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  #1271  
Old 09-24-2017, 05:41 PM
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HAWAII

http://www.civilbeat.org/2017/09/pen...on-to-stop-it/

Quote:
Hawaii
Pension Spiking Costs Taxpayers Millions — Now The Push Is On To Stop It
27
City Councilman Joey Manahan urges state to change how it sets retirement payouts to prevent overtime abuse.

Ever since he was a state representative, Joey Manahan said he has been concerned about the cost to Hawaii taxpayers of overtime in general and its potential effect on retirement pensions in particular.

But a recent critical audit of a Honolulu trash collection service was the last straw for Manahan, who was elected to the City Council in 2012 and is now chairman of its Budget Committee.

Manahan has proposed a resolution that urges the council to “take steps to eliminate overtime abuse and pension spiking.” He calls for the city to “address any management complicity with such abuse.”

And he also proposes that the council ask the Legislature to pass a law that would completely halt the practice of considering overtime pay when determining pension amounts for all employees.

Such a law was passed in 2012 — Manahan’s last year in the statehouse — but it only applied to workers hired after July 1, 2012.

Making it apply to everyone might present legal challenges.

.....
When 2,125 public employees retired in fiscal year 2015, the ERS found that 447 of them had spiked their pensions — about 21 percent. The following fiscal year, 16 percent of the state’s 2,188 retirees were found to have spiked their pensions.

The ERS reviews the salaries of new retirees every year to watch for signs of pension spiking, and then bills the spikers’ employers for the additional costs. Not surprisingly, the City and County of Honolulu and the state have the largest number of spikers.


.....
Colbert Matsumoto, an ERS trustee, was surprised to learn Thursday of the number of retirees who had spiked their pensions.

“What was more surprising was the magnitude of the financial cost associated with that relatively small group of people,” he said.

The cost adds to the state’s already massive unfunded liability. The state’s pension fund shortfall jumped to $12.4 billion in 2016 from $8.8 billion in 2015, according to a report by the state’s independent actuarial consultant, Gabriel Roeder Smith & Company.

.....

In 2011 when then-Gov. Neil Abercrombie testified in support of bills to reduce public employee retiree benefits, he found himself in front of a crowd of jeering public workers.

“These types of issues should be vetted but a lot of the members don’t want to touch it,” state Rep. Calvin Say said of legislators. “You’ll get the unions on your back.”

Manahan’s resolution is headed for its first hearing before the council’s Executive Matters Committee on Sept. 26 at 1 p.m.

“It’ll be a lively hearing,” Matsumoto said.
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Old 09-24-2017, 06:01 PM
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http://www.dailyrepublic.com/solano-...blic-pensions/

Quote:
Bay Area conference shines light on public pensions

PALO ALTO — Pension costs cut into police staffing in Silicon Valley and public spending on teacher salaries in San Francisco, speakers said Monday at a Stanford University conference.

David Crane, a lecturer on public policy at Stanford, said spending in the San Francisco School District on teacher pay is now 29 percent of the budget, down from 31 percent five years ago because retirement benefits in the district have doubled over the same time.

“You ain’t seen nothing yet,” Crane said.

Chuck Reed, former San Jose mayor, said while funding for the police department in Palo Alto has increased by 50 percent, staffing is down by 10 percent as the city pays more for pensions.

The two men were among speakers at the “Understanding the Public Employee Pension Debate” conference offered by the Stanford Institute for Economic Policy Research.

Reed, who helped lead pension reform in San Jose, said such efforts are demanding.

“It’s a lot of heavy lifting,” he said. “This is not easy.”

Voters passed pension reductions in 2012 in San Jose.

Asked if other California cities facing such issues should focus on retirement costs for new employees, Reed said the real expenses come from current workers and retirees.

Joe Nation, public policy professor at Stanford and a former member of the state Assembly representing Sonoma and Marin counties, spoke about pensions as an albatross around the neck of local and state governments in the United States. California is in the middle of the pack nationwide for pension funding problems, Nation said.

A study that Fairfield City Council members took up in May found pensions costs in Fairfield will increase 14 percent in fiscal year 2018-19 and continue to climb yearly for the next decade until the city’s yearly cost is projected to be $37.5 million.

Increases to the city’s pension contributions are estimated to result in Fairfield paying an additional $122 million over a decade, the city staff said. Bartel Associates of San Mateo prepared the study for Fairfield.
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Old 09-24-2017, 06:12 PM
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OPEBs

http://reason.com/blog/2017/09/20/th...m_medium=email

Quote:
The Hidden $700 Billion Debt Owed to Public Workers
.....
That's largely because states don't bother accounting for their so-called "Other Post-Employment Benefits," or OPEB, costs in the same way that they do for pensions. Instead of putting money away year-after-year to pay for those liabilities, most states fund OPEB costs on what accountants call a pay-as-you-go basis, meaning that revenue is appropirated from the state budget each year to meet those needs. The majority of OPEB is in the form of health care benefits, including retiree health insurance and other expenses like dental, vision, life, and disability insurance.

States paid more than $20 billion towards OPEB costs during 2015, according to a new analysis from the Pew Charitable Trusts. That sounds like a lot of money, but it's really just a drop in the bucket compared to the estimated $692 billion owed to public workers over the next few decades.

Some states have done better than others when it comes to keeping up with OPEB costs, but only six states (Alaska, Arizona, North Dakota, Ohio, Oregon, and Utah) have set aside more than half of the the assets necessary to meet thier long-term OPEB obligations, according to Pew's analysis. By comparison, 30 states have less than 10 percent of the necessary savings.

Think about it like this. Much like pension costs, OPEB costs are a long-term thing. When a state government hires a new worker, or a school district brings in a new teacher, the employer (the government) has a number of years to save-up for the eventual retirement of that employee. How much those retirement benefits—pensions and OPEB—will cost varies from employee to employee, but actuaries do a pretty good job of predicting costs in the aggregate. Based on those projections, actuaries come up with an "annual required contribution," which is exactly what it sounds like, except governments often ignore the "required" part.
.....
When it comes to OPEB, most states don't even pretend to care about the ARC payments. That's why things are getting worse, not better. Compared with the same survey in 2014, Pew found that 31 states saw their OPEB liabilities grow during 2015. Even though states paid about 6 percent more towards those costs in 2015, the overall liability grew by better than 5 percent.

That's a worrying tragectory. Many states are already struggling to fund their pension promises, which are eating away at parts of state budgets meant to fund schools, roads, social services, and more. Because most states fund OPEB costs directly from state budgets, the lack of long-term savings threatens to cause more budgetary pain.

Like in Connecticut, for example. Last year's state budget (the current state budget is still being hammered out) projected $731 million to cover health care costs for retired state employees in 2017, compared to just $698 million for the health care costs of current employees.

Because Connecticut failed to save-up for the long-term costs of their retirees, state taxpayers are now paying more money to cover the costs of people who aren't providing any government services—because they are retired—than for people who actually are.
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Old 09-24-2017, 06:16 PM
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COLORADO

http://denver.cbslocal.com/2017/09/2...ibutions-cuts/

Quote:
Pension Board Calls For Higher Contributions, Cuts

DENVER (AP) — The board that oversees Colorado state pensions is recommending higher contributions from employees and taxpayers and cuts to retirees’ benefits, saying the changes are necessary to shore up the underfunded system.

The Denver Post first reported the board’s approval on Friday. Lawmakers must approve the changes as well.

According to the latest financial report, the Public Employees’ Retirement Association is 58.1 percent funded, down from 62.1 percent in December of 2015.

The recommendations include: cutting the annual cost of living adjustment from 2 percent that most retirees get to 1.5 percent and making 65 the eligible age for full benefits starting with new employees in 2020.

The board also recommended increasing employee contributions by 2 to 3 percent and a 2 percent increase on taxpayers’ payments toward the fund.
https://www.usnews.com/news/best-sta...ributions-cuts

Quote:
Colorado Pension Board Calls for Higher Contributions, Cuts
The board that oversees Colorado state pensions is recommending higher contributions from employees and taxpayers and cuts to retirees' benefits, saying the changes are necessary to shore up the underfunded system.

.....
"The recommendations from the PERA Board reflect our commitment to ensuring the long-term health of the fund," Chairman Timothy O'Brien said in a statement following Friday's meeting. "We understand that these recommended changes will not be easy, but we believe shared impact across the membership and with employers are absolutely necessary."

The last dramatic changes to the pension system came in 2010, when lawmakers approved benefit cuts and increased contributions over several years.

