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  #771  
Old 05-26-2017, 05:20 PM
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Mary Pat Campbell
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MASSACHUSETTS
MBTA

http://www.telegram.com/opinion/2017...t-pension-plan

Quote:
Editorial: Reform the T pension plan

The MBTA and its driver and machinist unions are wrangling over the T’s pensions in moves with far-reaching consequences over a disputed $1 billion funding shortfall and questions of whether the state’s taxpayers and T passengers should foot the bill.

Sharply diverging views over critical issues as basic as projected returns on $1.5-billion in assets could end up in the hands of an arbitrator if the two sides can’t agree.

Private industry has largely moved away from such defined benefit pension plans, in which pay and years of service determine payouts. Only a quarter of transportation companies among the Fortune 500 offered such plans to new employees as of two years ago, according to Business Insurance. But they remain a staple, if a troubled one, of public employment. The T’s especially rich benefits are a ready target for its Fiscal & Management Control Board’s efforts to bring fiscal sanity to the public transit system.

The T’s pension plan is a unique hybrid, a publicly-funded private trust covering public employees. It goes back 70 years - think about that - to when the Legislature took over transit operations of private companies. The trust is run by a seven-member board, three from management and three from the union and a neutral seat (currently vacant) acceptable to both.

Data presented to the T’s Control Board this week showed a sorry state in which pension assets have declined by 23 percent in the past 10 years – from $1.9 billion to roughly $1.5 billion - while annual contributions from the state have grown from $37 million to $87 million. The plan has about 6,700 retirees collecting pensions from a system to which only 5,800 current employees are contributing. Compare that ratio - .85 worker contributing for every one retiree collecting - to the national alarm over Social Security’s declining ratio toward two workers contributing for every one retiree by 2060! It’s no surprise that the T’s plan allows 25-year employees to retire at 55 on a full $49,200 pension - at 61.5 percent of wages.

On the other side, the unions contend, is a problematic projection by T management of a $1 billion shortfall based on a projected annual return of 4 percent on assets. Why project 4 percent if the yield in the past five years has been about double that? Not to mention that 80 percent of that 899 retiree-to-employee imbalance directly results from management incentives to cut positions. It saved $61.5 million in operating costs in just the past two years; but grew the retiree count by 12 percent.

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Old 05-26-2017, 05:21 PM
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BIBB COUNTY, GEORGIA

http://wgxa.tv/news/local/we-were-co...-email-release

Quote:
‘We were conned’: Bibb Co. Manager resigns amid pension fund investigation, email release

AA
MACON, Ga. -- Former Bibb County Manager Dale Walker resigned in late April after emails show he deliberately misled the county commission into hiring a pension fund management company for personal reasons.
The Securities and Exchange Commission subpoenaed the county in February for all correspondence from between Walker and Independent Portfolio Consultants (IPC), specifically those with Cheryl Underwood.
In 2014, when Macon-Bibb County chose a new pension fund management company to replace Merrill Lynch, Walker allegedly changed the proposals of other companies and personally recommended IPC to get the bid. The commission agreed with his recommendation.

"What we've come to understand is that process was definitely steered toward IPC and that the information that was presented to the commissioners in order to make a knowledgeable decision was misrepresented when it came to other bidders," Schlesinger said.
The SEC subpoena revealed Walker's relationship with IPC and Underwood to the mayor and commission. With the new information, Mayor Robert Reichert said his relationship with Walker was "irreparably damaged."
"He recognized that the county manager can't work if he doesn't have the trust and confidence of the mayor so he submitted his resignation, and I accepted it," said Mayor Robert Reichert.
In the emails obtained by WGXA through an open records request, Walker wrote he loved Underwood and wanted to go away with her, among other things.
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Old 05-29-2017, 06:47 PM
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FRESNO, CALIFORNIA

CRIMINAL OFFICIAL

http://www.yourcentralvalley.com/new...sion/723671438

Quote:
Convicted Keith Foster to Still Receive Pension

FRESNO, Calif. - New stories are developing out of the Keith Foster trial, the former deputy chief of the Fresno Police Department will still receive his lucrative pension, even though he was just convicted of dealing drugs while on the job. Several Fresno City council members are now trying to change this retirement policy.

