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  #1281  
Old 09-24-2017, 06:49 PM
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Mary Pat Campbell
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KENTUCKY
CRISIS
Spoiler:

https://pensions.ky.gov/Pages/index.aspx
Governor’s page
Quote:
CRISIS

$64+Billion
Unfunded Pension Liability
per consultants

$6+Billion
Unfunded Health Care Liability

$15,000
Liability for each Kentuckian

$7Billion
Negative cash flow from FY 2006 through FY 2016
http://www.kyforward.com/stephen-bya...ions-disaster/
Quote:
Stephen Byars: Why everyone should care that Kentucky’s public pensions are a disaster
I understand a discussion about pensions is about as welcome as Lyme disease. But, while much has been written about who is to blame for Kentucky’s pension crisis and what the impact might be to participants in the various retirement systems, very little has been written about why those of us who don’t have pensions should care.

Here is why we should care: because if this is not fixed, Kentucky will slide back rather than be able to invest for our economic future.

Enjoy the state parks? You might have to take the kids to Opryland instead. Appreciate the opportunities that our public schools and public universities offer? Well, get ready to sell more wrapping paper and explain to your student that history didn’t end in 2002, despite when the textbook was published.

As financial planners, my firm and I often work with young clients who have high debts, usually student loans. The first step toward their financial freedom is to create a plan to pay off their debt. Only then can they pay themselves first and invest in their future selves. Kentucky must develop a plan for this massive pension debt so we can start investing in our future.

A quick review of the problem:

$36 Billion is the total of the pension systems’ unfunded liability.
…..
The Governor is expected to call a special session of the legislature later this fall to address this pension problem.

Here is a secret: at best, whatever changes they make to the retirement plans will only stop the hole – the $36 Billion – from getting deeper. It won’t fill the hole.

The hole won’t get addressed until the 2018 regular session when the legislature will write the budget. That’s when they will have to figure out how to fund that $36 Billion. The preliminary estimate of how much additional state money is needed to get us on the right path is $600 Million — each and every year for a very long time.

Here are the legislature’s three broad options:

1. Do nothing, always a viable option in Frankfort, and hope the changes they make in the special session will not only stop the hole from getting deeper but will eventually help fill the hole too.
This option is not only irresponsible but it has consequences too – such as a lower credit rating. Similar to a personal credit score, that will increase borrowing costs for things like schools and infrastructure. Doing nothing will not only not solve the problem, it will make things worse.
2. Cut roughly $600 million from the state budget each year and redirect that money to pay pensions. There is absolutely no way that can happen without cutting investments in our future. In fact, finding dollars of this magnitude would even require cuts to the main funding formula of K-12 education that, until now, has always been off the table. Senator Chris McDaniel, chair of the Senate budget committee, was recently quoted by the Courier as saying all areas of government would have to be cut 12%, including K-12 education, to fill the hole. A 12% cut to K-12 is the equivalent of cutting roughly $350 per child in every school district in the state. Think if they have to cut K-12 that your favorite item in the state budget – such as higher education, state parks or healthcare for the poor, etc. – will be spared, think again. Not a viable option.

3. Comprehensive tax reform. Adding 1 penny to the state sales tax will raise approximately $570M each year. If the base on which sales tax is charged expands, it would raise more.

http://www.courier-journal.com/story...ers/549085001/
Quote:
Kentucky's pension crisis: You're on the hook, and this is what you need to know
For hundreds of thousands of Kentucky public employees and retirees, and for the elected officials responsible for dealing with the state's pension crisis, the moment is nearly at hand.

Gov. Matt Bevin has promised to call a special legislative session this fall to tame the state's pension debt — which he estimates at a whopping $15,000 for each of Kentucky's more than 4 million residents.

Anticipation is building because the governor is still developing — and has not revealed — his proposals.

The stakeholders include more than public retirees or current teachers and government workers who may be nervous about their benefits.

You are a stakeholder. That's because any solution will have a profound effect on funding for the services you receive.
….
How big is Kentucky’s pension problem?

Big. It can be fairly called a crisis.

The latest official reports put Kentucky’s pension debt at $33 billion, plus $6 billion for retiree health plans. That means Kentucky is at least $39 billion short of what it needs to pay off pension and health care obligations for retirees over the next 30 years.

That number will go up to at least $43 billion because of new, more conservative assumptions adopted for Kentucky Retirement Systems plans this year.

The Bevin administration says the debt is actually much worse. Its new website puts the debt figure at more than $64 billion for pensions plus the $6 billion for the retiree health plans.
……
What is the "inviolable contract," and does it mean my benefits are safe?

Pension recipients and employees say they are protected by an “inviolable contract” – language within state law that guarantees they get the benefits promised when they were hired.

But others — the fiscally conservative Bluegrass Institute, for instance — have different opinions of exactly what is protected by the inviolable contract. And then there are a few important parts of current benefits for teachers that all sides agree are not protected, such as a benefit that lets teachers accumulate unused sick days over their careers to enhance their benefits.

This question will be a lot easier to answer after the Bevin administration consultant (PFM Consulting Group) issues a report on Monday with options on how the pension crisis can be addressed.

Is Kentucky’s pension problem the worst of any state?

Kentucky is clearly among the worst.

Last September, Standard & Poor’s ranked Kentucky’s pension funds as the worst-funded of any state, with just 37.4 percent of the money it needs to pay obligations to retirees. Moody’s has ranked Kentucky as having the third-highest pension debt when measured against a state’s capacity to pay it off.
One of Kentucky’s pension plans — the one that funds pensions of most state government retirees — is the worst-funded public pension plan in America with less than 16 percent of the money it needs to pay obligations.
….
Are Kentucky’s pension benefits too generous?

The benefits in Kentucky Retirement System plans compare “highly favorably” to those offered by Kentucky’s 12 largest private employers, according to PFM Consulting Group, a consultant retained by the Bevin administration to look at the pension problem.
PFM noted that private-sector employers have largely shifted to 401(k)-style retirement plans and rarely offer retiree health care benefits.

PFM reports teachers also get a "comparatively generous overall benefit." The consultant reported that teachers can retire at any age with 27 years of service or at age 55 with 10 years of service. "As a result, according to actuarial reports, the average age at retirement of a TRS member is 55 - below the age when teachers in many other states are even eligible for full benefits," PFM reported.

Kentucky public employees and retirees say that they make, or made, much lower salaries than their private-sector counterparts and their total compensation of wages plus benefits is lower overall. The promised benefits, many say, are why they took a lower paying job. They note they've given up some benefits in reform efforts of the last decade. And they warn a reduction in benefits to current workers and teachers will trigger an exodus that will drive up pension costs and hurt the quality of public services.
….
How did we get into such a big mess?

For the past 20 years or so, the state did not put in nearly enough money.

For most plans over that time, governors did not propose, and the legislature did not appropriate, as much into the plans as was needed. These governors and legislatures were frequently struggling to fund schools and other needs amid recession economies.

Also, in the 1990s when the pension plans were fully funded, the General Assembly approved benefit increases without funding them — including an expensive cost of living benefit increase for Kentucky Retirement System members in place between 1996 and 2012.
http://www.courier-journal.com/story...ler/670350001/
Quote:
Immediate pension action needed; Kentucky's economic stability at risk | Kent Oyler
Kentucky’s public pension systems are in crisis. The issue is sprawling and complicated for sure, but we simply cannot afford to defer action. Do not believe those that say this is a matter of differing opinions. This is a math problem and the numbers are ominous. Our elected leaders must enact realistic solutions quickly if we are to maintain our state’s economic stability.

It is an understatement to say that Kentucky’s eight pensions systems are severely underfunded. Current estimates suggest that the commonwealth’s taxpayers must come up with an extra $1 billion each year for the next 30 years just to make up for the shortfall. To put that into perspective, Kentucky’s entire state budget is only $10.6 billion. The accumulated liabilities associated with public retirement systems affect every aspect of our state’s financial security.

If our commonwealth’s bond rating continues to plummet in the face of all of this debt, we will see less economic activity and even higher borrowing costs. Necessary spending cuts will significantly reduce funding of vital public services including K-12 schools, colleges and public safety. We cannot continue to bury our heads in the sand. We must act in 2017 to save these troubled systems, or we will find pensions consuming a greater and greater share of our budgets.

The first thing legislators must do is to pass a long-term plan to ensure the longevity of the retirement system. Other states have taken steps to pay down their unfunded pension liabilities by using a level dollar approach, similar to how most of us pay down our home mortgages. The current method of paying a percentage of payrolls is, according to the PFM report, the largest contributing factor of the unfunded liabilities.
….
Kent Oyler is president and CEO of Greater Louisville Inc.
http://www.courier-journal.com/story...its/661009001/
Quote:
Kentucky pension crisis: Retirees ask board to protect their benefits
FRANKFORT, Ky. — The Kentucky Retirement Systems board deferred action Thursday on requests that it urge Gov. Matt Bevin and lawmakers to protect current benefits of public workers and retirees when they consider pension reform later this year.

Bevin appointed most of the board's members including its chairman, John Farris, who anticipated the requests and remarked at the outset of the meeting that the board oversaw the systems and managed its investments, but did not "set pension policy."

During the public comment portion of the meeting Jim Carroll, president of the advocacy group Kentucky Government Retirees, asked the board to pass a resolution announcing its intention to defend the constitutional rights of retirees and employees — even if it meant going to court.

While Carroll's request produced no action, later in the meeting one of the board members, Jerry Powell, who was not appointed by Bevin but elected to the board by members of the County Employees Retirement System, made a motion that the board urge Bevin and the legislature to honor the contractual rights of all public employees.
….
Among those recommendations are some that advocates for retirees and employees say violate the so-called "inviolable contract" within state law that assures benefits granted an employee at the time of his or her employment will not be diminished.


Carroll said after the meeting that past retirement system boards, and similar boards in other states, have taken such positions advocating rights of their members.

"We either have contract rights or we don't. This board either has a duty to enforce those rights, or it doesn't," Carroll said. "If it has taken a position that it doesn't have that duty, I would like for them to transparently explain why they don't believe they have that duty."
http://wkyufm.org/post/lawmakers-tel...sion-town-hall
Quote:
Lawmakers Tell Public Employees 'Don't Do Anything Rash' at Pension Town Hall
Some Kentucky lawmakers say drastic recommendations issued to pay down the state’s pension debt have no legislative support.

Legislators from south central Kentucky addressed a packed room last night of public workers and retirees in Bowling Green concerned about how pension reforms will change their benefits. Among them was Terry Eidson who retired from state government in 2006.

"Employees and retirees are feeling a little devalued and demeaned in all this, and it just doesn't sit well," Eidson told WKU Public Radio.

Kentucky has a pension deficit of at least $30 billion, threatening the state’s ability to pay retirement benefits for current and future retirees. In order to return the pension plans to solvency, consultants have recommended an end to defined-benefit pensions for public employees in favor of less generous defined-contribution accounts and a raise in the retirement age to 65 for most workers.
http://www.dailyindependent.com/news...32ed9481c.html
Quote:
Special Report: Ky. pension obligations loom in the Tri-State
ASHLAND The Kentucky pension crisis will shred the budgets of this region's Kentucky counties and cities in two years if profound changes aren't made to the system, according to a memo recently sent to government leaders throughout Kentucky.