The latest proposal also asks lawmakers to give up some control over setting rates. The board's package includes an automatic increase to contributions and cuts to cost of living adjustments based on the pension's finances.

PERA's Executive Director Gregory Smith said in a statement that the system will work with lawmakers to ensure the proposal "receives serious consideration" during next year's legislative session.

"These changes impact every member, whether they are still working or retired, and will require difficult sacrifices," Smith said. "These modifications represent the ability of the plan to adapt to our changing environment while retaining the overall value of PERA for our membership, our employers, and Colorado."

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Old 09-24-2017, 06:18 PM
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OREGON

http://www.oregonlive.com/politics/i...t_of_memb.html

Quote:
PERS managers shift investment of members' money to age-based

Oregon’s public pension managers voted this week to undertake a major shift in the way they invest members’ money, turning to age-based investment funds for beneficiaries’ individual accounts.
For Treasury staff and the Oregon Investment Council, the citizens panel that oversees the investment of the pension assets, it’s a no-brainer, Investment 101 decision they’ve been discussing for years. They say they’re replacing a one-size-fits-all investment approach with one that will insulate older workers from market volatility as they near retirement, while giving younger workers a more aggressive, growth-oriented investment mix.
“This is the right thing to do and a common sense change,” said Oregon Treasurer Tobias Read, a member of the council.

For the Public Employees Retirement System Board, or at least its chair, however, it’s a misguided and unnecessary change that will require significant member education. It also will require complicated and potentially costly technology upgrades to track and report investment returns that will now vary across the membership pool.
John Thomas, a Eugene businessman who chairs the PERS board (below), said his colleagues have not had a detailed discussion of the change, which is being presented as a fait accompli that they will be responsible for administering. He believes the board’s focus needs to remain on how to manage the crippling costs associated with the pension fund’s existing $24 billion unfunded liability, not adding another wrinkle to an already complicated system that will increase costs and may not deliver much value to members.
.......
POLITICS INVOLVED
As is usually the case when the pension system is involved, there are complicated politics in the background. The move puts a spotlight on the $8.2 billion pool of assets funded by member contributions, which are the central part of ongoing and controversial pension reform discussions in the Legislature. It’s unclear whether the investment shift, or simply the increased attention it brings, will complicate that discussion.
At the treasurer’s request, the council also took the unusual step Wednesday of interrupting its meeting to allow the president of the Service Employees International Union 503 to comment on the change. The situation was made more awkward because Steve Demarest had also just been confirmed for the PERS Board, and he was taking an advocacy position on an issue he hasn’t discussed with the board.
“Members want it,” he told the investment council. “They want to be able to choose how investments are directed. SEIU will be advocating in the future for member choice.”
To be clear, investment managers are not changing the way they invest pension assets. The shift deals with members’ individual accounts, which were created in 2004 when the legislature redirected member contributions – 6 percent of pay – out of the pension system to slow the runaway growth of pension liabilities under the system’s lucrative money match formula.
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Old 09-24-2017, 06:40 PM
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okay, I have a big dump coming (uh, twhs...)

I will group these by state, and spoiler by subtopic.
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Old 09-24-2017, 06:44 PM
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CALIFORNIA
COLAs
Spoiler:

http://www.sacbee.com/news/politics-...174256201.html
Quote:
California pensioners: Your COLAs are safe, for now

The state’s largest pension fund on Tuesday shot down a pitch from a Republican lawmaker who wants it to study how much money it could save by cutting benefits for retired public workers.

Sen. John Moorlach of Orange County in July wrote letters to CalPERS board members – Richard Costigan and Dana Hollinger – making two touchy requests for the pension fund.

In one, Moorlach wanted CalPERS to estimate how much money it could save by temporarily suspending cost-of-living adjustments for retirees. CalPERS has different retirement plans that allow cost-of-living adjustments of 2 to 5 percent for its pensioners.

In the other, Moorlach asked CalPERS to look at reducing benefits for current workers and retirees by moving them into the less generous plans public agencies began offering in 2013, after Gov. Jerry Brown signed a pension reform law.
Moorlach submitted bills this year that would have carried out those ideas, but they died in the Democratic-controlled Legislature. A dozen local government leaders attended this week’s CalPERS meeting and implored the fund to study Moorlach’s requests.

They say they’re struggling with fast-rising pension costs, which could double over the next five years in some communities, and they want the information so they can negotiate contract changes with their unions.

“None of us are interested in negotiating with our bargaining units for something that takes away from them and doesn’t solve the problem,” said Phil Wright, West Sacramento’s human resources director.
…..
Today, CalPERS is considered underfunded because it has about 68 percent of the assets it would need to pay all of the benefits it owes immediately. That number sets off alarms for Moorlach and others who worry public agencies won’t be able to make good on their debts.

“We’re 32 percent off,” said Hollinger, who has asked CalPERS actuaries to study how cost-of-living adjustments affect the fund. “I’m worried about the future of all our hard-working constituents who earned a pension. I want to make sure the money is there for them.”

The CalPERS board did not vote on responding to Moorlach. Instead, a majority of members criticized the requests, making clear that a motion to respond to Moorlach would fail. Several CalPERS members and union advocates suggested the data would be used one day in a political campaign targeting public employee pensions.

“I love data, but I’m not sure I want to help write the bullet point for the initiative,” said J.J. Jelincic, member of the California Public Employees’ Retirement System Board of Administration.

Added CalPERS President Rob Feckner: “We’re being asked to fund somebody else’s pet project.”


DIVESTMENT

Spoiler:

https://www.thebaycitybeacon.com/pol...a10728c92.html
Quote:
Pension System Balks at Calls to Divest from Fossil Fuels

Can San Francisco’s pension system kick the big oil habit?

While the San Francisco Board of Supervisors has voted unanimously since 2013 for full divestment from fossil fuels, the San Francisco Employees Retirement System (SFERS) has postponed its decision, even in the face of dismal returns. SFERS is now accused of “dithering” on the financial challenges of climate change.

SFERS Board President Victor Makras is in favor of divesting. He spoke at a Government Audits and Oversight committee hearing September 5, stating the $500 million investment in fossil fuel funds has not been a money-maker for the 28,000 City employees.

“We’re avoiding the debate, and we’ve got our heads in the sand. What we’ve seen over the last four years is diverting from transparency,” said Makras. “The fund managers should call out for us that this has not had good returns and bring us recommendations.” Makras proposed a divestment vote at last month’s SFERS board meeting. That vote was postponed.

A city employee retiree took the podium at the Board of Supervisors hearing and confirmed the low rate of return on the investment in fossil fuels. “Four years ago, the price of oil was over $90 a barrel,” he said. “Now it’s half that.”

SFERS Executive Director Jay Huish also spoke, and confirmed that over the last three to five years, the performance of fossil fuels has diminished, but says that there is a still a place to continue holding them as a hedge against inflation in a ten-15 year horizon. Huish says SFERS has hired expert managers who understand they need to hold these stocks as long term investments.

But SFERS is no stranger to divestment. The pension system has a history of engaging in social issues dating back to 1988, when it divested of tobacco. In 2013, the board voted to rid the portfolio of all stocks related to firearms retailers and manufacturers, including those in firearms manufacturer Remington.
http://www.sfchronicle.com/bayarea/a...o-12189705.php
Quote:
S.F. employee pension fund under pressure to unload fossil fuel stocks
The San Francisco Employee Retirement System is facing mounting pressure to unload its roughly $470 million worth of investments in the fossil fuel industry, which would make it the first major pension fund in the nation to do so.

On Tuesday, the Board of Supervisors is expected to pass a resolution urging SFERS officials to consider selling all fossil fuel investments. It’s the second time since 2013 that city lawmakers have asked the governing board of San Francisco’s $23 billion employee pension plan to reconsider the fossil fuel companies.

But after what critics say has been four years of procrastination, time may be running out for the board to make an independent decision on the issue. Supervisor Aaron Peskin, who authored the resolution, said if the board doesn’t address the issue soon, he’s prepared to put a ballot measure before voters next year that would compel the the fund to sell its fossil fuel stocks.

…..
But SFERS and other large public pension plans across the country have resisted calls for divestment, claiming it would hurt the retirement system’s financial health. The SFERS governing board is bound by law to uphold its fiduciary duty, a legal mandate to act in the best interest of the fund.

The retirement system’s board is made up of seven members, three of whom are elected by active and retired SFERS members. Another three are appointed by the mayor, and one member is selected from the city’s Board of Supervisors. Currently, that’s Malia Cohen.

Both SFERS staff and NEPC, an investment consulting firm retained by SFERS, have recommended against divesting, largely on financial grounds.

