Threats and Opportunities: 2025 State Legislative Preview

Posted by

on

At NPPC, we believe every American deserves to retire with dignity. Our priority is protecting pensions for public workers in states across the country. Here is a look ahead at some of the state legislative sessions we are monitoring this year:

Alaska: State Legislature convened on January 21, 2025

Alaska’s 2024 session saw lawmakers come within arm’s reach of passing historic legislation that would have reinstated defined-benefit pensions for public employees. Unions and pension supporters were hopeful to end nearly two decades of inadequate retirement benefits, leading to grievous vacancy rates in state departments and eroding what were once reliable public services in the state. Despite the ongoing public service crisis, Senate Bill 88 ultimately came up short in the House. 

The prospects to push favorable pension legislation over the line in 2025 look very strong, thanks in no small part to the 2024 general election results. Labor majorities now control both legislative chambers, with Republican Representative Chuck Kopp, a longtime pension supporter, serving as House Majority Leader and Republican Senator Cathy Giessel, the chief author of SB 88, retains her role as Senate Majority Leader. 

On January 10, 2025, Sen. Jesse Kiehl pre-filed Senate Bill 28, which closely mirrors last sesson’s SB88. This bill is expected to garner ample support, as both majority caucuses are explicitly organized around restoring a defined benefit pension for Alaska public employees. Alaska remains the most closely watched state in the nation on public pension issues. 

Arizona: State Legislature convened on January 13, 2025

The political atmosphere in Phoenix remains volatile, and based on previous attempts to weaken the Arizona State Retirement System (ASRS), the Arizona Coalition for Retirement Security is monitoring possible legislation in 2025. Among the potential threats to ASRS is legislation that would restructure the current pension plan by introducing defined contribution plans or hybrid plans as options for new hires. Another possibility would be the expansion of university and college members who can choose between a defined-benefit plan and a 401(k)-style DC, or switching the default to DC if no choice is made within 30 days of hiring. The coalition is also prepared for a politically-charged divestment bill, a scheme that would jeopardize the state’s fiduciary responsibility and is focused on educating new and returning lawmakers about the economic impact public pensions have on Arizona’s communities. 

Connecticut: State Legislature convened on January 8, 2025

While Connecticut’s municipalities continue to reopen pension systems, particularly for public safety workers, changes could be coming to the mechanisms that fund the state’s public pension systems. Adjusting the state budget’s “fiscal guardrails” is a leading priority for the Connecticut General Assembly (CGA), which will affect additional funding into the pension system when the state experiences a budget surplus. Pension opponents at the Yankee Institute, which is funded by the Reason Foundation and right-wing billionaires, have been active in the media surrounding the fiscal guardrail conversation, and the Connecticut Coalition for Retirement Security remains vigilant in monitoring both opponent activity and the continuance of responsible pension funding by the CGA. 

Kansas: State Legislature convened on January 13, 2025

In 2024, a bill was introduced to move all teachers from KPERS 3 to KPERS 2, after a 2023 post-legislative audit of the Kansas Public Employees Retirement System (KPERS) Tier 3 determined that KPERS 3 delivers inadequate retirement benefits compared to neighboring states. The bill did not advance to the governor’s office, but final notes on the legislation recommended “possible future employee group transfers to KPERS 2” as a solution to ongoing recruitment and retention shortcomings. The Joint Committee on Pensions, Investments, and Benefits indicated that they would order further research on the pay gap between private and public sectors, and potential adjustments to the fiscal levers in KPERS 3. 

Kentucky: State Legislature convened on January 7, 2025

Kentucky has a 30-day session this year, and while pension allies are not expecting to see major anti-pension legislation, there are concerns that lawmakers could significantly lower the state income tax, which could negatively affect the Kentucky Public Pension Authority. Kentucky pension funds could be vulnerable after last year’s legislative session failed to prioritize several housekeeping measures to shore up the fund’s fiscal stability. 

Michigan: State Legislature convened on January 8, 2025

A retirement victory for corrections officers came in the very last hours of Michigan’s 2024 legislative session when state lawmakers passed House Bills 4665, 4666, and 4667, qualifying them for the same pension benefits as Michigan State police officers. The pension transition is aimed at easing the up to 36% vacancy rate in state prisons. Though this is a positive step forward, efforts to move all public employees to a pension system did not advance in the end-of-year lame-duck session. The Coalition for Secure Retirement–Michigan is following the pending signage of these bills, which have yet to be presented to Governor Gretchen Whitmer for signing. 