On Sept. 7, the office of Kentucky State Budget Director John Chilton sent a lengthy correspondence to all Kentucky governments enrolled in the County Employees Retirement System. The memo projects staggering pension payment increases across the state along with huge cost increases for Boyd, Carter and Greenup counties — and local municipalities — over the next two years in the CERS system.

Chilton wrote in the memo that rates for pension contributions are expected to be "substantially higher" starting in the 2018-2019 fiscal year. Chilton's memo goes on to break down stagggering cost increases for just the CERS system.

In this region, the city of Ashland faces combined payment increases of nearly $2 million for just one year to pay pension obligations for hazardous and non-hazardous employees in the CERS starting in Fiscal Year 2018-2019. In Fiscal year 2017, the city's contributions to the CERS system were a combined $3.3 million. By fiscal year 2019 that number is projected to jump to a combined $5.3 million for one year.

The city of Flatwoods faces a nearly $100,000 increase, or 50 percent spike, in just one year to meet its pension obligations for non-hazardous employees. The city of Morehead is looking at nearly $300,000 in increased costs for a single year to fund its pension obligation for hazardous and non hazardous employees. In Greenup and Carter counties, public institutions are looking at the same types of numbers -- the Greenup County Board of Education faces a $400,000 increase in pension obligations in just one year. The Carter County Board of Education is looking at a $583,000 increase in just one year.

And, perhaps most importantly, those projected increased costs are just for the CERS system, meaning actual cost increases when contemplating all of Kentucky's retirement systems will be exponentially higher. In regards to school boards, for example, the CERS enrollment usually pertains to bus drivers, teachers aides, etc. It does not represent the costs associated with certified personnel, meaning the increased pension costs to school boards will likely be profoundly higher than what is represented in the CERS numbers.
http://www.amnews.com/2017/09/21/ken...nefits-system/
Quote:
Kentucky’s pension problem stems from defined benefits system
There are two types of pension systems: the defined benefits program and the defined contributions program. It is telling that private employers totally abandoned defined benefits pensions in the 70’s and 80’s, while almost all public-sector employers still rely on defined benefits pensions. Private sector employers pay for pensions with their own money, while public-sector employers pay for pensions with someone else’s money.

The mountain of unfunded pension liabilities is entirely due to Kentucky’s addiction to defined benefits pension programs. On a per capita basis, Kentucky holds the seventh highest unfunded liability of all states. The state cannot begin to recover until it eliminates defined contributions.

A defined benefits pension system is one that promises to pay the retiree, say, 80 percent of their highest real salary and complete medical care until they pass, while a defined contributions system promises to pay the retiree whatever was paid into his retirement and matched by the retiree before retirement.

There are two brutal facts faced by employers under defined benefits. The employer has absolutely no control over the future cost of healthcare or the retiree’s future cost of living. On the other hand, the employer is not responsible for future healthcare cost nor the cost of living under defined contributions retirement systems.

Some readers may be concerned that the typical retirees are in no better position to judge these future costs than are their employers. This is true, but there are cheap and sophisticated, highly diversified investment funds designed to provide for secure retirement. Every reputable private money management firm has access to these products.

Why does something with such adverse consequences have such a lasting grip on our state government? The answer is because defined benefits pension systems give rise to a multitude of opportunities for corruption — like the five pension fund managers in the Kentucky system who had no experience or qualifications in managing investment funds. Management of those funds allows the manager to direct the funds to his cronies, lowering the yield on the fund and weakening the pension system. In some states, members of the legislature can pass special bills that make their friends eligible for the defined benefits pension system. Their access is typically unfunded by the bill.

By far and away the most corrupting feature of the defined benefits pension system is the role it plays in state budgeting. Under the established budgeting system, the state budgeters must estimate the return they will earn on the pension funds and estimate how much the pension liabilities will grow. The difference between the growth in liabilities and what they will earn on current pension funds is the amount they must withdraw from general revenues and add to the fund. For year after year, they under estimate the amount to be deducted, so the unfunded pension liabilities grow and the state spends more than it is entitled to spend.
This steady hemorrhage of pension funds will not be stopped until the state abandons defined benefits retirement systems. This eventually would be achieved if all new hires were given defined contribution retirements.

Furthermore, defined benefits retirement systems are a cancer on the state’s creditworthiness. The mountain of unfunded liabilities will cause a significant downgrade in the state’s bonds and that will cause significant reductions in state services across the board. This is the dreaded “Greek solution.” Note, this cannot happen under a defined contributions retirement system because the state is required by law to make the necessary payments to third parties who manage the retiree’s funds — there is no “fudge factor” in the system.

Bob Martin is Emeritus Boles Professor of Economics at Centre College.
http://www.bgdailynews.com/news/loca...3a6b107b6.html
Quote:
Local governments, schools would be hit hard by pension hike
A substantial proposed increase in mandated employer funding to shore up the state retirement system could have a large impact locally. The increase and other cuts already have Warren County Public Schools looking at a potential tax increase.

Last week, the state budget office sent a letter to employers in the County Employees Retirement System outlining proposed increases in the employer contribution for the coming fiscal year.

The city of Bowling Green would be hit hardest by the hike, costing it an additional $3.6 million a year; followed by WCPS, $1.6 million; Warren County government, $743,000; and the Bowling Green Independent School District, $651,000.

The percentage increase varies by classification of employee. Currently, agencies contribute 19.18 percent of an employee’s salary for jobs classified as nonhazardous, a figure proposed to be increased to 28.86 percent. For employees in the hazardous job category, the proposed increase is from 31.55 percent of an employee’s salary to 56.17 percent.

For school districts, the hike comes on top of expected budget cuts, as Gov. Matt Bevin ordered state departments last week to cut their budgets about 17 percent.
….
The large hike is being proposed as a way to shore up the troubled Kentucky Retirement System, of which the CERS is a part.

Bowling Green Assistant City Manager Katie Schaller-Ward said the city had inclinations the proposed hike was coming, so city officials “will review the budget and determine where we can extract” the extra funds.

“We were expecting a number like this,” she said, adding that the legislature could modify that proposed increase. “We’re hoping for a compromise,” she said.

There has been repeated discussions of a possible special legislative session to deal with the state’s pension crisis, but no session has been scheduled.

Warren County Treasurer Greg Burrell estimated the increase to the county from the pension funding hike would be about $743,000, adding that the county had not yet formulated a plan to deal with the increase.

The long-discussed CERS hike prompted Bowling Green city commissioners in August to pass a nonbinding resolution seeking a split of the CERS from the KRS.

The state retirement system, which administers the CERS as well as other public employee retirement systems, has a reported $26 billion or more in unfunded liabilities. The CERS is the most solvent of all the retirement funds under KRS and has about $12 billion in assets – 73 percent of the total assets in the KRS.

The Kentucky League of Cities, which represents city and county governments, has been pushing for years for a separation of the CERS from the KRS.

The state legislature would have to approve a CERS split from the KRS.
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  #1282  
Old 09-24-2017, 06:49 PM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
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KENTUCKY
SPLITTING STATE AND COUNTY PLANS
Spoiler:

http://www.courier-journal.com/story...ers/673802001/
Quote:
Kentucky pension crisis: Plan calls for Louisville workers to exit troubled state system
Metro Council plans to take up a bipartisan measure this week calling for local public workers to be separated from a woefully underfunded state pension plan, a move that would fly in the face of a consultant's recommendations to Gov. Matt Bevin.

Under the nonbinding proposal that will be voted on Thursday, city and Jefferson County Public Schools employees would leave Kentucky Retirement Systems, an umbrella system that includes the County Employment Retirement System under which they are covered. (The move would not include teachers at JCPS, who are covered by the Kentucky Teachers Retirement System.)

"Cities and counties have always paid what was asked of them," said Councilman Bill Hollander, a Democrat who is sponsoring the measure along with Republican leader Robin Engel. The county employees system "is much better funded than any of the other systems, and it's on an upward trajectory. Changes may need to be made, but they should be made by people who are interested in local retirement funds."
http://www.courier-journal.com/story...tem/686085001/
Quote:
Kentucky pension crisis: Metro panel supports splitting local workers from state system
After back-to-back hearings Thursday, a Metro Council committee advanced a measure that supports getting most local workers out of the troubled Kentucky Retirement Systems.

The largely symbolic vote comes as public employees, city leaders and state lawmakers wait anxiously for Gov. Matt Bevin to call a special session that will tackle pension reform.

Bevin's administration says the state's pension debt is at least $64 billion. The city's retirement costs are expected to skyrocket from $76.5 million this year to $120 million next year, and Jefferson County Public Schools' cost would go from $36.4 million this year to $54.8 million.

By a voice vote, the council's government accountability committee approved a resolution that calls on the state legislature to take city and most Jefferson County Public Schools workers who are under the County Employment Retirement System away from the state system.

Council Republican leader Robin Engel, who co-sponsored the resolution with Democratic leader Bill Hollander, said he was pleased with the information about the need to separate CERS. But he urged the committee to slow down and get more input, particularly from any opposition.
"It could be weeks before the governor calls a special session," he said. "Why push this in a quick fashion without getting more dialogue out there?"

But Hollander said it is important to push the measure through quickly to convey the city's message.
"At some point in the near future, none of us know exactly when, the governor will put out a call for a special session," he said. "And I think it's important that the potential separation of CERS be on that call. I would hate for us to be considering something and the governor to put out a call and we haven't had our voice heard."

An hour earlier, Kentucky League of Cities officials made an impassioned case to the council's Budget Committee arguing that CERS plans are far more solvent than other retirement plans within Kentucky Retirement Systems.

401(k) s
Spoiler:

http://www.nkytribune.com/2017/09/ja...pension-plans/
Quote:
Jason Bailey: Proposed 401Ks cost most than Kentucky’s existing defined benefit pension plans
The 401k-type defined contribution (DC) plans proposed by PFM in their final report would cost more than Kentucky’s existing defined benefit (DB) plans, according to data from PFM itself and the systems’ actuaries.

Under a switch, the state would pay more for a plan that reduces the retirement security of its workers.

PFM’s proposed DC plan would require employees to make a minimum three percent contribution to their accounts and employers to make a minimum two percent contribution. The employer would then be required to match 50 percent of employee contributions up to an additional 6 percent, and there would be vesting requirements for employees to access what employers contribute. For workers in the Kentucky Employees Retirement System (KERS) and County Employees Retirement System (CERS) non-hazardous plans (along with the judicial and legislative systems), PFM projects the average employee will put in 6.5 percent of salary in total with a net employer contribution of 3.2 percent.

The DC plan would replace the existing hybrid cash balance plan for new employees in those systems, which the state put in place in 2013 (and is known as Tier 3). However, the cost for employers of the cash balance plan is very low already. The price tag for a pension plan is known as the normal cost, which is what actuaries say must be contributed each year so enough money is in the systems to pay workers’ benefits when they reach retirement (the other part of pension costs are catch-up payments when past contributions are not made and/or assumptions not met).

For workers in the KERS non-hazardous plan, the employers’ normal cost is only 2.24 percent of a worker’s pay, according to Kentucky Retirement Systems (KRS), with employees contributing 5 percent (employers’ normal cost is 1.27 percent of pay for CERS non-hazardous). That number is lower than the 3.2 percent employer contribution described above for the proposed DC plan, as shown in the graph below.