Selling off a well-performing part of the portfolio, SFERS officials argue, would deal a financial blow that could constitute a breach of their duty to the fund and the pensioners who have paid into it. Last year, SFERS paid out $1.24 billion to over 28,200 retirees and their beneficiaries.

“This is a very difficult legal question and discussion that every fiduciary on every public pension plan across the United States is dealing with today,” said Jay Huish, the SFERS executive director, speaking before the supervisors’ Government Audit and Oversight Committee last week. “None of them have been able to come forward and do a complete ban.”
…..
At the oversight committee meeting last week, Huish said he doesn’t disagree with Makras’ conclusions about the performance of the fund’s fossil fuel stocks over the past five years, but he maintained that the stocks performed better over a 10- to 15-year window. “These types of assets … serve a purpose. And we believe we’ve hired expert (investment) managers who understand that they need to hold these stocks, even though they are losing short-term,” Huish said.

That explanation did little to placate Peskin, who serves on the oversight committee.

“It’s getting to the point where … if you can’t get there and your board can’t get there, it’s going to be incumbent on me and my colleagues to get you there,” Peskin said.

“I will certainly be interested in the legal analysis of forcing us to sell at a potential loss without having repercussions on the members of the board as fiduciaries,” Huish replied.

“I’ve got some theories,” Peskin said, wryly.



LOS ANGELES
Spoiler:

http://reason.org/blog/show/city-of-...ension-gap-sur
Quote:
City of Los Angeles Pension Gap Surpasses $10 Billion
Marc Joffe
September 6, 2017, 4:12pm

California pension worries most often focus on CalPERS and CalSTRS, the state’s two multi-employer behemoths. But the state has many other underfunded plans, and these city and county systems pose significant challenges for governments that contribute to them.

The City of Los Angeles faces the largest municipal pension funding gap, measured in absolute dollar terms.. According to the city’s 2016 Comprehensive Annual Financial Report, Los Angeles’ Net Pension Liability totaled $8.2 billion. Curiously, this number does not appear on the city’s government-wide balance sheet (called a Statement of Net Position). Instead, the $8.2 billion is reported as part of L.A.’s long-term liabilities, resting in the footnotes of the city CAFR at pages 133 and 141.

But the city’s pension debt is actually even worse than this reported $8.2 billion. Drilling down further into the CAFR, we find that the pension liability data is based on actuarial valuations from 2015. Actuarial valuations of the City of Los Angeles’ three pension systems for 2016 were not available at the time the city’s CAFR was prepared, so accountants relied on prior year data. However, since the CAFR was released, all three Los Angeles pension systems have published their 2016 actuarial reports. Thus, we can get a preview of what the pension debt will look like when L.A. updates its CAFR.
…..

All three plans reported increased unfunded liabilities because investment returns for the period July 1, 2015 to June 30, 2016 were lackluster – below 1% for all three funds. WPERP’s unfunded pension liability increased the most — from $1.1 billion in 2015 to $2.2 billion in 2016 — because plan administrators changed the discount rate assumption they were using from 7.50% to 7.25%, resulting in a larger reported amount of promised pension checks (even though the actual number didn’t change, only the accounting of them).

A pension system’s liability is the present value of expected future payments — or in other terms, the total value today of all promised pension checks for the future. The lower the rate at which these future payments are discounted, the higher the reported liability in current dollar terms. On June 1, 2017, the LAFPP board voted to reduce that system’s discount rate to 7.25%, following WPERPs lead. LACERS staff has also proposed moving to 7.25%, but the board has deferred action on their proposal.

The LAFPP move and pending LACERS decision will further increase the reported size of liabilities and unfunded liabilities in subsequent city CAFRs. LAFPP estimates that its new discount rate and other economic assumption changes will increase system liabilities (and unfunded liabilities) by $682 million; for LACERS the increase would be $328 million.

Although these discount rate changes are a step in the right direction, they still leave the Los Angeles systems with more aggressive assumptions than those used by CalPERS and CalSTRS. Both statewide systems are transitioning to a 7% discount rate. If all three Los Angeles systems went from 7.25% to 7%, the city’s unfunded pension liabilities could be expected to rise by another $1.5 billion.


SAN DIEGO

Spoiler:

http://www.voiceofsandiego.org/topic...ns-bills-grow/
Quote:
Morning Report: City Gets a Break as Pensions Bills Grow
Last week, city pension fund trustees made a change that will make pension bills larger for the city and its employees.

In 2016, the city of San Diego sent $261 million to the pension system, writes VOSD’s Scott Lewis. That’s nearly all the funds the city collected in sales tax the same year, $275 million. This year the city sent the pension system $325 million. Next year, projections put the amount the city will send to its pension system at $329 million.

For years, the pension system assumed that the money it collected through taxes and paycheck contributions would get a return of 7 percent when invested every year for 30 years.

That number was a high estimate and last week, trustees of the pension system decided to would lower that return assumption for next year to 6.75 percent, reports Lewis. The following year it would decrease further to 6.5 percent.

That means that employees will have to make higher contributions from their paychecks and that includes the San Diego Police Department, which is already facing a recruitment and retention problem. The city would need to give police officers – who are expecting an actual raise – a nearly 2 percent raise with the new pension contributions, just to keep their salaries where they are.

But there was something else worked into this pension decision that lowered the city’s contributions over the next few years, Lewis reports, which means the city might actually be able to pony up for those police raises.

http://www.voiceofsandiego.org/topic...ce-take-a-hit/
Quote:
The City Gets a Break as Big Pension Bills Loom
…..
This year, the city sent the pension system $325 million.

Next year, the treasurers project it could reach $329 million. Of all the bluster about pensions, that these kinds of bills might come was the heart of the concern.

The pension fund has only three sources of money. It gets money from the employees, who contribute with every paycheck. It gets money from the city, via those checks we send over, funded by taxes.

The pension fund combines that, and makes money on its vast portfolio investments across the world.

For years, the pension system assumed its investments would earn an average of 7 percent every year for 30 years.

But last week, trustees of the once chaotic and beleaguered system made a change. They decided to assume that the system would only earn 6.75 percent on its investments next year. The year after that, they decided to drop it again to 6.5 percent – the most conservative assumptions in the state.

The moment trustees tell actuaries to assume they’ll make less in investment returns, the bill gets larger for everyone else.

Indeed, next July police officers and firefighters in the system will see their take-home pay drop 0.9 percent of their salaries as the pension fund claws for higher contributions.

The year after that, police officers will have to contribute another 0.9 percent. That means that, as the city grapples with a recruitment and retention crisis in the police department, it will have to give them a nearly 2 percent raise just to keep them where they are.

The expected rate of return of pension investments is called the “discount rate.”

“I understand what they’re doing and I’m not opposed to reducing the discount rate, especially if the actuary believes returns will be below that,” said Brian Marvel, president of the Police Officers Association. “It would have been nicer if they’d done smaller amounts of lowering over a longer period of time.”

Marvel didn’t seem too concerned, though. His union is currently in negotiations with Mayor Kevin Faulconer and it expects to get raises.

The other side, though – the city and taxpayers – got a kind of break in the deal. Next year’s $329 million bill will actually be less. More like $312 million.

The employees have to pony up. How did the city get out of it?

“They took an additional step to ensure a more consistent cash flow into the system,” said Mark Hovey, CEO of the San Diego City Employees’ Retirement System.

It was a complex move but essentially they pushed off some of the pain. It surprised me because after 13 years of covering San Diego politics, one basic law I knew was that if they lowered the assumption of what they earned in the market, it would cause significant pain.
Over the long term, the bill will come but Hovey and his team argued that in the future years, the city will get an enormous break. Its pension bills will drop by more than $200 million in 2029.

Basically, when the city closed the pension to new hires in 2012 (except for police) it forced itself to pay off the debt of everyone else in just 15 years. When that’s over, taxpayers will experience enormous relief, but Hovey said the income from the city dropping that much could cause the pension system to have to sell assets or otherwise come up with cash to send out its regular monthly pension checks.

The thing is, the pension system is paying out more than it’s taking in every year. So trustees want to make sure the city has to pay more in 2029 than it would have under the old plan.



COSTS

Spoiler:

https://calpensions.com/2017/09/20/c...taff-pay-cuts/
Quote:
Cities urge CalPERS to help ease staff, pay cuts
The city manager of once-bankrupt Vallejo expects soaring police pension costs to reach 98 percent of pay in a decade. Lodi employees dropped from 490 to 390 in the last decade. And Oroville, after cutting a third of its staff, recently cut police pay 10 percent.