As the policy stands, if you are a Fresno City employee and you are found guilty of a felony, you still get to collect your pension. Now that's different on the state level, and two city council members want Fresno to catch up.

Foster spent nearly 30 years on the force, and two and half weeks in federal court this month. It took a jury two days to find him guilty of conspiring to sell heroin and marijuana. But Foster's pension will go untouched. Certified financial planner Brian Ullmann with Ford Financial Group in Fresno explains.
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Old 05-29-2017, 06:51 PM
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COOK COUNTY, ILLINOIS

http://www.chicagotribune.com/news/l...524-story.html

Quote:
No pension for Cook County judge who refused traffic court and quit

The Cook County judge who resigned in April rather than face a possible inquiry from a state disciplinary agency into his refusal to work in traffic court won't be walking away with an Illinois pension.

Former Judge Richard Cooke, 50, needed to work at least 8 years before he could begin collecting a pension from his $194,000-a-year job, according to a state retirement system representative. If he had made it that long, Cooke would've collected an annual pension worth about a quarter of his pay.

Cooke, who was elected in November, made waves after lending his campaign an unprecedented $660,000. He was slated in a Northwest Side subcircuit by the Democratic Party after directing nearly $70,000 to politicians.

But after refusing a traffic court assignment — the place almost all new judges get their start — Cooke was sent to marriage court. Just days after the Tribune began asking questions, a committee of 17 presiding judges headed by Chief Judge Tim Evans voted to refer Cooke to the state agency that handles judicial discipline.

Cooke resigned soon after, ending any possible investigation by the Judicial Inquiry Board. The episode left many of his fellow judges, who declined to talk on the record, shaking their heads in bewilderment wondering why Cooke thought he could leapfrog over more experienced jurists to a more sought-after assignment.

But Cooke doesn't have to walk away with nothing. If he asks for a refund, he's entitled to five months of payments he made into the pension system, according to figures provided under an open-records request.

That's $8,639.93.

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Old 05-29-2017, 07:10 PM
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SOUTH CAROLINA

http://www.thestate.com/news/politic...152821224.html

Quote:
Winners and losers in new SC pension law

A new S.C. law aimed at shoring up the state’s ailing pension system will take effect July 1.

The changes will help the state afford to pay roughly $20 billion in benefits already promised to retirees. The new law will infuse money into that system. A look at who wins and who loses under the new pension law:

Winners

Teachers, state agency workers and law enforcement officers

Public-sector workers have seen more and more of their paychecks go toward their state pensions – and they will see their rates go up again when the new law takes effect.

However, the drain on their paychecks eventually will stop. The new law caps most public employees’ contributions at 9 percent of their pay. Law enforcement officers’ rates will be capped at 9.75 percent.

.....
While lawmakers were working on a pension fix, public worker retirees urged lawmakers to preserve those promised benefits, including an annual 1 percent cost of living increase capped at $500. Taking it away would cripple “an already meager retirement” benefit, said Carlton Washington, executive director of the S.C. State Employees Association.

Good news for retirees, lawmakers preserved the cost-of-living increase in the new law.

.....
The state’s credit rating

Making sure the state can pay retirees the benefits they have been promised also will help the state’s credit rating, lawmakers say. Keeping the state’s credit rating in good standing will have a positive impact when the state borrows money through bonding, said state Rep. Bill Herbkersman, R-Beaufort, who co-chaired the special pension panel. A better credit rating will save the state money in interest payments, and those savings could be used to pay into the pension system, he said.

Losers

S.C. taxpayers who fund government

For every $100 that an employee makes, a public employer eventually will contribute $18.65 to the retirement system. Law enforcement agencies will contribute $21.24 toward every $100 an officer earns.

Who picks up the tab? S.C. taxpayers who fund government.