PFM’s plan would also put new teachers in a DC plan, which would necessitate moving them into Social Security (that’s because their DB plan is a Social Security replacement plan but a 401k-type plan is not). The employee and employer cost for the DC plan is similar to the cost for other state employees, but both employers and employees would also each need to make the required 6.2 percent contribution to Social Security.

However, Social Security in itself is more expensive than the employer normal cost of the existing DB plan for teachers, which is estimated at 5.84 percent of pay, and the total cost of the new plan is much higher, as shown in the graph below. PFM admits to this additional cost in their report, but says already-strapped school districts rather than the state could pick up the cost of Social Security contributions.
[img] http://www.nkytribune.com/wp-content...-Teachers2.jpg [/img]
In both cases, then, moving to a 401k plan would increase costs to fund retirement benefits for new employees rather than reducing them. And of course any change for new employees does nothing to reduce Kentucky’s substantial unfunded liability from the past, which is the major challenge the state faces.

But the added cost of switching to 401ks is even higher than that, because a switch involves closing the existing defined benefit plans to new entrants. As we note in our recent report, that will make it more expensive to pay off the closed plan’s liabilities over the coming decades. The added cost comes from the closed plan no longer being balanced by workers of different ages, which means it must take on a more conservative investment portfolio that will earn lower returns.

Studies from 14 states have shown that closing a plan makes it more expensive to pay off legacy debts.

What’s more, these added costs would result in substantially lower retirement benefits for employees. As the graph below shows and as we describe here, it costs 42 to 93 percent more to provide the same benefit through a DC plan that an employee receives through a DB plan. DC plans are inefficient, earning lower investment returns and, unlike DB plans, not allowing workers the protection of insuring against each other about how long they will live.



Kentucky needs ideas that work to reduce its unfunded pension liabilities. Moving employees into 401k-type DC plans is actually more expensive, increases the cost of paying off existing liabilities and harms retirees while making it much more difficult to attract and retain a skilled workforce.


.
Jason Bailey is founder and Executive Director of the Kentucky Center for Economic Policy. He is the author of numerous reports and analyses of economic and fiscal issues facing the Commonwealth
http://www.the-messenger.com/news/lo...cffb56b0e.html
Quote:
Pension crisis: 401(k) factor
FRANKFORT, Ky. - To the taxpayer, the solution to Kentucky’s pension crisis may seem simple: Just move those public employees from pensions to a 401(k).

Indeed, Kentucky’s pension consultant — PFM Group — recommended that very thing when it released a report in August calling for moving state and local government employees in non-hazardous jobs to a 401(k)type benefit plan — as well as teachers hired in the future.

The move, PFM says, would stabilize costs and significantly reduce the state’s risks — particularly the risk that pension plan investments will not perform as expected. Reducing risk, PFM said, is a “particularly critical” goal given the severe funding shortages in a pension system that’s saddled with debts of at least $40 billion by official estimates but that the Bevin administration says actually exceed $64 billion.
…..
Pensions

“I’m hoping public pension reform is not the kind of easy solution of, ‘Oh, the private sector does it, why don’t we?’ ” said J.P. Aubry, associate director of state and local research at the Center for Retirement Research at Boston College. “We want to encourage retirement security, and the current model for retirement in the private sector has made retirement more precarious.”

Keith Brainard, research director for the National Association of State Retirement Administrators, said risk doesn’t disappear under a 401(k) plan.

“These proposals shift that risk from the state and its public employers and taxpayers and put it all on the workers. In fact, there’s going to be more risk because they are no longer in a group that can manage the risk much better,” he said.

Whether the moves actually will save the state money is a question being hotly debated.

Jason Bailey, executive director of the Kentucky Center for Economic Policy, of Berea, said, “Moving employees into 401(k)-type plans is actually more expensive … and harms retirees while making it much more difficult to attract and retain a skilled workforce.”

Not so, says Bevin administration Budget Director John Chilton.

“The narrative that it costs more to enroll new employees and new teachers in a defined contribution retirement plan is false. The truth is, switching doesn’t cost any more taxpayer dollars,” Chilton said in a short statement. “The PFM report shows it will also provide a generous retirement benefit for future teachers and state workers.”
…..
Aubry, of the Center for Retirement Research, said reducing risk to the state is important, though he said it will do little if anything to reduce the current large debt. And he warns that there are “serious potential issues with retirement security” under the design of most current defined contribution plans.

“The biggest concern is that employees and employers very often do not contribute enough” to a 401(k) plan, Aubry said.

He said the average balance for people age 55 to 64 in a 401(k) or individual retirement account is $111,000. “That’s far less than needed for a secure retirement,” he said.

Brainard, of the National Association of State Retirement Administrators, said only three states (Alaska, Michigan, Oklahoma) and the District of Columbia use a 401(k)- style approach as their only or primary benefit plan, though several others offer optional or supplemental employee savings plans.

Brainard said in designing a 401(k)type plan, Kentucky policy makers need to keep in mind one principle.
“There are reasons for providing a retirement benefit and they all really revolve around the ability of the state and its political subdivisions to attract and retain the talent that it needs,” Brainard said. “... One risk that needs to be considered is the risk that services will not be able to be delivered in a costeffective and timely manner.”
http://www.nkytribune.com/2017/09/do...hing-to-401ks/
Quote:
Dorsey Ridley: Kentucky’s public pension faces very real challenges not met by switching to 401Ks
While I appreciate the Governor’s efforts to address Kentucky’s pension challenges, I fear the proposals would only enhance our problems further. Kentucky’s public pensions face very real challenges, but imploding the pension systems that provide benefits promised, and legally protected, to our current and retired public employees — city, county, state, teachers and other school staff — is not the way to solve the crisis.

Some Philadelphia consultants hired at $556,300 and paid nearly $1.2 million in Kentucky taxpayer money (You literally cannot make this stuff up.) recently recommended switching most public employees to a 401(k)-type retirement plan as a way to “save” public pensions.

It’s as if anti-pension ideologues are using the smoke screen of a “crisis” to get rid what they’ve long sought – the dismantling of public pensions in Kentucky. Pensions aren’t the enemy. It is the retirement plan 14 percent of Kentuckians depend on, according to The Lexington-Herald Leader.
The average pension benefit in Kentucky is $1,983 a month, or $23,791 per year, according to the National Institute on Retirement Security. A less secure retirement from a 401(k)-type retirement plan would cause an increase in public welfare spending as more workers retire into poverty. Pensions also support local economies and help Kentucky communities thrive. The institute found that each $1 paid out in pension benefits supports $1.43 in total economic activates in communities like Henderson.
Shifting public employees to a 401(k)-type retirement plan would not reduce the liabilities but will make the funding challenge worse, according to a report by the Kentucky Center for Economic Policy. It would also undermine the Commonwealth’s ability to attract a skilled workforce and would weaken local economies. Kentucky public employees already make less in total compensation than comparable workers do in the private sector, according to the report.
A switch to 401(k)-type retirement plans would close the existing pension plans to new members, which would lower investment returns on the existing plans’ assets over time, according to the report. That would increase the costs to pay down the unfunded liabilities – exactly the opposite of the goal I thought we were trying to achieve.
One needs to look no further than the states that have closed their pension systems to learn of the costly ramifications that follow. In 1997, the Michigan State Employees’ Retirement System pension plan was closed and new hires were placed in a 401(k)-type retirement plan, like the one those Philadelphia consultants recommended for Kentucky. At the time of the closure, the pension was funded at 109 percent, according to the National Public Pension Coalition. With no new employees paying into the pension and an aging demographic, plan costs soared and the funding level dropped. By 2012, the plan was severely underfunded at 60.3 percent, according to the coalition. After 20 years under the 401(k)-type retirement plan, the state’s Office of Retirement Services found that the median balance in these accounts was just $37,260.
….
Governor Bevin has promised that he is going to call us into a special session to address the pension issue. Thus far, I have not seen a proposal from the Governor or the Republican leadership, but be assured, I will keep you up-to-date on any developments.
We will return to Frankfort January 2, 2018 for the budget session. I encourage you to stay in touch to share your input on the issues facing our Commonwealth. You may leave me a message by calling the toll-free Legislative Message Line at 800-372-7181. You can also e-mail me directly at Dorsey.Ridley@LRC.KY.GOV.


Dorsey Ridley is a Senator from the District 4 that includes Caldwell, Crittenden, Henderson, Livingston, Union and Webster counties. He is Minority Caucus Chair.

https://www.illinoispolicy.org/kentu...risis/#new_tab
Quote:
KENTUCKY GOVERNOR PUSHES 401(K)S TO HELP RESOLVE BLUEGRASS PENSION CRISIS
Despite the smaller relative size of its burden, Kentucky is considering making far more comprehensive changes to its public sector retirement systems than Illinois ever has.

Kentucky’s state pension crisis is bad – one of the worst in the nation. But it isn’t as dire as that of Illinois, and the governor of the Bluegrass State wants to keep it that way.

Kentucky Gov. Matt Bevin is promoting 401(k)s as the main solution to the state’s crisis going forward, even though Kentucky’s retirement debt burden per household is just half of what Illinoisans face.

Kenucky’s pension debt has grown significantly over the past decade. The state’s pension systems were almost fully funded in 2000, but have been declining ever since. Now, lawmakers are looking for solutions so retirement costs for government workers don’t get worse.

“The net result…[is] something more like a 401(k)-type, defined contribution type, with matching, with the ability to be portable. And that’s in line with what’s happening everywhere else in the real world, and frankly it’s what will have to happen,” Bevin said.

Each Kentucky household is on the hook for $22,600 in pension and retiree health insurance debt. That amount, by any measure, is already at crisis levels. Illinois’ pension crisis, by comparison, is about double that, with households burdened with over $43,000 in retirement debt.
http://www.wpsdlocal6.com/2017/09/19...ers-classroom/

Quote:
Kentucky pension crisis could force dedicated teachers out of classroom
MARSHALL COUNTY, KY – How will Kentucky’s pension crisis affect your child’s education?

The recommendation from consultants that some state retirees convert to 401Ks instead of a state pension plan has left some state workers desperate for answers.

Public school systems across the state have asked for help. Tuesday’s is one of several forums where state leaders are meeting with local teachers to answer their questions and address their concerns.

State leaders are hoping they’ll inspire teachers to talk to their legislators, while teachers say they feel the state broke a promise.
….
Right now, 13,500 teachers are eligible for retirement in Kentucky. That’s why state education leaders say if we don’t fix the pension problem, your child’s education could be at risk.
Kentucky Education Association President Stephanie Winkler says that’s why they’re helping host the forums, hoping they can ease fears in the teaching community. They also encourage teachers to contact their lawmakers.
….
Winkler says if the state went to a 401K plan for teachers, most teachers would walk away with $30,000 to $40,000 for the rest of their retirement.
http://www.courier-journal.com/story...ion/626423001/
Quote:
Kentucky pension crisis: Are 401(k) plans the solution?
…..
Save money, or cost more?

McNeeley said the recommendations on shifting to 401(k)-style plans would lead to reduced spending for each plan in the short and long term.