Eight cities struggling with rising pension costs urged the CalPERS board yesterday to analyze two ways to reduce the cost of pensions, even though the proposals were said by the CalPERS attorney to be unconstitutional under current law.

State Sen. John Moorlach, R-Costa Mesa, asked the CalPERS board to analyze the cost of suspending cost-of-living adjustments and giving current employees, for work done in the future, the lower pension for employees hired after Jan. 1, 2013, under reform legislation.

The chairman of the League of California Cities pension committee, Bruce Channing, Laguna Hills city manager, told the CalPERS board that cities throughout the state are “gravely concerned” about “unsustainable” pension costs and all options should be considered.

“Cutting staff, as we have done in my city, is becoming a recurring pattern,” Channing said.

Five unions and retiree groups urged rejection of Moorlach’s request, saying a COLA cut would harm retirees with small pensions. They said Moorlach wants to do away with pensions and should do his own analysis, rather than pass the cost to CalPERS.

The CalPERS board president, Rob Feckner, said he won’t repeat what he said on first seeing the Moorlach letter. He said the request did not come from the entire Legislature, and if Moorlach really believes in his “pet project” he should find another way to fund it.

Vallejo filed for bankruptcy in 2008 and did not cut pensions, a trend followed by the Stockton and San Bernardino bankruptcies in 2012. Vallejo said CalPERS threatened a long legal battle. The other two cities said they needed to be job competitive, particularly for police.

There was speculation several years ago that Vallejo, which had higher costs than the other two cities, may be headed for a second bankruptcy. The Vallejo city manager, Daniel Keen, said he took office three months after Vallejo exited bankruptcy in 2011.

Keen told the CalPERS board yesterday that Vallejo has the same gradual erosion of services that the other seven cities talked about, despite an increase in the sales tax and a tax on medical marijuana.

“We are facing dramatic increases in our pension rates, as are many cities,” Keen said. “We will be looking at 98 percent rates for public safety by ’27-28 and 55 percent rates for our miscellaneous employees in that time frame.”
…..
Others urging CalPERS to do the cost analysis requested by Moorlach were Concord, Santa Rosa, Chico, Yuba City, and the California Special Districts Association.

Opponents said the Moorlach proposals would violate the “California rule,” a series of state court decisions widely believed to mean that the pension offered at hire becomes a vested right, protected by contract law, that can’t be cut unless offset by a comparable new benefit.

Al Darby of the Retired Public Employees Association said the Moorlach request is an “anti-pension proposal” that the CalPERS actuary extimates would cost 80 hours of work time, not counting followup questions.

He said CalPERS was being asked to do opposition on itself, which is absurd. He said cities should explore other methods of relief, such as better use of technology, innovative contracting, and taxing power.

Neal Johnson of SEIU Local 1000 said the fact that the request comes from one legislator, not a committee, seems to have a “certain aim.” He said the advocates say all options should be considered but the request is for just two.

“It is self-serving,” he said. “It is not in the benefit of the 1.5 million members of the system, and I hope you will reject it. As I said, the data is there. They can do the analysis.”

Board member J.J. Jelincic said “a big problem is that what we are being asked to do is a bullet point for an initiative that will pick out the most extreme number and will ignore all the conditions that went into the assumptions.”
…..
Board member Richard Gillihan said he probably would not support the reforms Moorlach wants analyzed, particularly the COLA cut. But he said the request is being “twisted” by some of his colleagues.

Because the CalPERS staff often responds to stakeholder requests without going to the board, he said, the fact that the Moorlach request is before the board suggests that the board is politicizing it.

He said the Moorlach request comes from not just one legislator but also the cities that urged that CalPERS provide the data. He said it’s difficult to negotiate with the unions, as some members suggested, without the data.

“We are just going to disregard their interest in the data,” Gillihan said. “I find that somewhat insulting.”

Given the comments of most board members, the committee chairman, Richard Costigan, said he would not call for a vote. He instructed the CalPERS chief executive, Marcie Frost, to tell Moorlach where to get information to answer his request.
http://www.pressdemocrat.com/opinion...being-squeezed
Quote:
Gullixson: What is being squeezed out to pay increasing pension costs?
Here’s an important question to pose to Sonoma County’s new pension advisory committee. For that matter, it should go to all local elected officials. How much are rising pension costs crowding out other spending — money for public assistance, park maintenance and “soft services” such as libraries and museums?

If the county, cities and school districts are honest, local residents probably won’t like the answer. And given the increased contributions that local agencies are having to pay to the California Public Employees’ Retirement System and the California State Teachers’ Retirement System, the “crowding-out effect” of pensions is expected to get far worse.

“In counties, what we are seeing is a decrease in spending share in particular in public assistance and health care,” said Stanford professor Joe Nation, who represented Marin and southern Sonoma counties in the state Assembly until being termed out in 2006. “The irony here is as pension costs increase, the people who are arguably being hurt the most are the people who can least afford it. It’s people who need the public assistance from counties.”

Nation, now project director at the Stanford Institute for Economic Policy Research, hosted a workshop on Tuesday where he presented the preliminary findings of a study of this crowding-out effect. His research team looked at the finances of cities such as Los Angeles, Sacramento and Pacific Grove as well as counties and school districts — small, medium and large — and the state as a whole. These case studies offer a snapshot of what’s happening statewide.

Los Angeles County, for example, was contributing 3 percent of its operating budget toward pensions in 2002 before public employee retirement benefits were boosted retroactively almost statewide. Since then, that slice of the pie has nearly tripled to about 8.7 percent. According to the Stanford analysis, it is expected to grow to 10.2 percent by 2029-30, if the county meets its goals of about 7 percent average annual return on investments. If not, and returns come in at more around 5 percent, the share of the budget taken up by pensions will be 13.8 percent — an 11 percent increase in just 17 years.
…..
And the problem is not likely to get any better, given the massive phased-in contribution increases that school districts face each year in order to meet a state goal of making CalSTRS fully funded by 2047. As of April 6, CalSTRS only had about 64 percent of the assets needed to meet its obligations.

Meanwhile, CalPERS, the largest pension fund in the nation with some $323 billion in assets, has only 68 percent of the assets needed to cover the promises made to public employees. And, as with CalSTRS, it has cut expectations on investment returns from an annual average rate of 7.5 percent to 7 percent for the next 20 years.

Lowering expectations on returns means local agencies need to pony up more money to bolster the funds, which means more services and programs getting squeezed.

“Based on what we are seeing,” said Josh Rauh, professor of finance at the Stanford Graduate School of Business, “I would say get ready for much higher taxes and much worse public services.”

So what services are being squeezed in Sonoma County and local cities? It’s not clear, but we can guess. The most honest answer can be found in the final report issued last year by the county’s Independent Citizens Advisory Committee on Pension Matters. The committee calculated that the enhanced benefits Sonoma County granted to employees have cost the county an extra $260 million over the 10 years from 2009 to 2016. That’s money that “would have been available to fund critical public services,” the report said.
…..
Unfortunately, that committee has since been disbanded, replaced earlier this month by a permanent seven-member advisory panel on pension reform. In addition to having three members of the previous committee, the panel now includes two members with ties to organized labor and a former assistant executive officer for CalPERS. The seventh is former Rep. Lynn Woolsey, who represented this region in Congress for 20 years. The jury is out for now on whether this group will continue the good work of the previous panel or try to sugarcoat what’s happening. For my money, the best way to tell is how thorough it will be in looking at not just the cost of pensions in dollars but the costs in terms of reduced services. The public may not always understand the long-term impacts of unfunded liabilities. But they understand the cost of poor roads, shabby parks and reduced public assistance. Ultimately, it’s never programs that really get squeezed. It’s people.


DEFAULTING PENSIONS

Spoiler:

https://medium.com/@DavidGCrane/for-...ls-7769c7a1708
Quote:
For Whom CalPERS’s Funded Status Tolls
Some pension beneficiaries are safer than others.

