after recognition. The new layers cover the specified unexpected revenue changes, excluding changes to a benefit formula. Final law, 861.001(2), (7-a)–(7-c) and 865.015(b).

The definition of “actuarially sound” now requires contributions sufficient for current-service pension costs and a debt-payoff period ending no later than the later of 15 years after the valuation date or September 1, 2055. This replaces a fixed 30-year test. The annuity-formula rule and the reporting trigger for significant deterioration are updated to that definition and no longer assume the old capped maximum state contribution. The statutory 2055 legacy target should not be read as a promise that every later loss must also be fully paid by 2055. Final law, sections 2–3 and 5; Previous definitions; Previous annuity rule; Reporting requirements.

Before each regular legislative session, the system must give the Legislative Budget Board the required payment amount, and the LBB director must include it in the general appropriations bill prepared for introduction. That budget-preparation subsection expires September 1, 2057; the act does not make the entire state-contribution law expire then. Inclusion in an introduced budget is not itself an enacted appropriation. The Volunteer Fire Department Assistance Fund remains an authorized source of appropriated contributions, with the old limiting cross-reference removed. Final law, sections 1 and 7; Budget-preparation process; Assistance-fund provision.

Local options for supplemental payments or annuity increases remain optional. The state board may require a department’s governing body to seek its approval and may prohibit an increase without approval. State contributions cannot fund an option elected under those rules. The associated political subdivision that elects the increase must contribute enough to cover all of its added benefit costs, and the board may set regular-payment rules. Existing law already required locally elected increases to be locally funded; the act adds explicit state-money protection and approval/payment authority. It does not award a cost-of-living increase to every retiree. Final law, sections 4 and 6; Existing optional-benefit rule; Existing local contributions.

Changes during passage: All five operative versions are identical and the amendment index lists none; both committees reported without amendments. The “local board” and “volunteer” definitions are renumbered without changing their substance. Senate passage was 30–0 and House passage 140–0, with two present but not voting, satisfying the immediate-effect threshold. Introduced; Senate committee; Senate-passed; House committee; Final law; Version index; Amendment index.

Compare the published text versions in the official text index. A change is not attributed to a specific amendment here without a verified record.

Members and beneficiaries may gain a more predictable plan for financing earned benefits, while the state assumes a larger contribution obligation instead of relying on the old cap. Local bodies choosing extra benefits must pay for them. The actuarial statement projects a move from an infinite repayment period to 30 years under its assumptions; this is a forecast, not a verification of current funding health or actual future investment performance. Final law; Actuarial impact statement.

The April 1 fiscal note reports $0 net impact to General Revenue-related funds, but not zero state cost. It estimates an additional $2,005,832 each year in fiscal 2026–30 from Volunteer Fire Department Assistance Fund 5064, matched by the same amount entering the retirement trust fund. The estimated annual state contribution rises from $1,292,763 to $3,298,595. The bill makes no appropriation; it supplies a legal basis for one. The note anticipates no significant local-government fiscal impact, which does not cancel the cost of a local body’s optional benefit increase. Fiscal note.

The actuarial statement estimates that lowering the assumed investment return from 7.25 percent to 7 percent raises the measured unfunded liability from $45.6 million to $52.7 million—a $7.1 million valuation change, not a new benefit payment. Its projections use the August 31, 2024 valuation, assume no other legislative changes, and warn that actual experience will differ. This review does not verify subsequent appropriations, payments, current valuations or adopted benefit rules. Actuarial assumptions and limits.