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Old 05-18-2017, 11:31 PM
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MISSOURI

http://www.stltoday.com/news/local/g...5b7c5b1a9.html

Quote:
Qualifying for pension won't take as long for some Missouri workers under bill OK'd by lawmakers


EFFERSON CITY • State prison guards, social workers and other government employees won’t have to spend as much time on the state payroll to qualify for a pension under legislation approved in the Legislature Thursday.

The proposal, which now heads to Gov. Eric Greitens' desk, would allow workers to qualify for pensions at age 67 after working five years, rather than the current 10-year time frame.

The measure comes in response to a decision by Gov. Eric Greitens and the Legislature not to raise wages for the lowest-paid state employees in the nation.

By shortening the so-called “vesting period” to qualify for a pension, supporters hope it will keep employees from departing the government workforce for more lucrative paying private sector jobs.

Altering worker pensions was among a series of recommendations made in a report issued last year that found Missouri state workers are paid the lowest in the nation. The low wages have driven up turnover rates among employees.

“The millennial generation has shown a willingness to change jobs often and typically places a much higher value on benefits that vest quickly and are transportable,” the $300,000 report noted. “Additionally, the 10-year vesting creates a challenge in attracting 'second careers employees, who may be deterred by the 10-year requirement.”
.....
The average benefit payable to state retirees is approximately $15,000 per year, according to the Missouri State Employees’ Retirement System, which manages retirement plans, life insurance and disability benefits for 116,000 present and former state employees and their beneficiaries.

The proposal contains a separate provision that would allow as many as 19,000 former state workers to cash in their future pension payments as part of a proposal designed to shore up MOSERS.


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Old 05-18-2017, 11:33 PM
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DALLAS, TEXAS

http://www.nbcdfw.com/news/local/Dal...422143024.html

Quote:
Dallas Pension Deal is Not Done Yet


Compared with the deal approved unanimously by the Texas House last week, the new deal limits city contributions and grants the city majority control of the Police and Fire Pension Board.

Mayor Mike Rawlings said seven of eleven public safety employee and retiree groups that participated in negotiations this week signed a paper supporting basic points of the new deal.
The Mayor counted Dallas Fire Fighters Association President Jim McDade as a supporter.
......
McDade was pleased with the House version before city leaders pushed for changes in the Senate. Dallas Senators Royce West and Don Huffines held a joint news conference Thursday announcing they support the new deal.
“There’s been a lot of give by members, a lot of give. The majority of the burden is placed on the members of police and fire,” Mc Dade said.

Instead of 8.5% employees would contribute 13.5% of their pay toward the pension fund.
“That’s a 5 percent cut in everybody’s paycheck,” said Mc Dade.

The Senate version grants the city 6 appointees on a new 11 member Police and Fire Pension board. But in return, employees and retirees won a provision that any major change in benefits would require a 2/3rds majority, or 8 votes on the 11 member board.
“It’s a huge change,” Mc Dade said.


Source: Dallas Pension Deal is Not Done Yet | NBC 5 Dallas-Fort Worth http://www.nbcdfw.com/news/local/Dal...#ixzz4hUKGJWLw
Follow us: @nbcdfw on Twitter | NBCDFW on Facebook

http://dfw.cbslocal.com/2017/05/17/d...ion-fund-bill/

Quote:
Dallas Council Vote Supports Pension Fund Bill Before State Hearing


DALLAS (CBS11) – In a preliminary vote Wednesday, the Dallas City Council fully supported proposed changes to the state bill to rescue the police and fire pension fund.

The final vote will come next week.

The council’s move comes a day before the Texas Senate holds a hearing on the legislation.

Last week, CBS11 was the first to report about the conceptual agreement reached between the city and most of the police and fire associations.

Senators Royce West and Don Huffines held marathon negotiations.

The compromise worked out is now the basis for amendments to the House bill.

Senator West says some of the associations have signed off on the language of the amendments.

Dallas Mayor Mike Rawlings will be at the Capitol for the hearing Thursday morning.

Mayor Rawlings has said the proposed changes are fairer to city taxpayers.

He strongly opposed the original House bill that passed unanimously earlier this month saying it would be too costly to city taxpayers.

The city and some of the associations have described it as a win-win.

But details are still being worked out as of Wednesday evening.

The Dallas Firefighters Association has preliminarily supported the changes.

But the association’s President has said he’s concerned under the proposed changes, it would take longer to fully fund the pension than under the original House bill, 46 years instead of 43.

Four of the 11 police and fire associations aren’t on board with the compromise.

Both the Black Police Association of Greater Dallas and the Dallas Retired Officers Association say they oppose the provision that could allow hundreds of retirees to be forced to give back some money they received from the fund.

The BPA also opposes changes to the governance of a new pension board.

Six board members would be selected by the city and five would be chosen by the police and fire associations.

Any major changes to the pension fund would require a two-thirds vote.

But the BPA says it believes the city and the associations should each select five board members, and an 11th person such as a retired federal judge, agreed to by the different parties, would break a tie vote when necessary.

If the Senate committee approves the pension bill Thursday, it will move to the full Senate.

The House would have to either agree to changes in the Senate bill or both chambers would have to negotiate permanent changes.