A recent news article incorrectly describes the funded status of the California Public Employees Retirement System (CalPERS) as follows:
“Today, CalPERS . . . has about 68 percent of the assets it would need to pay all of the benefits it owes immediately.”
That is not correct. CalPERS does not have 68 percent of the assets it would need to pay all of the benefits it owes immediately. For that purpose it has only 38 percent.
68 percent is the ratio of pension assets to the present value of pension obligations discounted at the expected rate of return on assets. It means that CalPERS currently has 68 percent of the assets needed to pay benefits assuming it earns the expected rate of return over the period during which the benefits are scheduled to be paid, not immediately.
In contrast, the “immediate” ratio is the one CalPERS uses when a government for which it manages pension obligations seeks to terminate its plan. In that case, liabilities are discounted at a rate reflecting immediate defeasance via US Treasury obligations. Using that rate CalPERS has only 38 percent of the assets it would need to immediately fund benefits.
The difference is critically important to SOME — but not all — beneficiaries of government pension promises in California. That’s because pension beneficiaries in California fall into two very different categories:
1. Beneficiaries whose obligations are owed or guaranteed by the state DO NOT have to worry about funded status. Because states may not declare bankruptcy, beneficiaries owed or guaranteed their pensions by the State of California can expect to be paid regardless of CalPERS’s funded status. Examples of “protected” beneficiaries include employees of the state and California State University.
2. Beneficiaries whose obligations are not owed or guaranteed by the state DO have to worry about funded status. Because local governments and special districts may declare bankruptcy, failure of such an entity combined with inadequate funding could mean a reduction or elimination of retirement payments. Examples of such “unprotected” beneficiaries include employees of local governments or special (eg, water or fire) districts.
In other words, only unprotected beneficiaries, eg, city, county, and special district workers, are at risk to funded status. In contrast to employees whose obligations are owed or guaranteed by the state, unprotected beneficiaries should be keenly interested in the funded status of their pension plans. CalPERS and other public pension funds should make sure pension beneficiaries know the difference.
http://www.sacbee.com/news/politics-...172960601.html
Quote:
Public workers from two more towns expected to lose CalPERS pensions
Ten workers and retirees from government agencies in two far corners of California likely will see their pensions slashed because their employers have not paid bills to the state’s largest retirement fund in more than a year.

Trinity County Waterworks District No. 1 west of Redding and Niland Sanitary District from Imperial County are in line to become the third and fourth government agencies to break with CalPERS over the past 12 months in a manner that shortchanges their retirees.

The CalPERS Board of Administration is scheduled next week to vote on ending contracts with the two small districts because they’re in default.
The districts are expected to join the town of Loyalton in Sierra County and an organization called the East San Gabriel Valley Health Consortium as small governments that are falling out of CalPERS because of different financial stresses.
In Trinity, five current and former employees will see their promised pensions slashed by 70 percent. Niland’s five beneficiaries will see a 92 percent to 100 percent cut in pension benefits, according to CalPERS’ staff reports.

To fully fund their workers’ pensions, the two districts would have to muster up hefty termination fees. CalPERS asks for that money up front, and then moves the separating agency to a low-risk fund called the terminated agency pool.

CalPERS says Niland owes about $200,000 to cover the long-term costs of its employees’ pensions in the terminated agency pool, while Trinity owes some $1.6 million. Trinity has asked CalPERS for a 30-year, no-interest payment plan to cover the termination fee, but the district and the pension fund have not reached a deal, according to CalPERS.

More than 1,500 local government agencies are part of CalPERS, the $333 billion pension fund. As a whole, CalPERS has about 68 percent of the assets it would need to pay all of the benefits it owes to its members immediately.
….
A new CalPERS financial assessment of its participating agencies shows that 16 of its members are in worse-than-average shape, with less than 60 percent of the assets they’d need to fund full retirements for their employees.
….
Niland, although a part of CalPERS since 1995, fell far behind on its pension bills because it did not properly register its employees with the pension fund. CalPERS spotted the problem when one of the workers called the pension fund to ask about his status, according to CalPERS.

Trinity Waterworks is not in financial trouble, its district manager said. It voted to leave CalPERS in 2015 as it shifted its business model to one that relied on a contractor, meaning it did not have new public employees.

It has set aside money for CalPERS, but it does not have the full amount the pension fund wants.

“I’m hoping the story isn’t over,” Trinity’s Craig Hair said.

More small governments could follow the ones that left CalPERS recently.

Three other small departments, including the Herald Fire District near Galt, have filed notices to separate from CalPERS.
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Old 09-24-2017, 06:44 PM
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I just learned the limit of post length on the AO.

Here comes the last part of:

CALIFORNIA

PRIVATE EQUITY

Spoiler:
http://www.pionline.com/article/20170918/PRINT/170919845/bumpy-ride-seen-for-calpers-proposal?newsletter=investments-digest&issue=20170918#utm_medium=email&utm_source= newsletters&utm_campaign=pi-investments-digest-20170921&CSAuthResp=1506009585577%3A0%3A73393%3A0% 3A24%3Asuccess%3A27E6B54A015F2ADD37108923E8DEFBAA
Quote:
Bumpy ride seen for CalPERS proposal
CalPERS Chief Investment Officer Theodore Eliopoulos wants to boost returns by starting a direct investment program in private equity or finding another alternative to the traditional limited partner model, but the road ahead won't be smooth for the largest U.S. defined benefit plan.

The CIO of the $333.3 billion California Public Employees' Retirement System would face hurdles that would make it difficult to implement a direct investment program, say private equity and pension experts.

Competing on salaries for top talent against private-sector asset managers is considered the biggest challenge. How the program would be set up and whether it would answer to trustees is another challenge, experts and board members said.
If the direct-investment plan moves forward, Sacramento-based CalPERS would be taking a page from its Canadian peers, which started making direct private equity investments in the 1990s, pension experts said. CalPERS officials, who discussed the idea at a July 17 board meeting, plan to issue a more details about the direct investment program in six months.

Direct investing would reduce some of the approximately $800 million in fees CalPERS pays annually to private equity managers. But the size of the reduction is unclear because Mr. Eliopoulos said CalPERS would continue to participate in some private equity funds as a limited partner.

Private equity is CalPERS' best-performing asset class over the 10- and 20-year investment periods. But the fund's program shrunk to $26.2 billion as of May 31 from $34 billion four years earlier because of the difficulty private equity firms are having in finding suitable investments.

"There is a lot of competition," Mr. Eliopoulos said in a July interview, noting the large number of investors seeking available opportunities in commingled private equity funds.
….
Another option — never done before by a public pension plan — would be to outsource much or all CalPERS private equity program to a money manager that could potentially leverage better deals with private equity managers than CalPERS staff. Sources say Mr. Eliopoulos has talked to BlackRock (BLK) Inc. (BLK) about possibly taking over all or part of CalPERS private equity program. BlackRock is the world's largest asset manager with more than $5 trillion in assets under management, but its private equity program is a relatively small part of its business, a fund of funds with $21.5 billion in assets under management.
…..
High future returns in doubt

Mr. Eliopoulos' plan to find an alternative to the traditional private equity model comes at a time when high future investment returns are in doubt for most institutional investors including CalPERS, which had an estimated funding ratio of 68% for the fiscal year ended June 30.

Consultants and CalPERS investment staff expect a 6.2% annualized return for the entire fund over the next decade, below its assumed 7% rate of return.

Erik Gordon, clinical assistant professor at the University of Michigan's Stephen M. Ross School of Business, said in an interview it's understandable that Mr. Eliopoulos would want to find a way to lower private equity fees by starting a direct investment program. But Mr. Gordon, who consults with institutional investors on private equity, said even if Cal- PERS could pay the higher salaries necessary to assemble a top-notch investment staff, it could take time to garner strong investment results.
https://www.nakedcapitalism.com/2017...blackrock.html
Quote:
CalPERS Illegally Trying to Hide Its Scheming to Hand Over Private Equity to BlackRock
CalPERS continues to thumb its nose at the law. The latest example involves its plan to give enormous power and profit to BlackRock, a financial firm that damaged CalPERS in the past by putting it in the Stuyvesant Town real estate deal, in which CalPERS lost its entire $500 million investment.1

It’s astonishing to see an organization refuse to allow for open discussion of fundamentally important policy decisions, as required by the Bagely-Keene Open Meeting Act. That intransigence is made even worse by the fact that CalPERS is seriously considering implementing a strategy that would harm its beneficiaries and California taxpayer. CalPERS plans to introducing another middleman into its most expensive investment strategy, private equity. That would increase already high private equity costs and lower returns.

Mind you, this is the antithesis of the approach CalPERS uses for every other investment strategy, where it correctly fixates on cost reduction, to the degree that CalPERS has misrepresented data to exaggerate how much it has lowered costs.

Later in the post, we reproduce an e-mail by board candidate Margaret Brown to the members of the CalPERS board, along with its CEO Marcie Frost and general counsel, Matt Jacobs, vigorously objecting to how staff intends to discuss this and other agenda items impermissibly in secret.

CalPERS makes no pretense that it has any legal justification for this move. Note that the default position of Bagley-Keene is that all deliberations of governmental bodies are to be held in public; private discussions must be put on the agenda with a citation of the section of law that allows for the discussion to be in secret.
…..
Needless to say, PR considerations are not a legally valid basis for discussing a major policy item, which is what this proposal amounts to, in secret.