The new pension law eventually will cost S.C. taxpayers – who fund state, local and federal taxes – $827 million a year, according to estimates by the Public Employee Benefit Authority. “It’s a hit, but it’s a hit we knew was coming,” said Herbkersman, the retirement panel co-chair.
.....
The state budget, employee pay hike

Lawmakers plan to spend about $150 million on the pension system in the budget that starts July 1.

The House and Senate proposed spending the money differently and must resolve those differences as they work out a budget compromise.

However, the hefty pension price tag means less money to spend on other would-be priorities, such as employee pay raises, which some lawmakers say are necessary to compete for quality workers.

......
S.C. Treasurer

The new law bars S.C. Treasurer Curtis Loftis, R-Lexington, from appointing himself to the Retirement System Investment Commission, the panel tasked with deciding how to invest state retirement funds. Instead, Loftis only can appoint a representative to the commission, which oversees the pension system’s investments.

The new law also removes the State Fiscal Accountability Authority, of which Loftis is a member, as a co-trustee of the retirement system’s assets, leaving the Investment Commission and Public Employee Benefit Authority as co-trustees. They also approved removing the treasurer as custodian of the retirement system’s assets.

“Curtis was very forthcoming in bringing a lot of deficiencies to light” about the pension system, Herbkersman said. But, he added: “What if we get a treasurer that’s not as financially astute?”
hey, what if all the other trustees also suck?

That is an idiotic argument.

http://www.thestate.com/opinion/opn-...152953964.html

Quote:
Should we subsidize pensions for 11 lobbying groups?

COLUMBIA, SC
WHO SHOULD pick up the S.C. Education Association’s extra cost for its employees’ pensions next year? The S.C. Education Association, or the taxpayers? How about the State Employees’ Association? Or the Municipal Association? Or the other eight wholly private organizations that participate in the S.C. Retirement System?

Set aside your justified concerns about the fact that employees for what are essentially lobbying organizations are even allowed to be part of the State Retirement System, because that’s not going to change this year. Maybe not ever, although I keep hoping.

Instead, let’s talk about whether the lobbying groups deserve a taxpayer subsidy — which is part of the main dispute that is holding up passage of next year’s state budget.

.....
The big hang-up in the budget conference committee is how to fulfill a promise to cities and counties that the state would cover half of their first-year costs for the bail-out of the state’s underfunded pension system. (The cost will go up each year through 2022, and there is — at this point — no commitment to help local governments beyond next year.)

......
But from a public policy perspective, there’s a much more important difference between the House and Senate plans. The Senate plan only provides funding for actual local governmental entities — and not even all of them; just cities and counties. The House plan provides money for every entity that participates in the State Retirement System — including recreation commissions and other special purpose districts, as well as water and sewer authorities and hospitals, all of which are technically governmental, even though the hospitals and in some cases water and sewer authorities compete with private businesses.

And yes, the House plan covers half of the cost for those 11 lobbying organizations: the Municipal Association, at $47,000; the Association of Counties, $40,000; the S.C. Association of School Boards, $25,000; the education association (which some critics like to describe as a teachers union), $8,700; the S.C. High School League, $7,500; the S.C. Association of School Administrators, $4,500; the Palmetto State Teachers Association, $4,000; the State Firefighers’ Association, $4,000; the S.C. Sheriffs’ Association, $2,000; the State Employees’ Association, $1,200; and the S.C. Law Enforcement Officers’ Association, $935.

It’s a tiny amount of money (relatively speaking), but it’s a hugely important principle: There is simply no way to justify spending tax dollars to subsidize a lobbying organization.

.....
The Legislature might have an even bigger obligation to add money to the local government fund than to cover part of the pension costs. And the $30 million that the Senate plan would add to the local government fund wouldn’t come close to meeting that obligation.