Minnesota: State Legislature convened on January 14, 2025

The legislature in Minnesota is very closely divided after the 2024 general election resulted in a tied House, 67-67. The Democratic Farmer Labor (DFL) party, which the DFL had a one-seat majority in the Senate before former Senate Majority Leader Kari Dziedzic passed away late last year, temporarily lost a member when one Representative-elect was found not to live in his claimed district. However, the DFL is expected to retain those seats in an upcoming special election. Republicans are expected to leverage their temporary advantage, which has resulted in a short-term boycott of the session by House Democrats (denying the body a quorum) if both parties can’t agree to a power-sharing agreement. It is currently unclear how these issues may impact pension legislation. Assistant DFL Leader, Senator Nick Frentz is expected to serve as the chair of the joint House/Senate Legislative Commission on Pensions and Retirement.

Minnesota’s public workforce is also experiencing some turmoil. Ranking 46th in the nation in per capita spending on public employee pensions, the state dedicates just 2.4% of state and local revenues to pensions, well short of the national average of 5.2%. Minnesota educators continue to push for improved pension benefits to resolve an ongoing teacher shortage. An unexpected increase in early retirements by first responders has pushed up PERA employee contributions to a record 12% of take-home pay. One potential solution lies in Governor Tim Walz’s proposed budget, which would grant a .25% pension “holiday” in which the state would make a one-time contribution of $56M to replace a portion of employees’ contributions. In a statement responding to the budget proposal, Education Minnesota stated that it, “prefers a different approach for pension reform than the policy in the governor’s budget,” and that the “pension proposals need another look.”

New Hampshire: State Legislature convened on January 8, 2025

Last fall a group of police, fire, and corrections workers filed a class action lawsuit against the state of New Hampshire, seeking to restore pension benefits that were cut twelve years ago. The lawsuit argues that the 2011 changes, which included raising the number of years worked to be eligible for retirement from 20 to 25, amounted to an unconstitutional retroactive law, and aims to win back benefits for Group II employees with less than 10 years of service as of 2012. The litigation could spur a legislative solution. Meanwhile, State Representative Bill Ohm recently published an op-ed in the Union Leader proposing to switch from a fully defined benefit pension to a hybrid DC plan, which would jeopardize retirement security for hardworking public employees. House Bill 581-FN establishes a Group III, defined-contribution state retirement plan for new hires who begin service on or after July 1, 2025.

Oklahoma: State Legislature convenes on February 3, 2025

In 2024, Keeping Oklahoma’s Promise faced a series of challenges. A bill to replace the state’s Pathfinder 401(k) program with a pension system was defeated in the Senate Retirement and Insurance Committee despite the ongoing public-sector employee shortage plaguing the state. The Oklahoma Public Employees Retirement System (OPERS) did see a big win after spending months subject to a lawsuit that would have affected the system’s ability to invest solely based on fiduciary responsibility without any political agenda. A state judge blocked the 2022 “Energy Discrimination Elimination Act” (EDEA) in May, ending the ban on state agencies investing with organizations that employ an Environmental Social Governance (ESG) policy. In 2025, we will monitor potential threats to OPERS and emerging opportunities to reinstate pensions for public employees across the Sooner State. State lawmakers have already pre-filed 68 bills which could potentially affect public employees or the pension system in Oklahoma.

Wyoming: State Legislature convened on January 14, 2025

The 2025 legislative session in Wyoming is one to watch closely. As the first state to elect a Freedom Caucus majority, Wyoming lawmakers are now in uncharted territory. The hard-right Freedom Caucus has been historically unfriendly toward labor policies, often including anti-pension rhetoric in its agenda. A “Stop-ESG” bill has already been introduced in Wyoming. HB 80 is a potentially damaging bill, which, according to the bill’s fiscal note, will cost the state’s pension funds over $1B in lost returns. The Wyoming Coalition for a Healthy Retirement is focused on advocating for prioritizing fiduciary performance over political agendas and will monitor the situation in Cheyenne closely in 2025. 

Stay tuned for more news on what’s happening in pensions across the country! Click here to join our email list.