The reason this item is scheduled for this Monday’s Investment Committee meeting is apparently because Bloomberg reported on CalPERS’ interest in outsourcing its private equity operations to BlackRock. The board is not supposed to find out about major plans like that in the press.
…..
Even if you were to accept the premise that this outsourcing scheme is a good idea, it is also remarkable to see CalPERS considering only one vendor for it, when many firms would likely be interested in managing the program, and on top of that, a firm that has treated CalPERS badly in the past. The Stuy Town deal was controversial internally when it was under consideration, and there were multiple parties who argued that it was a bad deal .Some people directly involved say that BlackRock had made misleading representations in marketing the deal and also treated CalPERS unfairly as it unravelled. Unless BlackRock has somehow made up to CalPERS for the loss, which seems impossible given its magnitude, it is hard to fathom why CalPERS would be willing to do business with an organization that has dealt with them in bad faith in the past.
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Old 09-24-2017, 06:45 PM
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CONNECTICUT
CONTRIBUTIONS
Spoiler:

http://www.ctpost.com/local/article/...e-12209987.php
Quote:
Malloy says GOP plan would underfund state pensions
HARTFORD — Gov. Dannel P. Malloy on Tuesday told Republican leaders that their pending budget proposal, which he plans to veto, would drastically underfund state employee pension programs that have rebounded since he took office in January 2011.
In a letter to GOP leaders that was released to reporters, he warned that since the employee retirement system was created in 1939, it has consistently been underfunded, to the point where it is behind by billions of dollars.
“ Rather than adding to the state’s crippling pension liabilities, my administration has had the courage to face this challenge, and deposited more than $500 million into the pension fund in addition to the cost for current employees,” Malloy wrote, adding that an analysis of the GOP budget that passed Friday and Saturday.
“It is worth noting that this analysis also reveals that your proposal to reduce pension contributions by $144 million and $177 million respectively over the two years of the biennium is even more aggressive than similar ill-fated decisions by former Governors Rowland and Rell,” he wrote. “Please understand that returning to the days of underfunding our state employee pension obligation is not something I can, or will, ever condone.”
http://www.ctnewsjunkie.com/archives...get_2017_09_16
Quote:
With 5 More Democrat Votes, House Forwards GOP Budget to Malloy; Veto Expected
HARTFORD, CT — Feeding off momentum created by three Senate Democrats who surprised their leadership Friday by voting for the Republican budget, five House Democrats also crossed the aisle in support of the GOP plan early Saturday.
The House voted 77-73 in favor of the minority party’s two-year, $40.7 billion budget, which is expected to be vetoed by Gov. Dannel P. Malloy. According to the Office of Fiscal Analysis, both the Republican and Democratic budget proposals are projected to yield multi-billion dollar deficits in 2020, 2021, and 2022.

…..
The Republican budget says the cost-of-living increases for retired state employees won’t be funded until the state employee pension fund is funded at 80 percent. Further, no overtime pay would be included in calculations for pension payouts for current state employees, and they would ask that employee contributions to the pensions go up to 7 percent.

Senate Republican President Len Fasano, R-North Haven, has said that that change would generate savings in 2018 and 2019 because it means the state would not have to contribute as much in those years to the pensions.

Rep. Michael D’Agostino, D-Hamden, questioned the one-page actuarial report used to put together Republican projections for how the changes in 2027 will help save $144 million in the first year and $177 million in the second year.

D’Agostino said he believes the language included in the budget will land them in court because they can’t make the necessary changes outside of collective bargaining.

AFL-CIO President Lori Pelletier said the Republican budget proposal attempts to “take away our freedom to negotiate our health care and our retirement security.”

She said Connecticut state employees gave back more than $1 billion to help shore up the state’s finances, and “Republicans not only demanded more blood, they refused to ask for anything from corporate CEOs and the ultra-wealthy.”

It was clear, maybe for the first time for some, that the partisan dynamics in the House chamber had changed.

https://ctmirror.org/2017/09/13/new-...contributions/
Quote:
New CT budget could shift teacher pension costs onto future taxpayers
If legislators vote on a new state budget Thursday, it may include a complex proposal from Gov. Dannel P. Malloy to restructure skyrocketing contributions to the teachers’ pension program — potentially inflating and then shifting billions of dollars in expenses onto a future generation.

But if the plan is incorporated into the budget, that would mark the first time many legislators hear about it.

The Malloy administration has been warning for years that Connecticut must address massive unfunded liabilities caused by more than seven decades of inadequate savings, and says there is no reason to delay.

But the proposal was not raised in bills, public hearings or budget proposals during the 2017 session or earlier this summer.

But given that, the fact that the proposed cost-shift would not happen immediately, and that billions of dollars are at stake, Republican legislators say lawmakers shouldn’t be rushed into voting on the Democratic governor’s plan.

Malloy spokeswoman Kelly Donnelly confirmed Wednesday that the administration wants to change a schedule that has the state’s annual pension contribution skyrocketing — according to one report — by more than 500 percent over the next 15 years.

Connecticut’s annual payment, which stood at $1 billion last year, could top $6.2 billion by 2032, unless adjustments are made.

Full details of the proposal were not available Wednesday [September 13], but Donnelly said the administration’s goal is to change the scheduled payments while preserving rules established in 2008 to prevent further short-changing of the teachers’ pension.
The $1 billion contribution the state made to the pension fund last year is slated — according to a study prepared for the state in 2014 by the Center for Retirement Research at Boston College — to skyrocket over the next 15 years, potentially topping $6.2 billion by 2032.
According to a 2015 study Malloy commissioned from the Center for Retirement Research at Boston College, annual contributions to state employees’ and teachers’ pensions were at risk to more than quadruple by the early 2030s because of decades of poor savings by governors and legislatures dating back to 1939.

State employee unions, Malloy and the legislature agreed in early February to reduce total payments into the state employees’ pension between now and 2032 to mitigate a projected spike. Annual contributions into that fund also were expected to top $6 billion in the early 2030s.

But that shift came with a cost.

When the state contributes less, that limits the treasurer’s ability to invest pension resources and grow the fund.
….
CT pledged not to short teacher pension fund

Connecticut doesn’t have the same legal flexibility, though, to restructure payments into the teachers pension.

That’s because the state borrowed $2 billion in 2008 to shore up the teachers’ pension and pledged to its bond investors not to short-change pension contributions for the life of the 25-year bond issuance.

In other words, if the state wants to pay less into the teachers’ pension than fund actuaries recommend — with a very limited exception — it needs to pay off the bonds first.
…..
Malloy did strike a concessions deal with unions that the legislature ratified in July. But Fasano and other Republicans offered that benefit reductions in that deal were not sufficient, especially given that it locked Connecticut into providing those benefits through mid-2027.

A handful of House and Senate Democrats also complained privately that the pension restructuring should be discussed publicly during the regular 2018 legislative session, which begins in early February.

Legislators are not the only ones still studying the challenge posed by the teachers’ pension fund.

Nappier said Wednesday that her office began researching options several months ago on how to to retire the pension bonds and to give the state more flexibility to deal with rising pension contributions.
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Old 09-24-2017, 06:47 PM
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ILLINOIS
RETIRING POLITICIANS
Spoiler:

http://www.bnd.com/opinion/editorial...174796016.html
Quote:
Illinois lawmakers quitting before voters get to fire them
Sometimes chickens come home to roost. Sometimes they fly the coop.

There are 25 Illinois state lawmakers getting out, and 19 of them voted for saddling taxpayers with the 32-percent income tax increase that no one believes really fixed anything.

Between when Gov. Bruce Rauner was inaugurated and by the time the next legislature takes office, 36 percent of the Illinois House and 25 percent of the Illinois Senate will have turned over.

The upside of dysfunction seems to be that if you allow a two-year budget impasse, if you let your deadbeat pile of bills grow from $6.6 billion in 2014 to $16 billion today, and if you ignore pension obligations until they are in a $130 billion hole, then all that will lead to frustration. In fact, it leads to enough frustration to make you want to get out.
Trouble is, mostly the wrong folks are getting out. The King of Illinois will remain. State Sen. Kyle McCarter, R-Lebanon, is one of those leaving.

To the good, Signal Hill Elementary’s favorite parent, state Sen. James Clayborne, is quitting. The No. 2 Democrat in the Illinois Senate decided it is time to go, leaving behind a history of “no comments,” state jobs for close female friends, constituent disdain and head-nodding votes including for that tax hike. (Kiss. Kiss. Miss ya, James!)