But of course you can’t set aside those lobbying organizations. Well, you can’t set them aside unless … you set them aside. That is, unless the Legislature amends the House plan to cover only government employees. (Or, better still, only city and county employees.) That would take a two-thirds vote in both the House and the Senate. And if lawmakers did that, there would be nothing wrong with adopting the House plan.
earlier piece by same author on same issue:
http://www.thestate.com/opinion/opn-...e14442656.html
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  #776  
Old 05-29-2017, 07:14 PM
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JOHN BURY
CENSUS OF PUBLIC PENSIONS

https://burypensions.wordpress.com/2...pension-plans/

Quote:
Census Data for Public Pension Plans
Posted May 27, 2017 by burypensions in Public Pensions - General. 11 Comments
The Survey of Public Pensions: State- and Locally-Administered Defined Benefit Data provides revenues, expenditures, financial assets, and membership information for the defined benefit public pensions. Data are shown for individual pension funds and systems as well as at the national, state, and local level. There were 299 state-administered funds and 5,977 locally-administered defined benefit public pension systems, all of which are represented here.
Liabilities are provided only for the state plans and here are the pertinent totals from a generated spreadsheet:
Assets: $3,055 billion
Liabilities: $4,198 billion
Funded Percentage: 72.78%
Active Participants: 12,765,184
Terminated Participants: 5,881,705
Retirees: 8,791,392
Employee Contributions: $43.2 billion
Government Contributions: $107.2 billion
Total Payments: $248.1 billion
Other Investments portion of assets: $414.7 billion
Four states have funded percentages below 50%:


https://burypensions.wordpress.com/2...pletion-dates/

Quote:
State Pension Depletion Dates
Posted May 29, 2017 by burypensions in Public Pensions - General. 4 Comments
When I started looking at public pensions so many years ago the first thing I noticed was how, though ongoing and accruing benefits, all seemed to have negative cash flows where benefit payouts exceeded deposits. Coming from the private-pension world I could not see how these plans could survive. As it turns out they can’t and updated census data on public pension plans give us an idea as to when plan pension assets for each state will be depleted.
Of the 50 systems there is only one (Kansas) with positive cash flow. Of the others all are projected* to go bust. The top two are no surprise but….



* No trust earnings were assumed which is reasonable considering that we have a ‘correction’ coming with all these alternative investments and plans that need liquidity cannot be expecting to get
long-term investment returns.
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Old 05-29-2017, 07:18 PM
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TEXAS

HOUSTON

https://www.ai-cio.com/news/texas-le...ension-reform/
Quote:
Texas Legislature Passes Houston Pension Reform

The Texas state legislature has approved a bill to reform Houston’s struggling pensions, with the Senate voting 25-5, and the House voting 103-43, as the bill heads to Gov. Greg Abbott to be signed into law.

“Today is a historic day because we have done what many said was impossible,” said Houston Mayor Sylvester Turner in a statement. “Today’s significance is not marked merely by what we have accomplished, but by what we can achieve now that we have lifted a significant barrier to progress in our city.”

The reform package, known as the Houston Pension Solution, will immediately reduce the city’s $8.2 billion in unfunded liabilities through future benefit reductions, according to the mayor’s office. Under the plan, which uses a 7% assumed rate of return on investments, the city will be required to meet its annual contribution until the unfunded liability is fully paid off in 30 years.

.....
The bill still needs Houston voters to approve $1 billion in pension bonds to help support the plan. The reform plan was supported by two of the three pension systems, labor organizations representing city employees, and the Greater Houston Partnership, along with more than 40 CEOs and Houston-area business leaders who signed a letter of support.

However, the Houston Firefighters’ Relief and Retirement Fund opposes the reform bill, and said it is considering legal action to stop it from becoming a law. The firefighters were upset that the final proposal had removed three amendments that had been supported by the firefighters’ pension, but opposed by the mayor’s office.

The removed amendments would have given the firefighters more time to negotiate, and would have protected retired firefighters from being subjected to benefits reductions.


DALLAS

http://www.nbcdfw.com/news/local/Dal...424691234.html

Quote:
Dallas Pension Fix Leaves Room for Other City Needs


New figures on the full cost to taxpayers of the Dallas Police and Fire Pension solution also leave room for an $800 million public improvement borrowing plan, according to city officials.

