Summary:

 Senate Bill 138 (SB 138) removes distributions from the Oil and Gas Proceeds and Pass-Through Entity Withholding Tax Act to the Magistrate Retirement Fund and Judicial Retirement Fund and reallocates those funds to the Legislative Retirement Fund. SB 138 takes effect on July 1, 2025.
 

Legislation Overview:

 Senate Bill 138 (SB 138) reallocates specific tax distributions previously directed to the Magistrate and Judicial Retirement Funds to the Legislative Retirement Fund. Distributions of $75,000 or a higher calculated amount necessary to cover legislative retirement benefits will go to the Legislative Retirement Fund. The Public Employees Retirement Association (PERA), with assistance from the Legislative Council Service, will annually determine the funding needs of the Legislative Retirement Fund. The bill eliminates the criteria and processes for distributing funds to the Magistrate and Judicial Retirement Funds once their funded ratios exceed 100 percent.

Fiscal Implications

The reallocation of funds is expected to reduce support for the Magistrate and Judicial Retirement Funds while increasing the resources available to the Legislative Retirement Fund. Additional administrative duties assigned to PERA and the Legislative Council Service may result in minor costs related to compliance and fund calculations. 

Current Law:

 Currently, $100,000 annually is distributed to both the Magistrate and Judicial Retirement Funds, along with other designated funds. The original version of SB 138 removed these distributions, instead allocating the funds entirely to the Legislative Retirement Fund. The amendment reverses this shift, ensuring that all three funds continue to receive distributions as they do under existing law. 

Amendments:

 Amended March 12, 2025 in STBTC:

STBTCa/SB 138: The Senate Tax, Business, and Transportation Committee amended SB 138 by restoring provisions related to distributions from the Oil and Gas Proceeds and Pass-Through Entity Withholding Tax to the Magistrate Retirement Fund and the Judicial Retirement Fund. The original bill removed these distributions, instead redirecting funding solely to the Legislative Retirement Fund. The amendment undoes those removals, ensuring that all three funds—the Magistrate Retirement Fund, the Judicial Retirement Fund, and the Legislative Retirement Fund—continue to receive allocations from the Oil and Gas Proceeds and Pass-Through Entity Withholding Tax.

Additionally, the amendment reorganizes subsection designations to reflect these restored provisions. Specifically, on page 1, line 20, the amendment removes the brackets and strikethrough on subsection “A”, keeping it in the statute, and on page 3, lines 1 through 8, the amendment removes the line-through and closing brackets that had previously eliminated the funding mechanism for the Magistrate and Judicial Retirement Funds. The amendment also renames subsection “C” as subsection “B” to reflect the restructuring of the bill’s provisions.

Implications

By restoring funding for the Magistrate Retirement Fund and the Judicial Retirement Fund, the amendment maintains the existing distribution structure rather than shifting all funds to the Legislative Retirement Fund. The original version of SB 138 eliminated these distributions, redirecting funds to legislative retirement, which may have raised concerns about prioritizing legislative pensions over judicial and magistrate pensions. The committee’s decision to reinstate these allocations ensures that judicial retirement systems remain funded at their current levels, preventing potential financial shortfalls.

This change reflects fiscal caution, as eliminating funding for the Magistrate and Judicial Retirement Funds could have weakened the financial stability of these pension systems, potentially requiring future state appropriations or contribution increases to maintain solvency. The amendment balances legislative retirement funding with existing commitments to judicial pensions, avoiding potential conflicts over pension funding priorities.

From a governance perspective, the amendment also preserves continuity in how oil and gas tax proceeds are allocated to retirement funds. Rather than introducing a new funding structure that disproportionately benefits one group, the revised bill maintains the status quo while still allowing the Legislative Retirement Fund to receive funding. This change may help avoid opposition from judicial and magistrate organizations concerned about the potential loss of dedicated revenue for their retirement systems.