The legislative session ends at the end of the month.
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Old 05-18-2017, 11:34 PM
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CORRUPT OFFICIALS

http://www.firstcoastnews.com/news/l...sion/439317016

Quote:
VERIFY: Corrine Brown's government pension

JACKSONVILLE, Fla. - She could lose her freedom, but could she forfeit a whole lot more?

One day after former Congresswoman Corrine Brown was convicted on 18 of 22 corruption charges that could net her prison time, First Coast News is digging in to verify whether she stands to also lose the pension she accrued during her years in Congress. It's a substantial question because she would be due to receive $152,250 annually.

First Coast News spoke with Jacksonville criminal defense attorney Randy Reep to get answers.

CLAIM No. 1: Corrine Brown could lose her government pension as a result of her conviction.


Reep pointed to a bill signed into law by then-President George W. Bush, titled The Honest Leadership and Open Government Act of 2007, saying, "Given the eighteen counts, her pension will be exposed and likely revoked, if you will, as a result of the convictions. Keep in mind, that is all subject to the same appellate process as her criminal convictions would be. As go the criminal cases, likely will go her pension."

VERIFIED: If her convictions are upheld, Corrine Brown can forfeit her government pension.

CLAIM No. 2: Corrine Brown would lose the entire pension, even if only some convictions are upheld.

Reep spoke convincingly about this matter, saying "It's probably all or nothing, and I would say if any of the convictions hold, it's going to be all."

VERIFIED: Corrine Brown will likely lose her government pension if any convictions withstand appeal or a new trial.

However, it's worthy of note that Brown is entitled to her pension as long as her case is alive. Also, the pension she accrued during her ten years in the Florida Legislature will not be affected by her convictions.


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Old 05-18-2017, 11:36 PM
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INVESTMENT FEES

https://www.nytimes.com/2017/05/12/b...fees.html?_r=0

Quote:
Strapped Pension Funds, and the Hefty Investment Fees They Pay

Where are the pensioners’ yachts?

That riff on Fred Schwed Jr.’s famous Wall Street tell-all book — which explains why bankers and brokers own yachts, but the customers who take their advice do not — came to mind recently. I was reading a new report detailing how outsize money management fees are crippling the nation’s public pensions.

We’re talking about the fees charged by hedge funds and private equity firms to invest pension fund money — fees that enrich the wealthy but imperil workers, retirees and taxpayers.

State and local pensions oversee $3.6 trillion in investments meant to benefit former teachers, firefighters, police officers and other workers. These people rely on their pensions for a comfortable retirement.

Unfortunately, what many of these funds owe to beneficiaries far exceeds their ability to pay. Truth in Accounting, a nonprofit that aims to educate taxpayers on government finances, estimated that the unfunded liability at 500 large pension plans across the nation stood at $1.3 trillion in fiscal year 2015.

That is a mighty deep hole. And many pension fund trustees have responded by increasing their allocation to so-called alternative investments, such as in hedge funds and private equity, rather than sticking to lower-cost vehicles that invest in stocks and bonds. They seem to think that swinging for the fences with the more exotic strategies will close the yawning gap.

These investments beat the market, sometimes. But their enormous fees — as much as 2 percent in management fees and 20 percent of any gains — must always be paid. And these costs push pension funds deeper into the hole.

Consider the Teachers’ Retirement System of the State of Illinois, a $46 billion pension fund. At the end of fiscal 2016, the retirement system’s funded ratio, a measure of its ability to meet its obligations, stood at 39.8 percent, on an actuarial basis. It had a long-term unfunded liability of $71.4 billion. The fund has 34 percent of its assets in alternatives. And in the 2016 calendar year, its private equity and hedge fund investments underperformed the rise in the Standard & Poor’s 500-stock index.

Meanwhile, the fund incurred almost $750 million in direct investment expenses in fiscal 2016, up 7.6 percent from the previous year.

“States that tend to be in more financial difficulty tend to have higher-risk portfolios,” said Bill Bergman, director of research at Truth in Accounting, who is a former economist and financial market policy analyst at the Federal Reserve Bank of Chicago. “In Illinois, the defense is that in the long run, these investments will be good for us. But they are expensive, opaque and risky.”

Pensions are deep into alternatives. A recent study by the Pew Charitable Trusts showed that among 73 large state-sponsored pensions, allocations to hedge funds and other exotic investments grew to 25 percent in 2014, up from 11 percent in 2006.

Returns on these vehicles do not always match their promise. “Funds with recent and rapid entries into alternative markets — including significant allocations to hedge funds — were among those with the weakest 10-year yields,” Pew noted.

How these high costs harm pensions is detailed in a new report: “The Big Squeeze: How Money Managers’ Fees Crush State Budgets and Workers’ Retirement Hopes.” The analysis, by the American Federation of Teachers, estimated the costs incurred in alternative investments at 12 large public pensions and determined how much the funds would have saved if they had paid about half the going rate.

The dozen funds included in the analysis held almost $800 billion in assets. If fees on their alternative investments had been halved over the last five fiscal years, the 12 funds would have saved $3.7 billion annually and $18.5 billion over the period. Going forward, that reduced-fee structure would save the average pension fund an additional $1.8 billion over five years and almost $8 billion after 15 years.

The report urges pension fund overseers to work to reduce the fees they pay and adopt policies requiring a full accounting and disclosure of all fees by alternative investment managers.

“This report provides a blueprint for retirement security that fuels economic growth and creates good jobs,” said Randi Weingarten, president of the A.F.T. “By calling out these pernicious practices and working closely with pension trustees and legislative allies, we’ve begun to see fees cut and fee structures for hedge fund and private equity managers exposed.”