But police leaders are now concerned about talk of reducing police station security money in the proposed bond referendum that would go before voters in November.
.....
The security improvements were first promised after a 2015 attack on police headquarters by a man in an armored van. The deaths of five police officers in a Downtown Dallas ambush last year increased pressure for better protection.
.....
Mata said three-quarters of the solution came from increased employee contributions and benefit cuts in the bill, which has now been approved by both the Texas House and Senate.

From taxpayers the annual contribution to the pension in the city budget will increase for the next seven years from $124.93 million to $163.06 a year – $38.13 million more each year.

....
The pension fund would have gone broke within 10 years under the old funding formula after years of generous benefits, insufficient investment returns and deception about the problems by previous pension managers. The fears of pension failure produced a surge in withdrawals from pension savings accounts and record police retirement and resignation. Current police manpower is the lowest in years.

Mata said including money to properly secure Dallas police facilities after years of promises is a crucial step to restoring trust with city officials after the bitter pension fight.
http://www.bradenton.com/news/busine...153038749.html

Quote:
Poor land deals pushed Dallas pension fund toward insolvency

DALLAS
Failed land-development deals in Idaho and Colorado have cost the Dallas Police and Fire Pension System approximately $100 million, officials for the system say.

The deals account for a significant portion of the half-billion-dollar losses the fund has endured in recent years because of bad bets on real estate and private equity.

The fund has spent $25 million just in fees to advisers and managers of the land deals. Earlier fund managers intended to build sprawling housing developments, but the plans were ruined when the housing bubble burst.

The ventures are examples of the risky investment strategies that, along with overly generous benefits, led the pension to the brink of insolvency, The Dallas Morning News reports . Speculative investments in past years also included luxury homes in Hawaii, a resort near Napa and high-rise condos in Dallas.

Kelly Gottschalk said she was left in disbelief when she toured thousands of acres of empty land outside Boise, Idaho, shortly after she became director of the fund in 2015. She was left to wonder how prior leaders could allow a public pension, tasked with protecting the retirements of those who safeguard the city, throw away so much money on vacant land.

"It was really shocking," Gottschalk told the newspaper. "I don't know what they were ever thinking."

When pension board members toured the ranchland north of Boise in 2005, the fund was coming off a couple of good years. In 2003 it had posted a return of 31 percent, ranking it the best performer among similar funds.

The fund ultimately bought more than 17,000 acres and the plan was to turn 6,750 acres of foothills into a new community called Spring Valley. It would nearly double the size of the town of Eagle, a picturesque suburb of Boise. A partnership with a development firm brought a vision of a community featuring a 500-room hotel, office space, restaurants and a vineyard.

.....
Six years later, Dallas Mayor Mike Rawlings spurred the city to audit the pension fund's investments and prompted the removal of several members from the pension board. New appraisals of the land in Idaho and Colorado revealed more than $110 million invested by the pension "was no longer reflected in the value of the property," according to court records.

The Texas Legislature this month agreed on a fix to the fund that will deeply cut benefits and require city taxpayers and first responders to pay millions more each year to fill the financial hole left by the risky investments in prior years.

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Old 05-29-2017, 08:33 PM
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MICHIGAN

http://www.detroitnews.com/story/opi...gan/102249222/

Quote:
Editorial: Don’t delay teacher pension overhaul

Republican lawmakers did the right thing last week by introducing legislation that would close off the Michigan school employees’ pension system to new members. Moving new hires into a 401(k)-style plan is in the best interest of both teachers and taxpayers.

And really, what’s the alternative? Options are limited to reform the Michigan Public School Employees Retirement System. The glaring $29.1 billion in pension debt won’t go away on its own, as Democrats and teachers unions would have you believe. It will continue to grow at an exponential rate.

Only 60 percent of the money needed to pay the system’s costs has been set aside, according to the Mackinac Center for Public Policy.

So, lawmakers can either take money from other areas of the budget to pay down the unfunded liabilities, or schools will have to keep shifting more from their classroom budgets to meet the obligation. Already, 37 percent of school payroll costs is going to the pension system.

Neither alternative solves the problem.

The only solution is to move in a different direction — one that won’t saddle future generations with an even greater mess.