He pointed to tables in PFM's recent report that show the recommendations would save $123.8 million in 2018-19 — savings that would grow to $212 million in 2028-29.

But Bailey, of the Kentucky Center for Economic Policy, said his study of the PFM report does not show how the consultant arrives at those savings, or whether they account for additional costs such as the cost for either the state or local school boards to cover Social Security payments for new teachers.

Consider this: Hey, the stock market is up. Doesn’t that help?

Last month Bailey and groups representing public workers released a report concluding that the move to 401(k)s would cost more. That's because shutting down existing plans that still must pay off accumulated liabilities would no longer have new employees joining them.

"The added cost comes from the closed plan no longer being balanced by workers of different ages, which means it must take on a more conservative investment portfolio that will earn lower returns," Bailey said.

Bailey emphasizes that pension reforms of 2013 already put new hires into a hybrid plan that combines features of a traditional pension and a 401(k). The state and local government costs for new workers under this plan is already very low.

Bailey said his analysis of the PFM report and Kentucky Retirement System's data shows the government's costs would be slightly higher under the proposed 401(k) approach for future hires.

Reporter Tom Loftus can be reached at 502-875-5136 or tloftus@courier-journal.com.

REFORM IN GENERAL
Spoiler:

http://www.kentucky.com/opinion/op-e...174897376.html
Quote:
Consultant ideas on Ky. pensions violate law

Kentucky has the strongest public-pension contract protection of any state in the country. The legislature long ago created the “inviolable contract” for all the major plans, and the Kentucky and U.S. Constitutions prohibit any legislative impairment of contracts.

According to Kentucky statutes, employee benefits are “not subject to reduction or impairment by alteration, amendment or repeal.”

Kentucky, in contrast to every other state, has spelled out in statutes exactly what the pension contract consists of, leaving no room for judicial interpretation. Virtually all the significant recommendations for pension reform made by PFM, Gov. Matt Bevin’s consultant, require amending those inviolable contracts.

In fact, only a few of PFM’s recommendations specifically suggest rolling back provisions “not subject to the inviolable contract.”

What if the lawyers all reached the same conclusion we have about the inviolable contract, but didn’t want to acknowledge it?

Let’s examine what happened in Illinois. Gov. Pat Quinn averaged one bond rating downgrade every 181 days, with the ratings agencies always citing the unfunded pension liabilities. Desperate to stop the hemorrhaging, he pushed pension reform through the legislature in 2013, despite abundant warnings of the obstacle in the Illinois Constitution.

A major Chicago law firm, which today boasts over 1,700 lawyers, produced a memorandum supporting the governor’s position, and the legislature bought it.

Two years later, the Illinois Supreme Court unanimously rejected that giant firm’s arguments.

When the Illinois Supreme Court struck down the pension law, Illinois wound up with embittered state employees (who concluded their elected representatives did not care about them) and frustrated taxpayers (who concluded their elected representatives were incompetent, or worse). Today, businesses and individuals are migrating out of Illinois, making a bad situation worse.

What happened to Illinois’ bond ratings? In June 2013, before the pension reforms, Moody’s cut Illinois to an A3 rating. In July 2017, again citing the unfunded pension liabilities, Moody’s downgraded Illinois again, this time to Baa3, one notch above junk status.

In July 2017, Moody’s downgraded Kentucky to Aa3, barely above where Illinois was in 2013.
…..
Kentucky could do the same if it transitioned its defined benefit pensions to the Canadian model, sharing risks among employees, retirees and taxpayers.

In addition, Kentucky could expand the size of its fund by creating a savings system for the 50 percent of Kentuckians without a retirement plan. One possible model could be based on the Pension Fund for the Christian Church.

Churches contribute 14 percent of ministers’ salaries and housing allowances, liabilities (money owed to retirees) are calculated with a 4.5 percent discount rate, benefits can be enhanced if the plan is more than 120 percent funded, and ministers generally begin drawing at age 65. Pension credits accrue at 1.5 percent of salary annually.

One could imagine different contribution levels for a Kentucky plan, perhaps at 5 percent, 10 percent and 15 percent, with accruals reduced accordingly.

Options exist, but are not being considered. Kentucky can choose to be world class or last in class. Go ask the local Christian Church minister what he or she thinks about the pension fund.

Fred Cowan is a former attorney general of Kentucky and retired circuit judge. Gordon Hamlin is president of Pro Bono Public Pensions.
http://www.kentucky.com/news/politic...172850171.html
Quote:
They’re called Save Our Pensions. Here’s why many Kentucky retirees don’t trust them.
It took less than 24 hours after a government-paid consultant offered radical recommendations to fix Kentucky’s ailing pension systems for a shadowy group called Save Our Pensions to launch its first online video ad.

The ad, like the recommendations, was drab and drastic, threatening millions in cuts to education and health care if the legislature does not solve the pension crisis, presumably by slashing pension benefits for public workers and retirees.

“Save our pensions,” the ad concluded. “Save education and health care. Urge your representative and senator to support pension reform.”

It’s the “our” in Save Our Pensions that some government workers and retirees take issue with.
The group is run by three longtime conservative activists — Bridget Bush, Karen Sellers and John Triplett — according to filings with the Secretary of State’s Office. All three ran the Kentucky Opportunity Coalition, a non-profit group that supports conservative polices and paid for ads in support of Senate Majority Leader Mitch McConnell during his 2014 re-election campaign.

A message left for Bush at her office went unanswered, but around the same time as the call, her husband was being honored by McConnell and sworn in as a federal judge.

The Kentucky Education Association, the Fraternal Order of Police and retiree advocacy groups have all said they do not agree with the tactics of Save Our Pensions.

“My thing is, when they say ‘save our pensions’ I would like to know who they mean by ‘our,’” said Nicolai Jilek, the legislative representative for the Kentucky Fraternal Order of Police.

The group pushes a message that highlights the severity of Kentucky’s pension crisis and stresses the possibility that lawmakers will have to drastically cut other vital services to pay for the pensions they have promised public workers.

“It’s a divide and conquer thing where they’re pitting us against children and people that need Medicaid services,” said Larry Totten, the president of Kentucky Public Retirees. “We think that’s unfair.”

Kentucky’s pension system is one of the worst funded in the nation, with an unfunded liability of $40 billion or more. Bevin has promised to call a special legislative session this year to deal with pension reform.
http://www.courier-journal.com/story...vin/677318001/
Quote:
Kentucky pension crisis: Save Our Pensions group secretive but mirrors Bevin's reform message
FRANKFORT, Ky. — The nonprofit organization called Save Our Pensions, Inc. declined this week to disclose the names of its donors or answer other questions about its relationship with the Bevin administration or its advertising plans as an apparent special legislative session on pension reform draws near.

But its limited disclosures and activities to date show Save Our Pensions is a conservative pro-business organization that is advertising a message that is similar, if not identical, to that of Gov. Matt Bevin.

And it shares the same chair and directors as another conservative non-profit group called Kentucky Opportunity Coalition, which has been operating for a decade and ran a big advertising campaign for the re-election of U.S. Sen. Mitch McConnell in 2014.

The chairwoman, Karen Sellers, a Paintsville healthcare executive, asked in a brief telephone interview this week that questions about the organization be emailed to her. But in response to an email from the Courier-Journal asking 10 questions about the organization — including a question asking to identify its donors, Sellers answered none.
….
By law, it is the type of organization not required to disclose its donors.
It established itself as a “social welfare” organization under section 501(c)(4) of the Internal Revenue Service code. Such organizations have become popular in recent years to launch advertising campaigns to promote public causes and issues.

As long as they do not have a primary purpose of engaging in political campaigns, they can accept contributions of unlimited amounts and not disclose their donors. And if they do not hire a lobbyist to lobby lawmakers, they do not have to register and disclose their expenses to the Legislative Ethics Commission.

All three directors listed in the Save Our Pensions articles of incorporation are registered Republicans. Besides Sellers, other directors are Bridget Bush, a Louisville attorney who is the founder of the Elephants in the Bluegrass blog, and John Triplett, an Inez attorney.

CASINOS AS REVENUE SOURCE
Spoiler:

https://www.casino.org/news/kentucky...pension-crisis
Quote:
Kentucky Lawmakers Turn to Casinos to Fix $33 Billion Pension Shortfall Crisis

SEPTEMBER 19, 2017 BY KATIE BARLOWE
Kentucky is facing a pension deficit of alarming proportions. By the latest conservative estimates, the Bluegrass State is some $33 billion short of the funds it needs to pay retired public employees over the next 30 years. And now, two State House Democrats believe that casino expansion should be at least a part of the solution to that shortfall.
On Monday, representatives Dennis Keene (D-Wilder) and Rick Rand (D-Bedford) pre-filed Bill Request 149, legislation that proposes the legalization of casino gaming via a constitutional amendment, to be decided by public referendum.
If successful, the bill would authorize up to 10 facilities across the state, which, once up and running, would generate as much as $500 million in taxes every two years, according to the two lawmakers.
Betting on Casinos

In a joint statement on Monday, Keene and Rand said that it would at least be a “step in the right direction” towards addressing the pension deficiency.
“Casinos are already located along all of Kentucky’s borders and those states are reaping the benefits of additional tax revenues,” said Keene and Rand in a statement. “Kentucky’s lottery gambling is highly successful and by expanding existing gaming venues to allow for casino-type games, we will grow a new revenue source to help us catch up on the pension shortfall.”
http://www.cincinnati.com/story/news...sho/679185001/

Quote:
NKY lawmaker: Pay off pension debt with casino revenues
Casinos in Kentucky might seem less likely than ever with Republicans in complete control of state government.

But that hasn't discouraged Northern Kentucky Rep. Dennis Keene, D-Wilder, from floating the idea of using gambling revenue as a way to pay the state's $40 billion pension debt.

"This is the start of the discussion," Keene said. "I'm refusing to look at that and say 'You can't do that.' At least this is something positive."

Keene and state Rep. Rick Rand, D-Bedford, introduced a constitutional amendment Monday to allow casinos in Kentucky. It would generate $325 million in one-time fees and an estimated $236 million in annual revenue.

The idea has at least one powerful opponent, Republican Gov. Matt Bevin.

Bevin said earlier this month in an interview with WHAS radio in Louisville that he won't allow expanded gambling while he's governor. The benefits of expanded gambling don't outweigh the "societal costs," Bevin said in the interview with host Leland Conway.

Even when Democrats controlled the House and the governor's mansion under Gov. Steve Beshear, casino legislation failed. Many Republicans and conservative Democrats opposed the expanded gambling on moral grounds, despite efforts by the Beshear administration to get it passed.

But Keene said he hopes the desperate fiscal situation in Kentucky will sway minds. He put the onus on Republicans.
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MASSACHUSETTS
CRIMINAL OFFICIAL
http://www.patriotledger.com/news/20...orliss-pension
Quote:
Process begins to revoke Corliss’ pension
The now-retired police lieutenant is convicted of stealing more than $8,000 from the city.

QUINCY – The retirement board is beginning proceedings to revoke the pension of Thomas Corliss, the former police lieutenant convicted of stealing thousands of dollars from the city of Quincy.

The hearing likely will start at the board’s Nov. 19 meeting, said chairman George McCray.