While some large pension funds have started to cut back on alternative investments, most continue to believe in them.

Dale R. Folwell, the recently elected Republican treasurer of North Carolina and a certified public accountant, is one pension overseer challenging the status quo. The state’s $92 billion pension is one of his responsibilities.

“In the last 16 years, our fees have gone from $50 million to over $600 million,” Mr. Folwell said in an interview. Meanwhile, assets under management grew by only 33 percent over that time.

“When I applied for this job, I said I was going to cut Wall Street fees by $100 million,” Mr. Folwell said. “We’re trying to reduce complexity and build value for our participants.”

Since entering office three months ago, Mr. Folwell said he had telephoned all of the pension’s investment managers — roughly 175 — to make sure they had the state’s interests at heart.

“We asked them: ‘Who are you? Where are you? How good are you? And how much are we paying you?’” Mr. Folwell said.

Not everyone made the grade: Mr. Folwell said he had fired nine managers so far. He has also extracted more than $30 million in fee reductions from some managers who remain.

Mr. Folwell is also examining how his fund’s assets are valued. Many alternative investments are illiquid and difficult to assess; because a fund’s fees are based on these valuations, it is imperative that they are not overstated, he said.

Mr. Folwell has an unusual background. For three years, he was North Carolina’s assistant secretary of commerce, and before that he spent eight years in its House of Representatives. Before he got his master’s degree in accounting, he was a trash collector and motorcycle mechanic.

“I’m the keeper of the public purse,” he said. “My loyalty is to the purse and whoever has money inside the purse.”

Alas, Mr. Folwell is rare among public pension overseers, many of whom seem to be wowed by the wizards of Wall Street.

“Our history teaches us that well-entrenched special interest groups have a tendency to dominate public policy for their own benefit at the expense of the rest of us,” said Mr. Bergman of Truth in Accounting. “That appears to be the current state of affairs in public pension funds.”

Mr. Bergman said he believes one problem with the current system is that many overseers have a duty only to the fund’s beneficiaries. While that might seem appropriate, it can encourage these fiduciaries to make riskier bets in the hopes of generating better returns.

“If your benefits are guaranteed, as they are in Illinois,” he said, “you have the incentive to take more risk, in part because the insiders and beneficiaries have all the upside and don’t get the downside.”

Because that downside ultimately falls to the taxpayers, Mr. Bergman said, pension fund trustees should also have a duty to them.

“We need fundamental changes in fiduciary duties in public pension funds,” he said, “to align the incentives more closely not just with beneficiaries but with taxpayers as well.” A good idea.

http://www.nakedcapitalism.com/2017/...fund-fees.html

Quote:
Some Public Pension Funds Taking on Outsized Private Equity and Hedge Fund Fees

Gretchen Morgenson of the New York Times has a rare bit of encouraging news. Some public pension funds, which collectively are the biggest investors in private equity and are also significant hedge fund investors, are finally pushing back in a concerted manner against outsized fees and costs. Recall that Oxford professor Ludovic Phalippou has estimated total private equity fees and costs at a mind-boggling 7% per year. Reducing that by a percent or two would make a big difference in investors’ net returns. And bringing activities in house (which would admittedly take years) would cut the costs of those who did so a great deal and would also pressure independent managers to cut fees.

One important development may not be obvious to readers of Morgenson’s article:

How these high costs harm pensions is detailed in a new report: “The Big Squeeze: How Money Managers’ Fees Crush State Budgets and Workers’ Retirement Hopes.” The analysis, by the American Federation of Teachers, estimated the costs incurred in alternative investments at 12 large public pensions and determined how much the funds would have saved if they had paid about half the going rate.

The fact that the powerful American Federation of Teachers is making a stink about fund manager fees is a big deal. Heretofore, unions have hesitated about criticizing private equity and hedge fund managers about fee levels publicly, even though quite a few top union officials and spokesmen have made clear that they know that both the fees, and in the case of private equity, the way the fund managers operate is to their detriment. But there is a big difference between griping to allies and taking a public stance.

It appears that the severity of pension shortfalls, which is due in part to deliberate decisions to underfund (New Jersey is the poster child) plus funds that were reasonably healthy being whacked by years of the Fed’s negative real interest rate policies, which hurt investors of all stripes, has finally roused public pension funds to act.

Morgenson describes how the first response to lagging returns was to chase higher risk strategies that offered the hope of getting the pension funds back on an even keel. Pew Foundation looked at 73 state-level pension funds. It found that their allocations to alternative investments increased from 11% in 2006 to 24% in 2014. As the article pointed out:

.....
Let’s hope that this is a sign that the tide is starting to turn. Fund trustees that have pushed back against hedge and private equity fees and costs, like Chris Tobe in Kentucky, Curt Loftis in South Carolina, and JJ Jelincic at CalPERS, have regularly been attacked, astonishingly not so much by the fund managers, but by the captured staff members who see them as a threat to their overly-cozy relations with fund managers. In some cases, it is because the outside managers are powerful political players in state; in others, the staff has no solution other than “more alternatives” to pension shortfalls.