These bills would offer a broad fix to the pension crisis, something that other attempts have failed to do.

As James Hohman, assistant director of fiscal policy at the Mackinac Center, says: “The mismanaged teacher pension system is the largest single cause of financial stress for Michigan’s public schools. If we had fixed MPSERS when we should have, we could have more than $1,600 per student in our public schools this year rather than going to pay off debt.”

....
Unions may think they can better entice new teachers with pensions, but the reality is many millennials and other mid-career workers would rather have a retirement system that can move with them.

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Old 05-29-2017, 08:39 PM
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CENSUS REPORT

http://www.plansponsor.com/State-and...-Five-Percent/

Quote:
State and Local Governments Increased Pension Contributions by 6.5%
Their contributions rose by $8.5 billion.

State and local governments increased their contributions to pensions in 2016 by 6.5%, or $8.5 billion, according to the U.S. Census Bureau’s report, “The 2016 Annual Survey of Public Pensions.” In total, state and local governments contributed $140.6 billion to their pension plans in 2016, up from $132.0 billion in 2015.

Employees also increased their contributions in 2016, to $51.0 billion, a 7.1% increase from $47.7 billion in 2015. Government and employee contributions, together, amounted to $191.6 billion in 2016.

Larger contributions by both government entities and employees are necessary to keep public pensions well funded, according to the Center for State and Local Government Excellence, which examined the practices of four well-funded government pensions. It is also necessary to increase employees’ retirement age to 65, according to the Center.

State governments contributed a total of $59.8 billion to their plans in 2016, and local governments, $47.5 billion. Earnings, however, dropped considerably, by $105.7 billion, to $49.9 billion—a 67.95% decline. This caused total assets in state and local government pension plans to decrease by 1.6% to $3.7 trillion, down from $3.8 trillion a year earlier.

The total number of beneficiaries of state and local government pensions rose by 3.3% in 2016, to 10.3 million people, up from 10.0 million in 2015 and 9.9 million in 2014. The value of their benefits rose 5.4% in 2016, to $282.9 billion, up from $268.5 billion.

In 2016, state and local governments paid out $303.6 billion from their pension plans, with $282.9 billion of that being in benefits. The data also shows how state and local governments invest their pensions. Of the $3.7 trillion in total assets, $3.1 trillion is invested in securities.

In 2016, state and local governments had $4.1 trillion in pension obligations—$400 billion more than the $3.7 trillion in their current holdings. In 2016, total assets in both defined benefit and defined contribution plans grew to $19.1 trillion, according to data from the Federal Reserve.

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Old 05-29-2017, 08:43 PM
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CALIFORNIA

STANISLAUS COUNTY
http://www.modbee.com/news/article153082439.html

Quote:
Stanislaus County’s annual employee pension cost to exceed $75 million

Stanislaus County’s employee retirement costs will climb to $75.6 million in the next budget year, a $9.4 million increase in what the county pays annually to fund retirement benefits.

The county’s pension costs have not been in the spotlight since the Stanislaus County Employees’ Retirement Association recovered from staggering investment losses in the economic downturn.

About $4 million of the increase will come out of the general fund in the fiscal year that begins July 1, while a $5.4 million impact will be spread among county departments.

The higher costs are partly tied to poor performance on investments. StanCERA’s $1.8 billion investment portfolio suffered almost a 2 percent loss in the year ending June 30, 2016. A yearly gain of 7.25 percent is needed to maintain viability of the pension fund. StanCERA’s board also lowered the expected rate of returns from 7.5 percent to 7.25 percent, which raises the costs for member agencies.

The county’s rising costs are also attributed to salary increases for county employees with vested benefits and to higher-than-expected cost-of-living increases in the pension checks for retirees.

In addition, StanCERA needs to make adjustments because of changes in retirement rates, death rates, disability and employees leaving the county workforce, which were documented in a 2016 study.
....
StanCERA’s unfunded liabilities have climbed $63.4 million to $691.3 million as of June 30, 2016. That means the pension promises made to employees and retirees are $691.3 million greater than the value of the fund that pays the benefits.