In June, a jury in U.S. District Court in Boston convicted Corliss of 10 federal felony counts of mail fraud and one of embezzlement. Corliss soon retired from his position as police lieutenant after the city began termination proceedings against him.

Corliss, a Hanover resident who at one point commanded the city’s SWAT team and special-operation motorcycle unit, was sentenced earlier this month to a year and a day of federal prison time starting Oct. 17.
The convictions stemmed from instances of “double dipping” – illegally gaming the payment systems such that he was paid for overlapping shifts of work, training and comp time. In total, he was convicted of stealing $8,211 in this way.
Corliss, who was the city’s top earner for a couple of years, bringing home $265,000 in 2015, retired shortly after his conviction when the city began termination proceedings against him.

He has been collecting his pension since his retirement. When they retire, police officers can receive annual pensions of up to 80 percent of the average of their best three years of base pay. In 2015, the last full year he worked for the department, Corliss made $161,071 in base pay, according to city documents. The rest came from overtime and details.

McCray said that the retirement board will begin to receive court documents about the retired lieutenant. McCray said that there’s two main questions that have to be answered when considering revoking someone’s pension: Did the person commit a crime, and, if so, was the crime in connection with the person’s official duties.
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MINNESOTA
POINT
Spoiler:

http://www.startribune.com/public-pe...rms/443324763/
Quote:
Public pensions: Minnesota's systems seek legislative action on proposed reforms
The complexity of the systems makes it easy to underestimate their value and for opponents to use data selectively.
Those who seek to privatize Social Security and state retirement plans covering public employees like to characterize these earned retirement programs as “Ponzi schemes” or “pyramid schemes.” This is the kind of hyperbole that substitutes for fact for those who are philosophically or ideologically opposed to defined-benefit pension programs. There’s something about the efficiency of pensions that irritates our detractors.

Public-pension plans are an ongoing and very long-term proposition. Teachers, public-safety officers, snowplow drivers and road-repair workers pay into their pension plans when they begin their careers, which might span 40 years, and receive retirement benefits until they die. This is why we manage public-pension funds with an indefinite horizon in mind. We continually monitor projections and regularly propose benefit and contribution changes to the Legislature to keep the plans on sound financial footing well into the future.

In response to an increase in liabilities due to longer member life spans and lower expected future investment returns, the Teachers Retirement Association (TRA) has proposed $1.6 billion in benefit reductions and $92 million in annual contribution increases, and the Minnesota State Retirement System (MSRS) has proposed $1 billion in benefit cuts and $37.5 million in annual contribution increases. The Public Employees Retirement Association (PERA) board is currently considering options to pursue in 2018.

Critics of public pensions respond that states and their taxpayers can’t afford these plans. In fact, Minnesota pensions are efficient: Government spending on pensions is only 2.3 percent of total state and local spending here, compared with 4.5 percent nationally. In addition, Minnesota’s pensions are prefunded, meaning the systems have more than $64 billion in the bank. That money is invested by the State Board of Investment and earns more money. For the year ending June 30, 2017, we earned 15.1 percent on investments. SBI’s average return is 10.2 percent over 35 years.

This successful investment program keeps taxpayer cost low, since the majority (73 cents of every dollar) of what is needed to pay benefits comes from investment gains. Well-funded plans reduce the reliance on future contributions.

In an August paper, the National Conference on Public Employees Retirement Systems said that public pensions are “beneficial to taxpayers in a variety of ways that are both underreported and poorly understood.” Indeed, Minnesota taxpayers pay only about 14 cents on the dollar for public pensions and benefit from millions of dollars in pension fund assets invested in our economy. And retirees typically spend their pension checks locally, supporting businesses and job creation.

But the complexity of public-pension finance makes it easy to mischaracterize or cherry-pick data. For example, we are required by the Governmental Accounting Standards Board (GASB) to report certain data annually using accounting methodology. Financial results using this method are simply a snapshot in time and do not anticipate any future course corrections or adjustments.

Long-standing actuarial methods of projecting funding status progress are more useful for plan administrators and policymakers because they are future-focused. The year-to-year GASB numbers will fluctuate wildly due to market swings and do not provide appropriate guidance for oversight of pension funding, which is best viewed through a long-term lens.
Public-pension opponents use data selectively to lobby for switching public employees to 401(k)-style retirement accounts. In 2011, the retirement systems conducted a study and found that closing the pension plans and switching to a 401(k)-type system would cost the state $3 billion. Benefits would still be paid to those in the legacy plan even as contributions were diverted to private accounts. Studies have shown that the U.S. has a retirement crisis as workers reach retirement age without adequate savings. Switching public employees to a wholly private savings system would be bad for Minnesota.

The state’s pension funds are not in crisis. Minnesota has a long history of taking appropriate corrective action when necessary, and now is one of those times. We urge lawmakers and the governor to act on our proposed reforms. With their help, Minnesota’s public-pension plans will be financially sound for many years to come.



Doug Anderson, Erin Leonard and Jay Stoffel are the executive directors, respectively, of the Public Employees Retirement Association, the Minnesota State Retirement System and the Teachers Retirement Association.

COUNTERPOINT
Spoiler:

http://www.fiscalexcellence.org/blog..._Rebuttal.html
Quote:
An Annotated Rebuttal to State Pension Plan Directors’ Star Tribune Commentary
Minnesota’s public pension plans recently made not-so-pleasant national headlines when Bloomberg News reported that under new government accounting standards Minnesota’s public pension health took the biggest hit in the nation. In that article the executive director of Minnesota’s Legislative Commission on Pensions and Retirement declared our current situation “a crisis.” Unsurprisingly, this prompted state pension plan directors to go to DEFCON 1 in a Star Tribune commentary to reassure its members and the general public that the state is on top of things and all is well.
The arguments presented in the Strib commentary are ones we have heard and commented on for many years, but the stakes surrounding this issue are simply too important to let this message go without a response.
“Those who seek to privatize Social Security and state retirement plans covering public employees like to characterize these earned retirement programs as “Ponzi schemes” or “pyramid schemes.” This is the kind of hyperbole that substitutes for fact for those who are philosophically or ideologically opposed to defined-benefit pension programs. There’s something about the efficiency of pensions that irritates our detractors."
Many staunch supporters of defined benefit pension plans, including pension actuaries and defined benefit plan experts, are critical of the types of certain policies Minnesota pension systems (and public pension systems generally) employ. It’s an effective rhetorical gambit to suggest everyone who objects to the status quo is politically and ideologically driven. However, these critics are not bothered by “efficiency,” but rather by the risk and exposure faulty accounting practices and other pension system policies create.
“Public-pension plans are an ongoing and very long-term proposition. Teachers, public-safety officers, snowplow drivers and road-repair workers pay into their pension plans when they begin their careers, which might span 40 years, and receive retirement benefits until they die. This is why we manage public-pension funds with an indefinite horizon in mind.”
Having an “indefinite time horizon” doesn’t eliminate the risk of running out of money – we can point to a few places in the U.S. where this is currently unfolding. Nor does it excuse the irresponsible current practice of transferring large current obligations onto future taxpayers. Should current taxpayers be paying for the retirement benefits of both the snowplow drivers and road workers of today and their predecessors? Should future generations of taxpayers be on the hook for both the employees of today and the employees that are providing service to them in the future? Because that is exactly what we are now doing, and based on our current path, we’ll being doing a lot more of in the future.
“We continually monitor projections and regularly propose benefit and contribution changes to the Legislature to keep the plans on sound financial footing well into the future.”
Then why, according the latest valuation reports, are we collectively $20 billion short based on market value of assets?
“In response to an increase in liabilities due to longer member life spans and lower expected future investment returns, the Teachers Retirement Association (TRA) has proposed $1.6 billion in benefit reductions and $92 million in annual contribution increases, and the Minnesota State Retirement System (MSRS) has proposed $1 billion in benefit cuts and $37.5 million in annual contribution increases. The Public Employees Retirement Association (PERA) board is currently considering options to pursue in 2018.”
That may sound like a lot of money but those numbers need to be put in perspective. Since 2002 (about the last time Minnesota pension plans were fully funded) policymakers’ failure to make the necessary required contributions has created over $6 billion of growth in our unfunded obligations. The $2.6-plus billion in benefit reductions is swimming against $17.3 billion in unfunded liabilities created by a failure to achieve targeted investment returns. The phrase “a day late and a dollar short” has never been more apropos.
“Critics of public pensions respond that states and their taxpayers can’t afford these plans. In fact, Minnesota pensions are efficient: Government spending on pensions is only 2.3 percent of total state and local spending here, compared with 4.5 percent nationally.“
There is a mammoth difference in what we DO spend and what we NEED TO spend to fund the current system responsibly. See those numbers above. It’s not a badge of honor to chronically underfund the system with help from accounting conveniences. But this is certainly a new way to define “efficiency.” It’s like your kids saying, “Mom, I cleaned half my bedroom. It was more efficient than cleaning the whole room like I was supposed to.”
“In addition, Minnesota’s pensions are prefunded, meaning the systems have more than $64 billion in the bank.”
A not-so-minor problem: we should have about $20 billion more “in the bank” right now just to pay for (*ahem*) prefunded benefits that have already been earned.
“That money is invested by the State Board of Investment and earns more money.”
Except for the money that goes out the door to actually pay retirement benefits, administrative expenses, and money owed to people who leave public service before retirement. In the 2016 fiscal year, the state’s public pensions paid out $4.5 billion or about $2.2 billion more than the contributions that went into the system.
“For the year ending June 30, 2017, we earned 15.1 percent on investments. SBI’s average return is 10.2 percent over 35 years.”
Well done. But since we’ve been assuming pension investments would “only” return 8 - 8.5% per year how in the world can we be $20 billion in the hole with that amazing track record – especially since as stated earlier, “we continually monitor projections and regularly propose benefit and contribution changes to the Legislature to keep the plans on sound financial footing well into the future.”
Something else must be going on. And one of many “somethings” is this: you only get investment returns on the assets you have to invest. If a pension plan is significantly underfunded, a 15.1% annual return generates far fewer investment dollars overall than if it was 100% funded.
“This successful investment program keeps taxpayer cost low, since the majority (73 cents of every dollar) of what is needed to pay benefits comes from investment gains. Well-funded plans reduce the reliance on future contributions. In an August paper, the National Conference on Public Employees Retirement Systems said that public pensions are “beneficial to taxpayers in a variety of ways that are both underreported and poorly understood.” Indeed, Minnesota taxpayers pay only about 14 cents on the dollar for public pensions and benefit from millions of dollars in pension fund assets invested in our economy.”
What is the source of capital behind pension plans’ investment gains? Magic beans? It’s employer and employee contributions and money from the state general fund. And if those investment gains don’t materialize as expected, who will make up the shortfall? Will our investment advisors and private equity firms say, “Sorry, we didn’t meet your expectations. Here’s the difference”?
“And retirees typically spend their pension checks locally, supporting businesses and job creation.”
And tax dollars that don’t go to increased pension support are put in a pile and incinerated.
“But the complexity of public-pension finance makes it easy to mischaracterize or cherry-pick data. For example, we are required by the Governmental Accounting Standards Board (GASB) to report certain data annually using accounting methodology. Financial results using this method are simply a snapshot in time and do not anticipate any future course corrections or adjustments.”
Exactly how is one ever supposed to “establish proper course corrections and adjustments” without proper accounting? It’s the foundation for making crucial decisions on how to repair these pension plans. Imagine a business making the same argument on their financials. “Just ignore our current balance sheet and income statement, what really matters is what we expect they will look like a few years from now.”
“Long-standing actuarial methods of projecting funding status progress are more useful for plan administrators and policymakers because they are future-focused. The year-to-year GASB numbers will fluctuate wildly due to market swings and do not provide appropriate guidance for oversight of pension funding, which is best viewed through a long-term lens.”
“Long-standing actuarial methods of projecting funding status” = using the expected investment return as the discount rate to calculate liabilities – a practice which keeps current contribution requirements low and allows pension liabilities to compound just as fast as investment return expectations. Or to put it more succinctly:

"The use of the expected return assumption as the discount rate virtually guarantees the eventual failure of any plan using it.” -- Barton Waring, former Chief Investment Officer of Barclays Global Investors and author of Pension Finance: Putting the Risks and Costs of Defined Benefit Plans Back Under Your Control, in testimony to the Government Accounting Standards Board
“Public-pension opponents use data selectively to lobby for switching public employees to 401(k)-style retirement accounts.“
The defined benefit versus defined contribution debate is a false choice. There are many reform options to explore.
“In 2011, the retirement systems conducted a study and found that closing the pension plans and switching to a 401(k)-type system would cost the state $3 billion. Benefits would still be paid to those in the legacy plan even as contributions were diverted to private accounts.”
Closing a pension plan doesn’t create new costs. That $3 billion “cost” estimates what would be needed upfront to speed up the payoff of unfunded liabilities so the can isn’t kicked to future taxpayers. It’s a timing issue of when the $3 billion would be needed, not if it would be needed.
But the way our pension plans are currently designed is already transferring billions in current pension obligations to future taxpayers. It’s tough to square up concerns about pension reform saddling future taxpayers with today’s pension costs when current pension practices are already doing an exceptional job of doing just that.
“Studies have shown that the U.S. has a retirement crisis as workers reach retirement age without adequate savings. Switching public employees to a wholly private savings system would be bad for Minnesota.”
Failing to fund pension obligations responsibly and properly is a lot worse for Minnesota.
“The state’s pension funds are not in crisis. Minnesota has a long history of taking appropriate corrective action when necessary, and now is one of those times. We urge lawmakers and the governor to act on our proposed reforms. With their help, Minnesota’s public-pension plans will be financially sound for many years to come.”
We urge lawmakers and the governor to cease and desist with the increasingly frequent “half measure” tweaks and repairs that are constrained by political and biennial budget circumstances rather than grounded in economic realities. It is time for full measure reform – and the extent to which that can or should be done within a traditional defined benefits system structure needs to be carefully examined. We do not serve the interests of present and future taxpayers or public sector workers, or ensure the continuing provision of high quality public goods and services by failing to acknowledge the seriousness and the magnitude of the challenge before us.

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Old 09-24-2017, 06:52 PM
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MISSOURI

INVESTMENT RETURNS
Spoiler:

http://www.pionline.com/article/2017...or-fiscal-year
Quote:
Missouri State Employees tops benchmark with net 3.52% for fiscal year
Missouri State Employees’ Retirement System, Jefferson City, returned a net 3.52% in the fiscal year ended June 30, said a report posted on the pension fund's website.

The $8.1 billion pension fund exceeded its policy benchmark of 1.64%.

For the three years ended June 30, the pension fund returned an annualized net 0.36%, below the benchmark of 2.35%; for the 10-year period, the pension fund returned an annualized net 4.45%, above the 4.22% benchmark return.
For the 12 months ended June 30, 2016, the fund returned a net 0.29%, below its 7.36% policy benchmark.


BUYOUT
Spoiler:


https://www.bondbuyer.com/news/misso...ogram-launches
Quote:
Missouri has launched a limited pension buyout
CHICAGO – Missouri’s launch of a buyout program represents a new avenue to reduce pension liabilities and depending on its outcome could provide an option nationally for local and state governments, says Moody’s Investors Service.

Gov. Eric Greitens signed legislation authorizing the Missouri State Employees Retirement System to implement the buyout program for former state employees who are fully vested but not yet retired. The fund launched the program on Sept. 5 so it’s unclear how many former employees will participate by a Nov. 30 deadline and how much the state stands to save.
http://www.news-leader.com/story/new...ion/658286001/
Quote:
MOSERS buyout plan calls for half of eligible members to take offer, saving $100 million
The voluntary buyouts being rolled out by the Missouri State Employees' Retirement System is being offered in hopes of saving $100 million, a spokeswoman for the pension plan says.

MOSERS is sending out letters offering lump sums averaging $18,450 to about 17,500 former state employees who have not yet retired. Eligible members of the public pension plan in the Springfield area will see letters arrive after Sept. 18 and will have until the end of November to decide whether to cash out.

"The plan was modeled on a reduction of approximately $100 million in net plan liability," said Candy Smith, a MOSERS spokeswoman, in an email. "The plan was modeled on 50% of eligible members taking the buyout."

Asked about the likelihood of the buyout negatively affecting MOSERS by depleting its funds, Smith referred to her response about "decreasing net plan liability."

In exchange for a check, MOSERS members who accept the buyout agree to "forfeit all such member's creditable or credited service and future rights to receive retirement annuity benefits from the system ... and shall not be eligible to receive any long-term disability benefit," the News-Leader previously reported.

MOSERS has seen its percentage of funded liabilities — a barometer for pension plans' fiscal health — sink over the past several years.

Pension buyouts are not new; places with troubled retirement systems including Illinois and Philadelphia have considered offering lump sums in exchange for reducing their future liabilities.

In 2015, the Internal Revenue Service barred pension plans from offering buyouts in some cases. The IRS guidance covers vested retirees and does not appear to apply to the MOSERS' buyouts, which are being offered to vested employees who have not yet retired.


CRISIS
Spoiler:


https://www.ai-cio.com/news/mosers-b...n-percentages/
Quote:
MOSERS Board Approves New State Budget Contribution Percentages
Actuaries debunk treasurer’s “crisis” warning.
Following criticism from Republican Treasurer Eric Schmitt, the Missouri State Employees Retirement System’s (MOSERS) board approved asking lawmakers for a 20.21 percent-of-payroll contribution in the state budget for 2018-19.

Of the 11 board members present, only one voted “no” on the decision.

The money is the state government’s “employer contribution” to the MOSERS board, which covers most past and present state government employees. The exact dollar amount will be decided during the budget-writing process.

Missouri’s current contribution in the 2017-18 budget is 19.45%, with more than $393.3 million for all funds—including $234.5 million in state revenue funds were listed in the budget bills. The total contribution, however, is a small chunk of the state budget.

The new contribution rate for the 2018-19 state budget was suggested by the Cavanaugh MacDonald actuarial firm, which began running the MOSERS account in May.

The vote comes just a day after Schmitt warned lawmakers of a state pension crisis, which he reiterated at Thursday’s meeting, referencing MOSERS missing earnings assumptions in “16 of the past 17 years.” To address the issue, he suggested MOSERS lower expectations for earnings as well as lower its investment fees.

However, Joseph A. Nichols and Patrice A. Beckham—consulting actuaries from Cavanaugh MacDonald—informed the MOSERS board things were not as bad as Schmitt claimed, citing reductions to the system’s estimated income from investments.

“A lot of changes have been made that are pushing us in [the] right direction,” Nichols said at the meeting. “We talk about a crisis—[but] it’s not.”

Beckham, who is also a principal at the firm, noted that the board had previously lowered its rate from 8.5% to 7.5%. By 2020, the board will reduce the expectation to 7.05%.
http://www.news-leader.com/story/new...orm/661308001/
Quote:
New report on state pension plan shows continued struggles, state treasurer says
Lawmakers were jolted Wednesday morning when Missouri Treasurer Eric Schmitt told them that a large state pension plan has continued to weaken financially.

Ten years ago, the Missouri State Employees' Retirement System (MOSERS) reported that it had enough money to cover about 79 percent of the future benefits it has promised to pay. Schmitt and others consider 80 percent to be a sign of a stable pension, though 100 percent funded is obviously an even better place to be.

As of July 2016, MOSERS had dropped to about 69.6 percent funded. And over the last fiscal year, the news has worsened.

Schmitt said Wednesday before the Joint Committee on Public Employee Retirement that MOSERS' status has continued to sink. He said the funded ratio had dropped to 60 percent — although that number could be misleading.

In citing the 60 percent funding level, Schmitt was referring to the market value of the pension plan's assets, what they would be worth today.

In previous annual reports, MOSERS — like many other pension plans — has used a different figure, called the actuarial value, a "smoothed" number used for long-term planning to account for stock market volatility.

The most recent actuarial value of MOSERS assets, which allows an apples-to-apples comparison to previous performance, also shows a drop, though to a less-severe ratio of 67.5 percent funded.
…..
At any rate, the data shows MOSERS continues to see its liabilities outpace its assets and continually fails to realize its investment projections. As a result, state-supported MOSERS is staring at an unfunded liability of more than $4 billion.

Schmitt's message to state lawmakers on the pension committee was that drastic change was needed to right the ship and prevent MOSERS' problems from affecting the state's credit rating.

He blamed unnamed officials from years past with consistently overestimating the revenue MOSERS would reap from its investment portfolio, which allowed the state to kick in less money to fund pensions for state employees.

"Past administrations have tried to keep the MOSERS contribution rate low by artificially inflating the MOSERS assumptions," Schmitt said. "The time for sugar coating this problem is over."
https://www.valuewalk.com/2017/09/mi...state-pension/
Quote:
Missouri’s State Pension In Crisis
Missouri State Treasurer, Eric Schmitt, told a panel of lawmakers on Wednesday that Missouri’s State pension deficit exceeded $5.2 billion. He went on to explain,

“The future of the state’s finances are at stake…Five billion dollars means we are thousands of dollars in debt for every single Missouri taxpayer. This liability is the number one liability for our state—a problem that, without action, will only get worse and worse every year.”
The Missouri State Employees’ Retirement System (MOSERS) has missed 16 projections in the past 17 years. The pension fund is only 60% funded, under the 80% or higher that is considered healthy funding status.

Schmitt explains, “So 60% is alarming, but even more alarming is the trajectory.” “In the early 2000s, we were nearly 100% funded. Now, just a few years later, we’re at 60% and falling.”

Missouri’s State Pension deficit is said to be the result of past administrations having unrealistic expectations regarding projected investment returns. In addition, expensive investment fees paid by the state also is considered a culprit in eroding the fund’s returns. Calling the situation “the number one threat to the state’s AAA credit rating,” Mr. Schmitt contends that pension funding shortfalls could have a devastating affect on funding for schools, roads as well as health services.

Mr. Schmitt recommends that MOSERS adjust its earnings expectations to be in line with market environment and the fund should seek to lower its investment fees.

“This crisis is no longer on the horizon, it is at our doorstep,” Schmitt said. “The future of Missouri’s finances are at stake, and this is a conversation that we need to have.

http://www.ozarksfirst.com/news/mose...ions/812170297
Quote:
MOSERS' Officials React to Concern over Pensions
SPRINGFIELD, Mo. -- Thursday, State Treasurer Eric Schmitt's expressed concern over the Missouri State Employees' Retirement System's pension system's long-term health.