It appears that too many years of too many fees and not enough performance can no longer be explained away even by the loyalists. And the more the press and public supports the trustees that take on the still-uphill battle, the greater the odds of success. So if you are in North Carolina, please drop a note citing Morgenson’s article to your local paper or TV station and tell them you support Dale Folwell’s efforts. CC your state representatives and Folwell’s office. People like him need your backing.
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Old 05-18-2017, 11:41 PM
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PENNSYLVANIA

http://www.bizjournals.com/philadelp...-could-be.html

Quote:
Pa. lawmakers debate whether pension debt could be paid off faster

The debate over how to pay off Pennsylvania's roughly $70 billion unfunded pension liability has seen some movement.

The commonwealth's Independent Fiscal Office recently released an actuarial note estimating a current House measure would save up to $18 billion by paying down the debt faster.

Republican Representative John McGinnis of Blair County is sponsoring the proposal, which would jack up the state's required pension payments by about a half billion dollars in just its first year.

That would shorten the time it would take to pay off the debt. But it also means the commonwealth would have to divert significant funds from other programs.

McGinnis sees it as a good trade-off.

"I think the proper thing is to give priority to your unpaid expenses in the past before you commit to new expenses," he said.
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Old 05-18-2017, 11:46 PM
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LINCOLN, NEBRASKA

http://journalstar.com/news/local/go...60b4bc4dd.html

Quote:
Pension ordinance makes funding police and fire pension top budget priority

The city’s pension plan for firefighters and police will be a top funding priority in the future no matter the economic climate, based on an ordinance passed by the Lincoln City Council on a 5-2 vote Monday.

The city must follow the recommendations of the actuarial firm hired to monitor the pension plan, paying the highest amount recommended until the plan reaches at least 115 percent of funded ratio, according to the ordinance.

Currently, the city must contribute what it costs to operate the plan for a year, plus administrative costs. But it doesn’t have to contribute more, even if the pension plan is in a funding hole, as it has been for the past eight years.

Though the city has been working to make up the losses created by the stock market crash in 2008, the ordinance will make that mandatory.

The two council members who voted against the funding mandate, Jon Camp and Cyndi Lamm, worried that the ordinance eliminated any flexibility for the mayor and council and could lead to tax increases during economic downturns.

If the city had budget problems, the council would have to fully fund the police and fire pension plan — or repeal the ordinance. A repeal would be unlikely because of its political ramifications, Camp said.

Though he has historically supported fully funding the pension plan, Camp said he would prefer making the requirement a resolution, which can be ignored.

Lamm said future councils will need to balance taxpayers' concerns with the pension plan's needs. “I can’t support boxing in future councils and the administration,” she said.

Past councils have not been able to prioritize the pension plan, even though paying those retirement benefits is a legal obligation of the city, said Councilman Roy Christensen.

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They had the flexibility to do the wrong thing, he said.

The pension plan is already on the back of taxpayers, he said.

Taxpayers eventually have to pay the benefits, and when adequate funding is not maintained, future taxpayers have to make up that funding and the lost interest that would have been earned, council members pointed out.
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Old 05-18-2017, 11:51 PM
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TEACHERS

https://www.usnews.com/news/educatio...e-report-finds

Quote:
Report: Teacher Pension Promises Not Kept

......
The story is not unique to Hiler. In fact, more than half of teachers do not receive any employer pension benefits because they leave before they are eligible, according to a new report published in EducationNext, which analyzed each state’s teacher pension plans and projections.

The promise of a pension that provides a monthly financial windfall after retirement and until death has historically been touted as a perk of the teaching profession. Nine out of 10 teachers participate in a pension.

But the authors of the EducationNext report found that pensions do little to attract new talent and even less to retain it. In fact, the opposite is true, they argue: States depend on the constant turnover to keep pension costs down, and pension rules are often to blame for pushing out the most veteran teachers as soon as they reach retirement age.

“Most teachers are paying into a system that, most likely, will never fully pay them back,” wrote Chad Aldeman and Kelly Robson, co-authors of the report who both work at Bellwether Education Partners.

....
Dotchin began her career as a music teacher in Massachusetts, where she worked for nearly a decade before being laid off just six months shy of being vested. After that, she moved to Vermont, where she taught music for 13 years – long enough to be vested, but not long enough to reach peak benefits. She moved once more, this time to Florida, where she taught first and second grade for 11 years, once again, long enough to be vested but not long enough to qualify for top benefits.

As a result, her pension is worth far less than those of many of her former colleagues, who stayed in one state for decades.

“It’s really obsolete thinking that people are going to stay and teach in one place their whole lives,” she says.

The report highlights this exact point, finding that just one in five teachers stay in education long enough to receive full benefits at retirement. In Minnesota, for example, 50 percent of teachers are vested in a pension plan, but only 3 percent break even and none reach normal retirement age.

.....
A major part of the problem is that pensions are expensive. According to the report, roughly 1 in 10 dollars spent on education nationwide goes toward teacher retirement benefits. Pension contributions amount to 17 percent of a teacher’s salary – higher than in any other profession – and those amounts have increased significantly.

As pension costs soar – states and school districts spend more than $50 billion each year on teacher pensions – teachers are experiencing a rapidly diminishing return on investment. As the report found, pension plans’ unfunded liabilities mean that 70 percent of contributions go toward debt payments, not future benefits.

“A close look at the financial assumptions that undergird [state] plans shows that the states themselves don’t believe these incentives are effective at retaining teachers,” Aldeman and Robson write. “In fact, they count on high rates of teacher turnover in order to balance the books.”