McCarter says the exodus is another argument for term limits. Those 25 departees on average hit the 9-year minimum for a legislative pension.
….
Lawmakers know 2018 elections will be tough. When 15 House Republicans crossed over to vote for the income tax hike, Illinois Republican chairman Tim Schneider said he was “confident voters will hold those politicians accountable for choosing Mike Madigan over the people of Illinois.”

Very likely, but they seem to be eliminating themselves before voters do.

CRIMINAL OFFICIALS
Spoiler:

http://www.chicagotribune.com/suburb...915-story.html
Quote:
Column: Lawrence Wyllie’s federal fraud charges and the ‘Lake Wobegon effect’
There's a scholarly theory in finance known as the "Lake Wobegon Effect."

When it comes to CEO pay, the theory goes, no board wants to admit its chief executive is below average. Corporate boards are thus inclined to reward CEOs with compensation above the median.
As a result, pay for top executives across the spectrum continues to spiral ever upward, regardless of performance.

I believe in the "Lake Wobegon Effect," and I think it has bearing on the situation that led to federal felony fraud charges announced Thursday against former Lincoln-Way Community High School District 210 Superintendent Lawrence Wyllie, 79, of Naperville.

I think some school districts, municipalities and other taxing bodies reward "rock star" executives with reputations for getting results and proven track records for creating improvements.

Sometimes it's about status. Everyone likes to score well on "best of" lists. Schools and towns are no different. Reputation-building produces actual benefits in the form of increased property values that enhance the wealth of stakeholders.
….
Prosecutors allege Wyllie used at least $50,000 of school money to build and operate a dog obedience school known as Superdog and paid himself at least another $30,000 in retirement and vacation benefits that weren't in his contract.

Federal authorities also accuse Wyllie of misrepresenting the district's financial health and causing the district to assume at least $7 million in debt. Wyllie faces five counts of wire fraud and one count of embezzlement.
…..
There's another consequence if the federal allegations against Wyllie are proven true. He could lose his pension.
Wyllie this year is receiving a pension of $321,444. That, according to a Better Government Association analysis, is the highest amount paid to a beneficiary of the Teachers' Retirement System — one of several state pension funds for public-sector employees.

State law is crystal clear when it comes to pension recipients convicted of felonies related to their job performance.

"None of the benefits herein provided for shall be paid to any person who is convicted of any felony relating to or arising out of or in connection with his or her service as a member," the Illinois Pension Code states.

Every year, pensions are revoked for retired public servants convicted of felonies, TRS spokesman Dave Urbanek told me on Friday. He said he was unable to readily provide comprehensive figures on the number of felons who have lost their pensions. There are more than 100,000 active TRS retirees.

"It's not uncommon," Urbanek said. "We do have every year a number of members who lose their pensions related to felony convictions. The felony has to pertain to their job performance."
…..
In politics, it's easy to incite suburban and downstate voters to rail against a "bailout" for Chicago pensions. I've often wondered why more Chicagoans don't publicly express their outrage at having to pay the generous pension benefits for suburban school retirees.

You know, those school CEOs who are considered financial wizards because of their ability to produce results. The beneficiaries of the "Lake Wobegon Effect" who impress their boards into rewarding them with compensation packages the average person in Chicago could only dream about.

I wonder what people who scrape by on fixed incomes of $1,000 a month think about public sector retirees collecting pensions of nearly $1,000 a day.

TEACHERS
Spoiler:

https://fixedincome.fidelity.com/ftg..._110.1#new_tab
Quote:
Illinois pension liabilities still loom large on its balance sheet
CHICAGO – A warning from Illinois’ largest public pension fund offers a stark reminder of the state’s most daunting fiscal threat – its $126.5 billion unfunded pension tab.
The Teachers Retirement System said changes that reduce the state's contribution in the current fiscal year will only make things worse later.
Significant pension changes that some believe could pass state constitutional muster were proposed during the regular session and enjoyed bipartisan support but they took a backseat as efforts built -- successfully -- to break a two-year-old budget impasse and stave off a cut to junk bond status.
“The 2018 budget may have stopped the bleeding, but Illinois faces significant structural headwinds that are not going away,” said Thomas Schuette, co-head of investment research & strategy, at Gurtin Municipal Bond Management. “Pensions remain the elephant in the room.”
The budget package included several “reform” measures first pitched by Gov. Bruce Rauner with projected budgetary savings of about $1.5 billion.
They limit end-of-career pension spiking, shift the cost of higher paid employers to local districts, and phase-in the impact of actuarial changes. The package also creates a Tier 3 defined benefit and defined contribution pension plan for some current employees.
The Teachers Retirement System late last month revised the state’s fiscal 2018 contribution that had been certified last fall, lowering it by $531 million to $4.034 billion from $4.564 billion to reflect the changes in law.
That includes the retroactive application of the law smoothing over five years the impact of actuarial changes since 2012. The fund has reduced its assumed investment return rates several times. The smoothing measure is expected to generate overall state budget relief of $800 million.
“The changes enacted this year in the pension funding formula move TRS further away from financial stability and continue to kick the can down the road. Period,” the fund’s executive director Dick Ingram said in a statement. “Cutting the state’s contribution only increases our concern that TRS will eventually become insolvent.”
The fund accounts for $71 billion of the state’s $126.5 billion in unfunded pension liabilities, which TRS called one of the largest in the country and said is a direct result of decades of underfunding by the state. In fiscal 2018, the state’s contribution will fall $2.839 billion short of what the system’s actuaries say is a sound actuarial funding level.
“For every dollar that the state cuts from the TRS contribution now, they will have to spend $3 down the road to replace that revenue because of the interest costs,” Ingram said. “A $530 million funding cut today just puts off the inevitable and will create a payment of $1.6 billion in the future.”

SAVINGS?
Spoiler:

https://www.bettergov.org/news/state...nsion-overhaul
Quote:
STATE BUDGET WHODUNIT RAISES DOUBT ABOUT QUICK SAVINGS FROM PENSION OVERHAUL
…..
In February, Gov. Bruce Rauner proposed a state budget that included creation of a 401k style savings plan for newer teachers and public workers that he said would save $500 million in the 2018 fiscal year that began July 1.

In July, the Democratic controlled legislature enacted its own budget over the objections of Rauner that nonetheless incorporated his pension overhaul. The governor quickly attacked that budget as unbalanced, in part because it counted on the very savings that he earlier had estimated would be reaped from the 401k-style initiative, commonly referred to as Tier 3.

Now, administrators at the state pension systems that must operate Tier 3 are scratching their heads over how exactly the $500 million estimate came to be, while also raising doubts that any savings might materialize for close to two years.

“Right now, my operating thesis is that July 1 of 2019 would be the earliest possible effective date (for Tier 3),” said Richard Ingram, executive director of the Teachers’ Retirement System which administers pension funds for hundreds of thousands of current and retired suburban and downstate teachers. “There is absolutely no way we can do it by July 1 of next year."

To recap, if Tier 3 does eventually prove a money saver for Illinois – whatever the amount – it’s unlikely to be this year or even next.

So how did this critical calculation creep into the current budget-making process? That, too, is a bit of a mystery.
Jason Schaumburg, a Rauner spokesman, said savings estimates were developed by the governor’s staff in consultation with the big state-run retirement systems for teachers, public university workers and general state employees.

But officials of some of those pension plans say they have yet to develop savings estimates because details of Tier 3 are still in flux. Meanwhile, legislative Democrats say they lifted their savings number straight from Rauner because it was his plan and they presumed he knew what he was talking about.
…..
At its core, Tier 3 aims to induce a portion of public workers into shifting their retirement benefits away from traditional pension plans and into more portable retirement investment accounts similar to those in vogue in private industry. Instead of browbeating workers into joining, participation would be voluntary and available only to those hired in 2011 or later, a distinct minority of the current public workforce.

Tier 3 beneficiaries would still get a traditional pension, though one smaller than they would otherwise receive. The upside for them would be a separate retirement account that is portable regardless of career track and one that can grow — or shrink — depending on investment choices.

Workers would contribute up to 6.2 percent of their pay toward the pension benefit. However, an additional 4 percent of their pay would also be deducted to help fund an individual retirement account. Employers like local school districts would then kick in a match for the retirement account ranging between 2 percent and 6 percent of pay.
….
Ingram, TRS’s executive director, explained that one challenge to get Tier 3 up-and-running is that, as written, the new law requires pension fund administrators to create retirement accounts for each worker that qualifies. Such an action requires approval from the Internal Revenue Service, Ingram said.