MOSERS spokesperson Candy Smith acknowledged the pension fund's financial challenges but wants viewers to hear the answer to a very important question.

"Is MOSERS going to be able to pay my retirement benefits? And the answer to that is yes, that promised benefits are secure," Smith said.

This week, Schmitt flagged a decline in MOSERS' funding ratio - which is the amount of assets the pension has versus its liabilities - to 60 percent.

But this doesn't mean that MOSERS is out of money. The 60 percent figure is a reflection of what MOSERS owes beneficiaries over time.

In real dollars, MOSERS has short-term solvency.

"We do have in the MOSERS pension trust fund right now $8 billion," Smith said.

The question now for policymakers is what to do to get the funding ratio higher - 80 percent is a rule of thumb.

Getting there will likely require more state funding and increased contributions from beneficiaries. MOSERS recipients joining after 2010 have to contribute to their pensions.

Schmitt has also raised concern that MOSERS spends too much on fees given consistent misses on projected investment returns.

Smith says the MOSERS Board is committed to getting the system on the right financial track and offers some perspective.

"A pension system like MOSERS have a very long-term time horizon," Smith said.

But, time is money, so fixing the pension funding problem soon will pay dividends later.

https://www.bizjournals.com/kansasci...c-schmitt.html
Quote:
Missouri’s $5B pension shortfall is ‘at our doorstep’
Missouri Treasurer Eric Schmitt warns that the state’s employee retirement plan faces a $5 billion underfunding shortfall that will make it unable to pay all the benefits it might owe.

The Columbia Daily Tribune reports that Schmitt said the Missouri State Employees Retirement System is funded at only 60 percent, with an 80 percent funding rate considered healthy. Even then, he said, 60 percent might be overly generous because it’s based on unrealistic rates of return and because people are living longer.
http://www.columbiatribune.com/news/...d-by-5-billion
Quote:
Missouri employees’ pension plan underfunded by $5 billion
JEFFERSON CITY — Missouri’s treasurer on Wednesday told a panel of lawmakers the state employee retirement pension plan is only 60 percent funded and warned that action is needed to prevent damage to state finances.

Treasurer Eric Schmitt told the Legislature’s Committee on Public Retirement that the pension plan is underfunded by more than $5 billion. He cited an 80-percent funding mark as being healthy, although that would still leave the state below the amount needed to pay all the retirement benefits it potentially owes.

“This crisis is no longer on the horizon, it is at our doorstep,” Schmitt said. “The future of Missouri’s finances are at stake, and this is a conversation that we need to have.”

Schmitt added that 60 percent might be too generous. He said that’s based on a higher rate-of-return on investments than he said is realistic and outdated death rates that he said need to be updated because of longer life expectancies. Schmitt said considering those two factors, the public pension system might be less than 50 percent funded.

The treasurer placed blame on the retirement issue on past administrations for what he said were unreasonably high expectations of investment earnings. Schmitt said returns have been below predictions for 16 of the past 17 years.

According to data from the Missouri State Employees’ Retirement System, investment returns have averaged close to 7 percent over the past 20 years. Returns have been lower in recent years, averaging close to 4.5 percent over the past 10 years and less than one percent over the past 3 years.

Schmitt also complained that the state is paying too much in investment fees.
https://cei.org/blog/missouris-5-bil...lty-accounting
Quote:
Missouri's $5 Billion State Pension Underfunding Shows Results of Faulty Accounting

Yesterday, Missouri State Treasurer Eric Schmitt announced that the state’s public employee pension plan was underfunded by $5 billion. That is an eye-popping amount, but the story is a sadly familiar one:
…..

For politicians, such rosy projections mean more taxpayer dollars to spend elsewhere, as they create the illusion of the state’s pension contribution obligation being lower than it actually is.

But the can only be kicked down the road so far. Schmitt told state lawmakers that the state will need to increase its employer contribution by $15 million to $30 million in the next year to help get the pension system back on its feet.

However, the state catching up to its pension contribution now doesn’t mean that taxpayers won’t be on the hook again in the future. Pension managers should calculate the state contribution using a discount rate based on a more conservative investment return projects, such as the 4.5 percent Missouri has achieved recently.

Furthermore, they should look for ways to shift away from a defined benefit system, which can translate into high liabilities for state taxpayers, and enroll new employees in either a defined contribution or hybrid system.

Finally, lawmakers should require state pension managers to focus solely on increasing returns and maintaining pension plans’ financial health, and not use pension funds to advance political agendas that have nothing to do with securing public employees’ retirement.
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Old 09-24-2017, 06:52 PM
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NEW MEXICO
INVESTMENTS
PAY-FOR-PLAY

Spoiler:

http://www.santafenewmexican.com/new...b0ae71aab.html
Quote:
Report: Investment deals may violate state’s pay-to-play rules
Nearly a decade after Gov. Bill Richardson’s administration was tarnished by a scandal involving state investments, an online magazine has blasted current Gov. Susana Martinez over more than $1 million in political contributions by firms that were awarded hundreds of millions of dollars in investments by the state of New Mexico.

The story, published Wednesday by the New York-based International Business Times, says people associated with eight firms that handled $757 million in state investments contributed more than $1.2 million to Martinez, her political action committees and national Republican organizations that have supported her.

And one company that since 2001 has been awarded $200,000 by the State Investment Council once hired a polling firm co-owned by the wife of Martinez’s political consultant, Jay McCleskey.

A Martinez spokesman on Wednesday called the article “a shameless attempt to generate clicks online with a story that is short on facts and long on innuendo.”

While it’s not clear whether any of the money dealings described in the story were illegal, the article prompted state Rep. Bill McCamley, D-Las Cruces, to ask state Attorney General Hector Balderas to investigate any possible violations of state law.

“When it comes to campaign cash from managers of state investments, Martinez turned a blind eye to the ethical standards she championed,” says the article, written by David Sirota and Josh Keefe of International Business Times and Andrew Perez of Maplight, a California-based nonprofit that tracks the influence of money in politics. “During her tenure, New Mexico has been giving lucrative investment deals to financial firms whose executives have delivered big campaign donations to Martinez and to groups that have supported her election campaigns — a situation that may have violated the very pay-to-play rules that were passed in the wake of New Mexico’s previous scandals.”

The bulk of the investments discussed in the article were made by the state Educational Retirement Board, which oversees the $12 billion pension fund for teachers and other school employees in the state. Martinez does not sit on that board and appoints only two of its six members.
….
The firms named in the article that were awarded investments by the Educational Retirement Board include:

Crow Holdings, a Dallas real estate investment firm that received a $50 million investment from the board months after its founder, Harlan Crow, contributed $50,000 to the Republican Governors Association. In late 2013, the company gave another $100,000 to the governors group. The next year, the Educational Retirement Board awarded the firm another $35 million investment. The Crow company gave the Republican group another $100,000 in 2015 and was awarded another $30 million investment.

Apollo Global Management, which received a $50 million investment from the board in 2013. Apollo executive Josh Harris gave the Republican Governors Association $25,000 in 2010 then $25,000 in 2012 while Martinez was on the organization’s executive committee.

Prudential was awarded a $50 million investment from the retirement board in 2011 and another $35 million in 2014. Since Martinez has been governor, Prudential has given $200,000 to the Republican Governors Association and another $50,000 to the Republican State Leadership Committee, a Washington, D.C.-based group that raises money for Republicans running for state offices. The group has given more than $1.7 million to Martinez-related PACs since 2012.

Bain Capital, founded by 2012 Republican presidential nominee Mitt Romney, received $40 million from the teachers’ pension in 2014 and another $50 million in July. Less than three weeks after the board approved the 2014 investment, Bain’s founding partner, Robert White, gave $50,000 to the Republican Governors Association, which later that year would buy television commercials for Martinez’s re-election.

EnerVest, which received a $37.5 million investment from the board in 2015. Before this investment, its chief executive officer, John Walker, according to the article, “steered more than $61,000 to Martinez-linked groups.”

BP Capital, an energy investment firm half-owned by Texas financier T. Boone Pickens, got a $30 million investment from the board in 2013. Pickens gave the Martinez campaign $10,400.
https://maplight.org/story/new-mexic...to-play-rules/
Quote:
New Mexico Politicians Call For SEC Enforcement Of Pay-To-Play Rules
This story is a collaboration between David Sirota and Josh Keefe of the International Business Times and Andrew Perez of MapLight.

Sen. Tom Udall, a New Mexico Democrat, called for federal regulators to begin applying an anti-corruption rule to outside political groups in the wake of an International Business Times/MapLight investigation revealing hundreds of millions of investment dollars flowed to firms whose executives donated to organizations supporting Republican Gov. Susana Martinez.

A 2010 Securities and Exchange Commission rule, implemented in the wake of previous New Mexico pay-to-play scandals, was designed to deter financial firms from donating to public officials who influence state investment decisions. The rule included provisions designed to prevent firms from circumventing the rule by routing campaign cash through third parties. IBT/MapLight, however, identified $757 million in state pension dollars invested with eight companies linked to donors who delivered a total of $1.2 million to Martinez and affiliated political committees.

“We have to make sure that the campaign finance rules that are still on the books are updated to reflect these new and dangerous circumstances -- to ensure that no one is able to circumvent these laws by using super PACs, dark money groups, or other campaign spending vehicles,” Udall told IBT/MapLight on Thursday. “The public deserves to feel confident that decisions made with public money are not being influenced by big money donors.”
…..
Donors connected to firms that manage money for New Mexico state investment funds have delivered $1.1 million to the RGA since 2010, according to federal campaign finance records reviewed by IBT/MapLight. Martinez was elected to the RGA’s leadership committee immediately after winning election in 2010. She was the organization’s chair from 2015 to 2016. The RGA, which spent $2.5 million supporting Martinez’s two gubernatorial bids, was her largest single political donor.

Meanwhile, a Republican member of the State Investment Council -- which oversees a $21 billion endowment funded by taxes, leases, and royalties from oil and gas production that supplements the state’s budget -- agreed with Udall, and worried that campaign donations could be influencing the council’s investment decisions.

“I would be very much in favor of super PACs and groups like the RGA being covered by those same rules so we don't have pay-to-play, or the appearance of pay-to-play,” said New Mexico Land Commissioner Aubrey Dunn.

Dunn is running for a congressional seat currently held by Rep. Steve Pearce, who is running for the 2018 GOP gubernatorial nomination.

Dunn has clashed with his fellow Republican Martinez over proposed ethics rules backed by the governor, who chairs the investment council. The council barred Dunn and Democratic State Treasurer Tim Eichenberg from participating in closed-door meetings because of their refusal to sign an updated ethics code. The two officials said the confidentiality rules in the code would have made the panel less transparent to the public.

“I’m extremely concerned,” Dunn told IBT/MapLight. “We’re doing these complex investments when really we could be doing an index fund or something else with equal or better returns. I think we’re taking on extreme risk and not getting the return for that risk. I am concerned that pay-to-play may be involved in those kinds of investments.”

Meanwhile, Rep. Bill McCamley, D-Las Cruces, called on New Mexico Attorney General Hector Balderas Jr. to investigate whether state or federal pay-to-play rules had been broken.