States need to stop using pensions to incentive the profession, they argued.

Despite the pitfalls, however, the idea of a pension still seems to hold sway with young graduates and professionals, even if they aren’t initially drawn to the profession explicitly because of the potential to earn one.

.....
Just last week, residents in Connecticut began pushing back against state officials who are reportedly mulling plans to shift hundreds of millions of dollars in teacher pension costs onto municipalities. The plan comes as Connecticut’s annual contribution to the municipal teachers’ pension fund is expected to grow six-fold between now and the early 2030s, according to a 2015 study prepared by the Center for Retirement Research at Boston College.

Pensions are also being blamed for significantly curtailing the amount of money states are spending on higher education. From 2000 to 2016, public universities lost 25 percent of their state funding per student, nearly $10 billion, as tuition and student debt skyrocketed – a trend that a new report from the Manhattan Institute places squarely on the back of growth in spending on public-worker pensions.

“So much of the pension conversation you hear about today is about state solvency and the financial angle,” Third Way’s Hiler says. “But this isn’t actually just about a states’ ability to pay back their teachers. It’s affecting real teachers’ retirements and for many teachers they are getting the wool pulled over their eyes about their retirement.”

She continued: “I wish there was a more authentic conversation about what is going on because it’s not good for states and it’s not good for teachers.”

https://www.aier.org/blog/incentives...-case-teachers

Quote:
Incentives in State Pension Plans: The Case of Teachers

Earlier this week, my colleague Theodore Cangero wrote about funding gaps in state pension programs. These can have negative consequences not only for state budgets but for residents currently employed in industries with state pensions whose regulations sometimes have adverse consequences for workers or the public. One well-studied example is public school teachers.

Most states have pension plans for teachers, and most of those plans have underfunded liabilities. This cost is borne partially by taxpayers and partly by young teachers, as states make programs less generous to young teachers. Researchers have found over 10 percent of current teachers’ earnings is set aside to pay for pension liabilities, which may make it harder to recruit and retain new teachers. An Urban Institute study cited in the New York Times reports that in AIER’s home state of Massachusetts, it is impossible for a new teacher to ever break even on their pension contributions.

Even well-funded pension programs, however, can provide disincentives to work, and they otherwise distort the labor market for teachers. Pension plans often take a long time to fully vest, but also, by providing relatively generous benefits that cannot be collected while working, they provide incentives to retire early. Thus the system creates undesirable incentives at both ends of a teacher’s career.

Early in their careers, young teachers who otherwise might be geographically mobile and able to help smooth demand for teachers between local labor markets are tied to particular states by pension plans, among other state-specific rules. One analysis of teachers in Oregon and Washington shows that even teachers living near the state border are far more likely to move 75 miles or more within their current state than across state lines. In Missouri, Kansas City and St. Louis operate separate systems from the rest of the state, making moves even within-state difficult. Then, as shown in the Times report and other research, pension incentives also cause early retirements of experienced teachers that are still of working age and whose experience could make them among the most effective teachers in their schools. In an illustrative example, the Times shows a representative teacher’s pension value exceeds total contributions by age 50, but dips below contributions again by age 65.

Current pension reform focuses primarily on reducing benefits. This may alleviate the underfunding issue (although it won’t solve it entirely), but the other issues remain. Introducing defined-contribution plans, or at least relaxing rules that create incentives that tie teachers to states and then entice them to retire at a relatively young age, could help create better incentives for teachers and enable a more flexible and efficient labor environment.



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ILLINOIS


http://northernpublicradio.org/post/...ension-changes

Quote:
Illinois House Leaders Propose Public Pension Changes

Illinois House leaders of both parties have introduced legislation to change the state’s public pension systems. But some constitutional lawyers say it has little chance of getting through the Illinois Supreme Court.

Republican House Minority Leader Jim Durkin and Majority Leader Barbara Flynn Currie are pushing a plan to effectively lower pension benefits for public employees by giving them a choice: agree to lower raises in retirement, or have your pension based on your salary today, no matter how much more money you make in the future.

Durkin says the last time he sat with Currie in a committee hearing, it was to impeach then-Gov. Rod Blagojevich.

"So, draw your own conclusions on how this is going to go,” he said, “whether or not this is a positive sign of momentum or a harbinger of doom.”

But Law Professor Allen Shoenberger, of Loyola University, says both choices are unconstitutional in Illinois.

“It’s my opinion that what are referred to as the consideration model options are both unconstitutional,” he said.

He says workers also would have to be given the option to keep what they have, or get offered something they don’t yet have -- like a car.

“I think that probably would fly through the Supreme Court,” Shoenberger said, “but I haven’t heard anybody offering a car, be it an American-made or foreign-made car as well.”

The legislation also would move pension obligations to local school districts and public universities.