StanCERA can reduce the unfunded liabilities with improved investment returns over time and larger contributions from member agencies.

County Supervisor Terry Withrow said the incremental pension-cost increase can be absorbed in next year’s budget. A proposed budget for 2017-18 will be released in June.

Retirement costs are one of several anticipated challenges in the county budget for 2017-18.
MODESTO

http://www.modbee.com/news/article153082744.html

Quote:
Modesto pension costs expected to skyrocket

City officials received a sobering assessment last week about Modesto’s pension costs, which are projected to nearly double in eight years.

Acting City Manager Joe Lopez delivered the appraisal Monday during a hearing for the city’s proposed $373 million operating budget for its 2017-18 budget year, which starts July 1. And he told officials that the California Public Employees’ Retirement System is not sustainable in its current form.

......
“It’s going to be a multi-tier approach,” Lopez continued. “It’s going to involve CalPERS, it’s going to involve the cities, it’s going to involve labor groups, and it’s actually going to involve the retirees to take a more holistic view of how the pension system is actually operating. We can’t continue to rely, CalPERS can’t continue to rely, on revenue (from cities and its other public sector members to meet its pension obligations).

“There is going to have to be substantial changes to the actual benefit packages if these are ever going to be sustainable.”

Lopez is a member of the League of California Cities pension task force and as a member he is hearing that many cities are facing bankruptcy over rising pension costs. “I’m pretty sure we can stave that off,” he said, because of the changes Modesto has made to its budget and because the city has met other challenges.

Modesto also has $15.8 million in reserves in what is called its general fund, and a council that is committed to increasing those reserves. The general fund makes up about a third of the operating budget.

....
But the projected pension increases are grim.

The city now pays about 40 cents in pension costs for every $1 in salary for a police officer or firefighter. The city projects that within eight years it will be paying nearly 72 cents in pension costs for every $1 in salary. “For every one police officer,” Lopez said, “three-quarters of the next police officer is a pension payment. That is a very scary place to be.”

Modesto now pays about 17 cents in pension payments for every $1 in salary for a civilian employee. That is projected to increase to nearly 30 cents within eight years.

Cities and other public sector agencies across California will be paying CalPERS substantially more after its board voted in December to reduce what CalPERS expects to earn on its investments, from 7.5 percent to 7 percent. Lower investment earnings mean larger contributions from the roughly 3,000 agencies that belong to CalPERS.

Lopez has said public agencies also are paying more because of other changes enacted by CalPERS in recent years, including increasing the life expectancy for retirees and accelerating the time period to fully fund the pension plan. Modesto expects to pay CalPERS $21.3 million this year and is projecting that its CalPERS payment will be $38.1 million in eight years.

Modesto and other local governments will start feeling the brunt of the increased pension costs in their 2018-19 budgets, which start July 2018.

Lopez thanked Modesto’s employees and their labor associations for working with the city in recent years on such reforms as agreeing to have employees pay the full share of their pension contributions (which Lopez said has saved Modesto millions of dollars) and agreeing to changes that are substantially reducing the city’s retiree medical liability costs.

Modesto’s civilian employees pay 7 percent of their pay toward their pensions. Lopez said police officers and firefighters pay 9 percent but eventually will pay 12 percent.

He said the city is starting to prepare for the rising pension costs now, but gave few details except that the city is looking at setting up a trust if it can come up with the money to fund it. He said in an interview that the trust would lower the city’s pension costs but would not solve its pension problem.

And there is a lot uncertainty. For instance, if CalPERS cannot meet its 7 percent return on its investments (and many observers think it cannot) then it could further reduce what it expects to earn on its investments. That could mean even higher pension payments for cities and other local governments.

“I think your presentation sucked the life out of everyone here,” Councilman Bill Zoslocki told Lopez.

“Sorry to be a Debbie Downer on that one,” Lopez said. “But I wanted to make sure we painted a realistic picture of the challenge ahead of us.”

“We can’t live without real numbers,” Zoslocki replied.
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