He said a workaround would be for lawmakers in their fall veto session to pass additional legislation to authorize pension systems to hire investment firms that already have obtained IRS approval to do the retirement account work. Such legislation, he said, would also need to spell out the mechanics of transitioning existing workers into Tier 3 and how to account for pension benefits they have already accrued.

“We can’t really start serious work until we know exactly what it is that we are implementing,” Ingram said.
http://www.wirepoints.com/about-that...linois-budget/
Quote:
About that 'whodunit' on apparently false pension savings in new Illinois budget
The Better Government Association has a “Whodunit” article this week questioning the supposed savings of $500 million dollars per year from adoption of the “Tier 3” changes in the state pension system. Nobody can prove up that number, and it appears very clear only part of whatever savings there are can be realized this year because the changes will take time to implement.

First, here’s the real answer on “whodunit,” which you might not conclude from the article: Somebody on Rauner’s former staff who just made up the numbers — for which Rauner deserves blame. But the General Assembly is just as guilty.

Rauner put out the Tier 3 proposal and the $500 million claim in February, as the BGA points out. Rauner changed out most of his staff in July and August. Think maybe the former staff person responsible is “former” because of things like this? Yup.

The BGA is right to question the numbers. If the claimed savings are near correct it’s just luck because nobody has professionally scored how the changes will work out. I doubt the numbers are right. We’ve written about other surprises, smoke and mirrors in the budget few in the General Assembly understood and this is just another.

Democrats in the General Assembly and some in the press were quick to blame Rauner, saying they just copied Rauner’s proposal and his numbers.” This was adopted at the recommendation of the governor,” said Rep. Greg Harris, the Chicago Democrat who is the party’s chief budget negotiator in the House. Crain’s put their own headline on the BGA story to focus the blame on Rauner: “This Rauner pension stopgap doesn’t add up.”

Oh, come on. The budget with the Tier 3 changes was passed six days after the new fiscal year had already started. It takes no pension expert to know that complex changes can’t be implemented immediately. And did anybody ask whether an actuary had looked at the proposal or if somebody else qualified had scored it? Did they ask to see any analysis? No, not that anybody has identified.
Blame Rauner’s former staff and therefore Rauner because the buck stops with him. But blame all in the General Assembly who voted for it, too.

The biggest lesson here is one you should already know: Don’t believe anything about savings from a pension reform proposal until some credible professional analyzes and scores it.

We’ve been similarly snowed before by both parties. Most recently, Rauner and many Democrats have claimed almost $1 billion per year can be saved from the “consideration” approach to pension reform. The press repeats that unchallenged. But nobody has ever produced an actuarial analysis or anything else credible. I’m extremely doubtful something even close to $1 billion could be saved under that approach.


CONTRIBUTIONS
Spoiler:

http://www.wirepoints.com/school-boa...epoints-guest/
Quote:
School Board OKs 100% Teacher Pension Pick-Up; Board President Is Leading Union Activist – Wirepoints Guest
Usually, people think of a portion as part of a whole or a piece of something, like a slice of pie or your roommate’s share of the rent. Sometimes it can be considered as a single unit, such as “The portions at the Cheesecake Factory are huuuge.”

As reported in the Wednesday Oak Park/River Forest Journal, District 90 in River Forest agreed to a new three year contract with the teachers union, a contract containing what seems to be an innocuous clause regarding portions: “The Board will pick up a portion of each teacher’s required contributions to the TRS (Teachers’ Retirement System) in the same manner as it did in the 2016-17 school year…” This is what is commonly referred to as the “pension pick-up” whereby taxpayers pay some “portion” of a teacher’s 9% pension contribution. D90 is not alone in offering this benefit as other school districts also pick-up a “portion”. As you might recall, the Chicago Teachers Union blew a gasket last year when CPS wanted to end their 7% pension pick-up, a relic of a benefit from 35 years ago that ceased serving its intended purpose – originally given in exchange for a wage freeze – long ago.

So, what “portion” of the employees’ 9% pension contribution will D90 and its taxpayers pay this contract? 9%. The whole portion. Portions usually imply a small percentage of the whole. The contract doesn’t even say “significant portion”. In fact, this new contract merely references the old contract which is equally as vague (I had to submit a FOIA request to get the exact amount). Why not just come out and say taxpayers are paying the entire amount of their teachers’ pensions? Great marketing tool to attract new teachers, right?

Because as with most government contracts, transparency is not the goal. It is easy to hide the true cost of something when you don’t specify numbers. The state’s $120 billion pension liability is unmitigated proof of that. To give you an idea of how significant D90’s benefit is: A private sector worker, having to deduct from his paycheck 7.65% for social security and medicare and 9% for a 401(k) contribution, would have to gross $100,000 just to equal the take home pay of a D90 teacher with a gross salary of $80,000 and no such deductions, a whopping 25% premium. In a time of meager retirement savings and Social Security approaching insolvency, it’s easy to see why a school district would be a bit obscure with such a benefit. The optics of a “free” retirement – one that will easily top most taxpayers – probably wouldn’t go over well in school board meetings.

What makes this contractual vagueness even more concerning is that it was signed under the tenure of D90 school board president Ralph Martire, executive director of the Center for Tax and Budget Accountability. That organization is essentially a union advocacy shop, as I described in an earlier article.

Put aside, for the moment, the deeply concerning fact that a board member representing the taxpayers on one side of the bargaining table earns his living from the dues money collected from the union members of the other side of the bargaining table. Why would he agree to such ambiguous wording in a legally binding contract, or anyone else on the board for that matter? Is this proper representation of the working families in the district?

The 100% pension pick-up in River Forest does predate Martire’s tenure there, but renewing it now, so opaquely, during the pension crisis we have, is the issue.
http://www.wirepoints.com/huh-martir...nsion-pick-up/
Quote:
Huh? Martire is president of a school board that gives 100% pension pick-up -- and hides it?
The thing about writing about Illinois government, particularly pensions, is that you’re forever discovering new things that make your jaw drop.

I only recently learned that the people of River Forest saw fit to make Ralph Martire president of their school board. He runs the Center for Tax and Budget Accountability. The CTBA is a union propaganda shop we’ve often criticized for distortions and half-truths.

I was truly skeptical when I reviewed today’s guest piece by Nick Binotti about that school board hiding a 100% teacher pension pick-up in their new school contract, so I looked at the contract and Nick’s FOIA answer. Good work, Nick. Read his article linked here.

It’s not like River Forest has the cash for such a thing. Their firefighter and police pensions are only 58% and 56% funded, respectively. (That’s from the most recent state report, which is 2014 numbers, so it’s probably much worse today.) Their firefighters and cops should be furious.
https://www.illinoispolicy.org/river...contributions/
Quote:
RIVER FOREST DISTRICT 90 WILL PAY 100 PERCENT OF TEACHER PENSION CONTRIBUTIONS
In the midst of Illinois’ pension crisis, River Forest District 90 has agreed to pay 100 percent of teacher contributions to the Teachers' Retirement System – and it did so secretly.

In Illinois, negotiations between local governments and government workers are done in secret. That’s a problem for taxpayers.

It means residents can be saddled with expensive contract provisions and can’t react until the contract is a done deal. And by then, it’s too late.

The latest example: River Forest District 90. That school district just renewed an agreement to pay 100 percent of teachers’ pensions contributions – the share the teachers are supposed to pay – as an additional benefit.
….
A big problem is the secrecy of District 90’s negotiations. Bargaining between the union and school district happened away from public scrutiny. And that means taxpayers couldn’t find out the details of the deal until it was too late.

What’s more, the contract was negotiated under the leadership of School Board President Ralph Martire – whose own organization, the Center for Tax and Budget Accountability, or CTBA, is heavily funded by government unions.

That means taxpayers in District 90 were essentially left without true representation in the negotiation process.
…..
Taxpayers need real representation in contract negotiations

It’s also nothing out of the ordinary to have a school board representative who has intimate ties with the union.

Of course, that leaves taxpayers without real representation at the bargaining table.

District 90’s school board president, Ralph Martire, is executive director of the CTBA.

CTBA has strong union ties. Its board members include the executives of the Illinois Teachers Federation, Illinois AFL-CIO and the Illinois Education Association – to name a few. A large portion of the group’s funding is derived from the American Federation of State, County and Municipal Employees, the Service Employees International Union, the Illinois Education Association, and the American Federation of Teachers. These unions or their affiliates gave hundreds of thousands of dollars to CTBA from 2012 to 2016, according to the U.S Department of Labor.
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