The consideration model has support from Senate leaders and Gov. Bruce Rauner. Many rank-and-file lawmakers have yet to take a position, but labor unions have vowed to challenge the proposal should it become law.

https://www.illinoispolicy.org/6-key...llinois-house/

Quote:
6 KEY REASONS TO SAY ‘NO’ TO IDENTICAL PENSION BILLS IN THE ILLINOIS HOUSE


.....
But before talking about the real solution, here are six key reasons to oppose the Flynn Currie bill:

1. It’s unconstitutional. The Flynn Currie deal will fail because the legislation tries to take benefits away from existing workers.While it’s possible that current workers may see reductions in their benefits through an eventual bankruptcy or a change to the Illinois Constitution’s pension protection clause, trying to take away benefits through legislation won’t work.The problem is the Flynn Currie proposal does just that. Its “consideration” model doesn’t offer existing workers a choice between the existing plan and something different of similar value.
Rather, the plan offers current workers two options that are both inferior to what they receive today. But the Illinois Supreme Court has already ruled against similar plans in the past. There’s little doubt that the “consideration” model in this bill would also be found unconstitutional.

It’s wrong for lawmakers to count on a bill that could in two years be declared unconstitutional in its entirety. Illinois will have wasted time and money on a failed deal.


2. It perpetuates pensions. One would think that with all the havoc politician-controlled pensions have wreaked on the people and budget of Illinois, the last thing politicians would include in “reform” for new employees would be more pension plans.But this bill perpetuates pensions. It requires new state workers to choose between the current Tier 2 pension system and a Tier 3 hybrid plan that includes a pension.
In either case, workers’ retirements would still be under politicians’ control, the state’s pension liabilities would still grow, and taxpayers would still be on the hook for the plan’s failures.

That’s unsustainable for both taxpayers and the state. The only way the state’s pension crisis will end is if lawmakers move away from pensions entirely and enact full 401(k)-style plans.


3. The bill forces new workers to subsidize older workers and retirees. The Flynn Currie bill is a bad deal for new workers because it perpetuates the Tier 2 benefit plan. Tier 2 is an unfair and immoral system that forces new workers to contribute more to the pension systems than what they’ll get out in benefits.For example, new teachers contribute 9 percent of their annual salary to their pension fund. But the benefits they accrue (the normal cost) are only worth 7 percent of their salary. They actually lose 2 percent of value annually.
In other words, younger workers are forced to subsidize the retirements of older workers and retirees.

Tier 2 is a ticking time bomb. According to the Teachers’ Retirement System, its fundamental unfairness could be grounds for the plan to be overturned in court. If that happens, the subsidy Tier 2 members provide to older workers and retirees would end, and the unfunded liabilities of Illinois’ pension plans would jump.


4. It only expands access to 401(k)-style plans to 5 percent of workers. On the surface, the Flynn Currie bill offers a way out of the broken pension system for new workers. It creates a 401(k)-style plan for Tier 1 workers to join if they so choose.However, that 401(k) option is limited. The bill gives only 5 percent of existing Tier 1 workers the chance to exit the pension plan. A vast majority of workers will still be trapped in the pension system, no matter how many want to leave.
The ability to join a 401(k)-style plan shouldn’t be restricted to an arbitrary percentage of workers. All workers should have the option to escape the broken pension system.


5. It has little math to support it. Flynn Currie hasn’t published any details on the math behind her bill. She’s demanding lawmakers vote on the plan with little proof of its supposed savings. In fact, no new numbers have been published on the consideration model since Senate President John Cullerton introduced it two years ago, when the details of the model were substantially different.


6. CPS bailout. The bill also includes a $215 million state bailout of the Chicago Teachers’ Pension Fund for 2017. State taxpayers would be forced to bail out Chicago Public Schools leaders and their decades of mismanagement. The school district would not have to reform anything.

http://www.journalstandard.com/opini...ng-states-debt

Quote:
Sounding the Alarm: Pension reform needs to focus on refinancing the state’s debt



It seems impossible Illinois will ever wake from its financial nightmare.

Where do you start? How do you prioritize a stack of unpaid bills that just this week topped $14 billion? Where do you start to rein in the $9.6 billion deficit the 2016 fiscal year ended on? How do you reverse the damage being done to the state’s businesses, universities and social service agencies that, at this point, just want some semblance of stability after being mired for nearly two years in a budget impasse?


We begin by understanding how Illinois got into this mess — and then find the courage to start reversing decades of poor financial choices. To not do so is to tie Illinois to an anchor and throw it overboard into uncharted waters, and let residents drown as the state sinks to an unknown depth.

Illinois has long spent more than it receives in revenue, and lawmakers have been loath to either raise taxes or make spending cuts to balance the two. Instead, the five state-funded pension funds have been the piggy bank legislators have repeatedly broken to cover their irresponsible spending, at the cost of racking up out-of-control debt accrued against the money owed to state employee retirees.

The groundwork for the current unfunded pension liability — which the Commission on Government forecasting and Accountability estimates will be about $130 billion by the end of this fiscal year in June — was laid in 1994 when the the General Assembly and Republican Gov. Jim Edgar agreed on a “pension ramp.” It set forth a plan that would allow the state’s pension systems to be 90 percent funded by 2045. The Center for Tax and Budget Accountability has reported the unfunded pension liability at that time was an estimated $17 billion, which now almost seems like a laughable amount to have fretted over.

But it was the ultimate kick-the-can-down-the-road play that has been perfected in the Statehouse. The “pension ramp” required relatively low payments for 15 years — and then drastically increased the amount owed for remaining years. Those levels quickly became unrealistic, and have been eating up a larger share of the state’s money ever since.