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PENNSYLVANIA

FEES
Spoiler:

http://www.cpbj.com/article/20170919...es-other-costs

Quote:
State pension weighs cuts to investment fees, other costs
Board members of the Pennsylvania State Employees' Retirement System hope to consider a plan to reduce investment fees before year's end.

The board directed its staff to work alongside investment consulting firm RVK to study how best to cut costs over a three-year period and come up with ideas for the board's consideration later this year.

Board members also ordered two other studies during their monthly meeting last week: one to look into ways SERS could cut costs by consolidating certain operations with the Public School Employees' Retirement System, resulting in a plan for the board to consider in the next six months; and one to find ways to increase participation in the state's deferred compensation program, resulting in a plan for the board to consider in the next three months.

The studies are a continuation of calls state officials have made over the past several months to reduce the amount of money flowing out of state coffers and into the pockets of investment advisers.
Gov. Tom Wolf and Treasurer Joe Torsella sent a letter to the boards of SERS and PSERS in April urging them to significantly reduce investment fees and certain administrative costs in an effort to make at least a small dent in both systems' large unfunded liabilities. The studies SERS now plans to conduct look specifically into the three recommendations Wolf and Torsella made in that letter.

Wolf believes that if both funds adopt these suggestions, they could cut their collective funding gap by 10 percent. He and Torsella, who sits on the boards of SERS and PSERS, both praised the SERS board's decision to look into their recommendations.

State officials are meanwhile sorting through the details of more comprehensive reforms that were signed into law in June. Officials say these changes will not solve Pennsylvania's current pension liability issues but could help the state save money in the long run.

http://www.nbcphiladelphia.com/news/...446797223.html
Quote:
$858 Million: 'Outrageous' Management Fees Paid By Pennsylvania's Pension Fund in the Last 5 Years

Management costs for the $26 billion state pension system are fourth highest in the country, the governor and state treasurer claimed earlier this year.
Officials who oversee Pennsylvania's $26 billion pension fund for state workers have begun studying ways to reduce management costs, which Gov. Wolf and Treasurer Joe Torsella cited in April as the fourth-highest in the country.
The governing board for the State Employees Retirement System (SERS) last week voted to begin working to reduce those management costs that go to financial firms, which Torsella described Tuesday as "outrageous."
More than 220 fund managers split $162 million in management fees in 2016, according to the most recent audit of SERS. Since 2012, management fees have totaled $858 million.
The size of the fund, meanwhile, is $1 billion less than it was three years ago. Its value was $26.3 billion at the end of 2016.
…..
And even after the SERS board reduced its expected annual return from 8 percent to 7.5 percent in 2012, investments have sagged below that figure the last three years: 6.4 percent in 2014, 0.5 percent in 2015, and 6.5 percent last year.
The pension plan is now funded at 58 percent of its total liabilities.
A spokeswoman for SERS said management fees have been reduced already.
"Since 2010, we reduced fees by about $73 million annually," spokeswoman Pamela Hile said in an email this week. "Our goal has always been and will continue to be driving the best value in the investment decision-making to maximize results at the lowest cost over the long term and multiple market cycles."
The "points" paid on its investments to those financial firms dropped to 62 last year from a recent high of 75 in 2012. Points are financial jargon for the percentage of fees collected on an investment. One percent equals 100 points.

CONTRIBUTIONS
Spoiler:

https://www.ai-cio.com/news/pennsylv...sion-payments/
Quote:
Pennsylvania Delays Pension Payments
State treasury holds up $581 million in obligations to PSERS.
Pennsylvania is delaying more than $1.7 billion in payments due to school employee pensions and Medicaid because the state government has run out of funds.

The payments are for the state’s share of pension obligation payments to Pennsylvania’s school employees pension fund, and for reimbursements for medical care under Medicaid. The Medicaid reimbursements, which are due Sept. 22, will be delayed for at least a week, and school officials said they expected the pension obligation reimbursements, which are due Sept. 25, to be delayed by a few days, reported the Associated Press.

The treasury delayed $581 million in the state’s share of pension obligations to the Pennsylvania School Employees Retirement System (PSERS), and $1.169 billion in payments to managed care providers for medical assistance services.

“Without a completed budget, the commonwealth’s Treasurer and Auditor General have said they are not currently inclined to authorize the normal short-term lending that would typically allow for seasonal cashflow interruption,” said J.J. Abbott, a spokesman for Pennsylvania Gov. Tom Wolf. “Delayed payments will remain stalled until funding exists to meet commitments.”

State officials expect rolling delays of payments, at least until spring, said the AP, unless the budget issues are settled before then.

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ok, caught up on two weeks' worth of links
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Old 09-25-2017, 06:36 AM
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KENTUCKY

http://www.dailyindependent.com/news...4bb225235.html

Quote:
Ky. Pensions Part 2: Higher Education faces huge cost increases

Kentucky’s public colleges and universities face massive pension payment increases come fiscal year 2019 as the state struggles to address its pension crisis, according to a new state memo obtained by the Daily Independent.

In the Tri-State region, Morehead State University faces an approximate $3.2 million increase in its pension obligations for the Kentucky Employees Retirement System (KERS). The figure represents an approximate 70 percent jump in the amount of money the university will have to pay for the KERS contributions. The memo from state budget Director John Chilton indicates the university is expected to pay $4.68 million in fiscal year 2018, then almost 8 million in fiscal year 2019.

Dr. Jay Morgan, president of Morehead State, said the numbers apply to staff covered by KERS and the university is also preparing for a spike of an additional couple of hundred thousand dollars in pension payment increases for faculty contributions.

“We think our new pension numbers will increase by 3.7 or 3.8 million,” Morgan said.

The increases require extreme efficiency on expenses but Morgan said the university will be able to handle the increases.

“We are looking closely at a lot of our expenses,” Morgan said. “Four million (more) will not cripple us but we will have to pay very special attention to new hires.”

Morgan added “we will be okay in the long run. We won’t like it but we will be okay.”

The proposed increases for the Kentucky Community and Technical College System are even more staggering. The memo from Chilton said KCTCS faces a nearly $8 million increase in pension contributions for a single year. KCTCS is expected to pay $11.5 million in pension contributions in 2018, and that number is expected to skyrocket to $19.5 million in fiscal year 2019, representing a 70 percent increase for one year.

KCTCS President Jay Box said the pension increases are coming in the face of proposed significant cuts to all of education.

“We’ve had 10 budget cuts in the last eight years,” Box said. "Our board of regents has mandated reserves for that very purpose because we are concerned there will be budget cuts at any time.”

Box said the pension costs are a significant concern.

.....
"On one side they are talking about potential cuts of 17.5 percent in the next fiscal year for everybody including higher education and k through 12,” he said. "So that’s 17.5 percent less money and on top of that we are going to have a pension increase that is going to result in another 8.2 million. We also have fixed cross increases we can’t control, utility costs, insurance costs, That is about another 8 million give or take. That 16 million in new costs without doing anything and then 17.5 percent cuts. Our operating from the state is about 182 million. It is a double whammy.”

Similarly huge increases are expected at Murray State, Northern Kentucky, Western Kentucky and Eastern Kentucky.

State legislators locally said they want to keep the promises made to those who have been in the system.

http://www.kentucky.com/news/state/a...174783431.html

Quote:
Bevin 'lost his courage' on pensions, tax reform, Rep. Kelly Flood tells teachers
Sep 22, 2017
Rep. Kelly Flood discusses the state pension crisis during a town hall at Frederick Douglass High School Thursday evening, September 21, 2017. Video by Matt Goins.
matt@mattgoins.com
Video at link



http://www.rcnky.com/articles/2017/0...eSYmh0.twitter

Quote:
With Increased Pension Costs on Horizon, Taylor Mill to Join Ft. Wright in Lawsuit

Add Taylor Mill to the list of Northern Kentucky cities faced with a daunting increase in pension contributions.
The city can also be added to the list of cities in the region that may turn to a tax increase to offset the costs.
As the Commonwealth of Kentucky prepares to deal with a drastically underfunded pension system, the cost burden on cities in the state is expected to be substantial. Taylor Mill city administrator Jill Bailey told the city commission last week that the city could pay roughly $275,000 more than usual over the next two years.
Municipal leaders across the state are upset that the state system seems to be the drag, as cities have faithfully made their payments to the retirement fund for their employees.
Mayor Dan Bell explained that the Kentucky Retirement System (KRS) is only for the state employees and CERS is for County and city employees. Since the creation of both systems, governments were required by law to pay a certain amount into their particular system, which the cities and counties have been faithfully doing.
"It's called an inviolable contract," said Bell. "It used to be that about seven employees would be contributing for one retiree, but now it is two employees contributing for one retiree."
The problem came, according to Bell, when the state made bad investments with its retirement fund, and allegedly used some of the money for other costs, which has left the state retirement system at just 16 percent funded, making it the second-worst funded retirement system in the country, behind Illinois.
Not only is it underfunded, according to Bell, but since the two systems are connected, monies from the CERS, which is approximately 62 percent funded, are allegedly being used to help out the KRS, which could be illegal. The City of Ft. Wright currently has a class action lawsuit against the state that would force KRS to refund CERS. Wednesday evening, the Taylor Mill city commission voted unanimously to join the City of Ft. Wright in that lawsuit, and Mayor Bell promised to encourage other cities to join the suit at Saturday's Kenton County Mayors Group meeting.
Bell explained that Governor Matt Bevin will likely call for a special session of the legislature where the pension crisis is expected to be addressed, but no date has been set. Because of this uncertainty, cities and counties are left in the position of believing they are going to be saddled with this huge debt that they have no way of paying for except to pass it on to their citizens in the form of taxes.
So when Bailey brought up the subject of the tax rate, she told the commissioners that they could take a compensating rate, which would be .4640 per $100 of assessed value, or the compensating rate plus 1, plus 2, plus 3 or plus 4 percent, all of which would require a public hearing. She told commissioners that their personal property of .750 per $100 of assessed value is already the highest rate they can take, so it will stay the same.
Bailey asked the commissioners for their input and said they would set up a public hearing for compensating plus 4. She also said they have to set the waste collection fee, which will probably go up from $145 to $175 per year for each household, since the cost from Rumpke has gone up and the city passes that cost on, but no final decision was made.

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Old 09-25-2017, 06:38 AM
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INVESTMENT FEES
http://www.nbcphiladelphia.com/news/...446797223.html

Quote:
$858 Million: 'Outrageous' Management Fees Paid By Pennsylvania's Pension Fund in the Last 5 Years

Management costs for the $26 billion state pension system are fourth highest in the country, the governor and state treasurer claimed earlier this year.


Officials who oversee Pennsylvania's $26 billion pension fund for state workers have begun studying ways to reduce management costs, which Gov. Wolf and Treasurer Joe Torsella cited in April as the fourth-highest in the country.
The governing board for the State Employees Retirement System (SERS) last week voted to begin working to reduce those management costs that go to financial firms, which Torsella described Tuesday as "outrageous."

......
The "points" paid on its investments to those financial firms dropped to 62 last year from a recent high of 75 in 2012. Points are financial jargon for the percentage of fees collected on an investment. One percent equals 100 points.



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