VETO MESSAGE ON HB 2544-S

                   April 2, 1998

To the Honorable Speaker and Members,

  The House of Representatives of the State of Washington

Ladies and Gentlemen:

     I am returning herewith, without my approval as to section 5, Substitute House Bill No. 2544 entitled:

"AN ACT Relating to funding of the state retirement systems;"

     Substitute House Bill No. 2544 makes several improvements to the state retirement system funding statutes.  It creates a Pension Funding Council to adopt long-term economic assumptions and contribution rates, and a work group to support that council.  It also establishes an open process for reviewing possible changes to assumptions and contribution rates and requires a periodic actuarial audit of the valuation reports used to set contribution rates.  I commend the Joint Committee on Pension Policy for developing this broadly supported proposal.

     Section 5 of this bill would eliminate the current requirements that long-term economic assumptions be changed only as part of a regular two-year cycle, and would reduce the number of votes needed to make a change in the assumptions from five to four.  These changes would create a risk that adjustments in long-term economic assumptions could be made to address short-term budget problems, rather than focusing on the appropriate goal of funding pensions in a responsible long-term manner.

     For this reason I have vetoed section 5 of Substitute House Bill No. 2544.

     With the exception of section 5, Substitute House Bill No. 2544 is approved.

                   Respectfully submitted,

                   Gary Locke

                   Governor