The prelude to the ramp was the 1989 decision, under Republican Gov. James Thompson, to allow for compounding 3 percent cost-of-living increase for retirees. Since the ramp, other horrible decisions made by lawmakers just exacerbated the problem. Republican Gov. George Ryan and Democratic House Speaker Michael Madigan in 2002 offered early retirement programs to those as young as 50; Crain’s Chicago Business reported it will “cost the pension systems at least four times more than originally billed and won’t be paid off until after 2045.” Under Democratic Gov. Rod Blagojevich, lawmakers decided to take “pension holidays” in fiscal years 2006 and 2007 where they skipped the state’s mandated contributions.

“Fixing” the state’s pension problems has been discussed for years, and yet few substantive solutions have been enacted. Most attempts to improve the situation have focused on changing benefits for state workers. Those hired after Jan. 1, 2011, for instance, are in what’s called the Tier 2 system, which provides less-generous benefits. But those gains won’t be realized for decades. There are measures pending now in the Statehouse that propose changing benefits for existing employees by giving them options to choose from.

Those may be unfruitful paths to tread. The state’s constitution says retirement benefits for state employees cannot be “diminished or impaired,” and the courts have been almost universal in agreeing former and current employees’ benefits can’t be touched. Short of a constitutional amendment, anything that challenges that is just going to be a waste of taxpayer money, as the state loses the inevitable lawsuit.
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PENNSYLVANIA

http://www.post-gazette.com/opinion/...s/201705130041

Quote:
State pension imperative: Zippo lights the way on reform — 401(k)-style


.....
Gov. Tom Wolf and lawmakers should take note.

Pennsylvania’s statewide pension crisis is no secret. The commonwealth’s two public pension systems — the Public School Employees’ Retirement System and the State Employees’ Retirement System — recently reported combined unfunded liabilities — or debt owed by taxpayers — of $62.2 billion. PSERS’ debt alone is an astounding $42.72 billion.

Ten years ago, PSERS and SERS were 81 and 92 percent funded, respectively. Today, they have enough assets to cover just 60 percent of liabilities. In fact, the state’s pension plans are so underfunded that Pennsylvania ranks near rock bottom in the country, according to a Tax Foundation analysis. Just four states have worse funding ratios.

Put bluntly, unless we act now, we risk being unable to keep the promises made to public workers. And everyone — public workers and all taxpayers alike — will suffer.

For proof, look no further than the Pittsburgh Public Schools. At the beginning of 2015, the district’s share of the unfunded pension liability was an incredible $793 million. By year’s end, it had risen to more than $870 million — a 10 percent increase. This increase alone equals the average salary of more than 1,000 classroom teachers.

Other large Pennsylvania school districts have similar pension plights: Philadelphia’s 2016 unfunded liability was more than $3 billion, Central Bucks’ was $475 million, and Allentown’s share equaled $346 million.

Families bear the brunt of paying off this debt through ever-rising property taxes.

From 2009 to 2015, school district revenue statewide grew by $3.9 billion to reach an all-time high of more than $27 billion. Yet 47 percent of this increase went to pension payments. This represents an increase of more than $578 per homeowner.

Without a doubt pension costs are the single biggest driver of property tax increases. In fact, over the last five years, 99 percent of school districts seeking exemptions to raise property taxes cited pension costs.

Our public pension system is broken. It puts public workers’ retirements at risk; it’s unsustainable for taxpayers; and it’s caused multiple downgrades of our state’s credit ratings.

Moreover, it does a disservice to new public employees. For example, three of four new public schoolteachers will never fully vest in today’s pension system. In contrast, 401(k)-style plans offer quick vesting and can be taken to new jobs. In today’s labor market — where workers change jobs an average of 10 times in their careers — portability is a must.

Fixing public pensions isn’t just common sense; it’s a necessity. We owe it to workers and retirees who are counting on the promises already made to them; we owe it to new teachers who want stability and options, and we owe it to working families who foot the bill.

The state Senate has discussed a proposal that shifts away from unsustainable defined benefit pension plans and includes a 401(k)-style component for new public employees. Similar legislation has been introduced in the state House, and voters support this type of reform.

Sadly, for years the staunchest opponents of reform have been government union leaders. From claiming that no pension crisis exists to spreading myths about reform proposals, these union leaders endorse the status quo that saw our state’s pension crisis drive up property taxes and force schools to lay off teachers.

Without reform, the crisis will worsen. However, by acting now, we can fulfill our promise to public employees and build a sustainable pension system for workers and taxpayers alike.

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JACKSONVILLE, FLORIDA

http://jacksonville.com/news/metro/2...pension-reform

Quote:
Bond-rating agency gives mixed review on pension reform

Moody’s Investors Service liked parts of Jacksonville’s pension reform but said the city’s pension debt will get worse until a half-cent sales tax starts around 2031. (Florida Times-Union, file)


Mayor Lenny Curry’s first-of-its-kind pension reform got a mixed review from Moody’s Investors Service when the bond-rating agency gave its assessment Wednesday.

Moody’s reacted positively to Jacksonville deciding to stop offering pensions to employees hired after Sept. 30, saying Jacksonville goes even farther than San Diego did in moving to 401(k) style plans because Jacksonville’s switch also covers public safety workers.

But Moody’s said the city’s “pay less now, pay more later” approach to fully funding its pension obligations means the city’s unfunded pension liabilities, which have long been a concern, are going to keep growing until after a voter-approved half-cent sales tax for pension costs starts around 2031.

“Jacksonville’s reliance on future revenues, rather than current contributions, to address its pension underfunding will continue to negatively impact our key credit metrics related to its pensions,” the report says.

When City Council unanimously approved Curry’s pension reform legislation last month, council members asked how bond-rating agencies would react.

Moody’s report doesn’t have any immediate effect on Jacksonville’s bond rating and what it costs the city to borrow.

Moody’s rating for Jacksonville is Aa2 with a stable outlook. An Aa rating is the second-best of nine rankings used by Moody’s.

“Right now the city’s outlook is stable, meaning we don’t see any changes in the next 12 to 24 months at this rate,” said David Jacobson, vice president of communication in the public finance group for Moody’s Investors Service.

Moody’s has closely followed Jacksonville’s years-long push for pension reform. Moody’s survey of 50 cities has shown Jacksonville suffers from the ninth-highest unfunded pension burden.

Moody’s says Jacksonville’s decision to stop offering pension to new hires will reduce the city’s investment risk “over time” because employees in 401(k) style plans bear the risk and rewards of how investments perform.

“However, Jacksonville will also provide costly new benefits and salary increases under the plan, which it can only afford because it will defer a significant portion of its legacy pension costs to the 2030s,” the report says.

Based on a change in state law geared toward Jacksonville, the city will count the future sales tax revenue as a current asset, which will result in the pension plans appearing to be better-funded when actuaries do annual reports determining what the city’s contribution to the pension plans must be.


Moody’s says that when it does its own assessment of the city’s pension plans, Moody’s will not consider future revenue as pension assets.


https://www.ai-cio.com/news/judge-up...orida-pension/

Quote:
Judge Upholds Tax to Fund Jacksonville, Florida Pension


A senior court judge in Florida has rejected a lawsuit that had challenged a half-cent sales tax intended to help pay for the city of Jacksonville’s unfunded pension obligations.

The tax was approved by a voter referendum last year, however, a lawsuit filed by five Duval County residents argued that the language on the ballot was so confusing and misleading that it failed to comply with state law requirements.

In his ruling, Judge Donald Moran Jr. said he saw no grounds to overturn the referendum.

“A court has a duty to only set aside an election when it finds substantial non-compliance with statutory election procedure and reasonable doubt as to whether the election expressed the will of the voters,” Moran wrote in his judgment. “In the instant case, plaintiffs have made unconvincing allegations of non-compliance and have demonstrated to the court there is not any reasonable doubt as to whether the voters were able to accurately express their will.”

Moran also denied the plaintiffs’ claims that city officials “made intentional representations and abused their authority” while asking the public to support the sales tax.

The tax was proposed to help the city eliminate its $2.86 billion pension debt, which has increased the city’s yearly pension costs to $290 million in 2017, from $78 million in 2008.

While the sales tax won’t kick in until after 2030, the city will start seeing financial relief next year from it because it will push back a significant portion of the city’s unfunded pension obligations to a later date. Future sales tax revenue will count as a current asset for the city’s pension plans. Revenues from the half-cent sales tax will only be used to pay down pension debt, and the tax will end when the plans are 100% funded, or by 2060.

According to the mayor’s office, Jacksonville owns 25% of the total unfunded pension liability of more than 400 cities and counties throughout the state, paying nearly $300 million for its three public pension funds. The funds include the Police & Fire Pension Fund, the General Employees Pension Fund, and the Corrections Officers’ Pension Fund. Jacksonville’s contribution to the three pension funds has totaled nearly 25% of the city’s operating budget.

The ruling comes not long after the Jacksonville city council unanimously approved in late April Mayor Lenny Curry’s proposal to fix the city’s pension problem, which includes closing its three pension plans to new employees.

Under the new legislation, the city will help compensate for the closing of the defined benefit funds by paying into defined contribution accounts for new hires at a rate of 25% of pay for public safety workers, and 12% of pay for general employees.

“This is not a perfect plan,” Councilman Al Ferraro said after Curry’s proposal was adopted by the city council. “This is the best we can do.”

http://floridapolitics.com/archives/...uncilman-wants

Quote:
Extra annual pension payment for Jacksonville? One councilman wants it

For those of you who thought Jacksonville was done with pension legislation, hold the phone.

Jacksonville City Councilman Danny Becton introduced a bill last week that would mandate 15 percent of budgeted money over a baseline budget would go to the city’s $2.8B unfunded pension liability.

“An amount equal to 15% of the General Fund/ General Services District aggregate increase in budgeted revenues (net of transfers from Fund Balance) over the baseline amount of $1,088,466,862 in FY16-17 [would] be used to make additional payments to reduce unfunded accumulated actuarial liability on the City’s three defined benefit pension plans,” reads the bill summary.

“The additional payments will continue until either the FY29-30 fiscal year or the commencement of the pension liability surtax established in Ordinance Code Chapter 776, whichever is earlier,” the bill summary adds.

The expectation is that budgets will increase: raises, mandated as part of the pension reform deal of 2017, would add up to a $120M hit on the general fund by FY 2020. Of course, 15 percent of $120M is $18M — serious money, and a commitment that hearkens back to the 2015 pension reform legislation that was largely revised by the latest deal.

The pension reform bill put forth at the end of Alvin Brown’s administration committed the city to increased pension payments over a twelve year period, with the number for most of that period being an extra $32 million.

Even in 2015, when the accord was being finalized, there was an unspoken consensus that things would get really interesting once that $32 million extra hit kicked in.

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