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  #1321  
Old 10-02-2017, 06:05 PM
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Mary Pat Campbell
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EMPLOYEE CONTRIBUTIONS

http://www.grsconsulting.com/nasra-u...nsion-plans-2/
Quote:
NASRA Updates Issue Brief on Employee Contributions to Public Pension Plans


Spoiler:

In September 2017, the National Association of State Retirement Administrators (NASRA) updated its issue brief, Employee Contributions to Public Pension Plans. The brief analyzes employee contribution plan designs, policies and recent trends.
As discussed in the brief, nearly all state and local government employees are required to contribute to the cost of their retirement benefits, with employee contributions typically ranging between 4% and 8% of an employee’s salary. In addition, the report indicates that 25%-30% of state and local government employees do not participate in Social Security. In many cases, those who do not participate in Social Security have a higher pension benefit and higher required contributions as compared with those who do participate in Social Security. The median contribution rates have increased to 6% of pay for employees who participate in Social Security and remain steady at 8.0% for those employees who do not participate in Social Security.
According to the brief, since 2009, more than 35 state governments increased their employee contribution rates. Moreover, an increasing number of states are exposing employee contributions to risk either by: 1) linking employee contribution rates to the pension plan’s investment return; or 2) establishing a hybrid or 401(k)-type plan, thereby transferring the related investment risk from the employer to the employee.
Other recent trends in employee contributions include:
• Maintaining a variable employee contribution rate based on the pension plan’s actuarial condition; and
• Increasing employee contribution rates when labor agreements are negotiated.
The legality of increasing employee contributions varies by state. In some states, courts have ruled that legislative efforts to increase employee contributions are a violation of the state constitution or contractual rights. However, in other states, higher employee contributions have either withstood or have not been subject to legal challenges.
The brief also includes an appendix of employee contribution rates for 120 individual statewide retirement plans and identifies whether or not plan members have Social Security coverage.
The issue brief is available here.


http://www.nasra.org/files/Issue%20B...ntribBrief.pdf
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  #1322  
Old 10-02-2017, 06:05 PM
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CALIFORNIA


LOS ANGELES
DISCOUNT RATE
https://www.ai-cio.com/news/los-ange...rn-assumption/

Quote:
Los Angeles Pension System Cuts Rate of Return Assumption
LACERS lowers investment guidance to 7.25% from 7.5%.

Spoiler:

The Los Angeles City Employees’ Retirement System (LACERS) board has unanimously voted to cut its assumed rate of return to 7.25% from 7.5%, the system announced at its most recent board meeting.

In addition to cutting the assumed rate of return, the LACERS board also adopted an inflation assumption of 3.00%, an inflation component of the salary increase assumption of 3.00%, and a payroll increase assumption of 3.50%. It also adopted a credit rate for employee contribution of 3.00%, and a real across-the-board pay increase component of the salary increase assumption of 0.50%.

The new investment rate assumption is expected to add $38 million in retirement costs to the city of Los Angeles’ general fund budget, and comes amid public concerns over the city’s growing pension burden, according to the Los Angeles Times.

LACERS’s consultant, Segal Consulting, recommended that the investment rate assumption be lowered to 7.00%, and suggested the 7.25% rate as an alternative assumption. The LACERS staff supported the 7.25% alternative, but under the stipulation that another review of the economic assumptions is completed in 2018, after the board adopts a new asset allocation.

The investment return assumption is comprised of two primary components: inflation and real rate of investment return, with adjustments for investment expenses and risk.

The LACERS board had been debating how much to lower the investment returns over the past couple of months. While Segal’s preferred rate was the lower 7%, that reportedly would have added $51 million to $84 million to the city budget next year, depending on the inflation assumption chosen by the board.

Board member Michael Wilkinson, a representative for retired city workers, advocated the lower 7% recommendations, saying it would be “dangerous” for the agency to rely on a higher, less-realistic number, according to the Times.

The LACERS move follows a reduction in the assumed rate of return for the Los Angeles Fire and Police Pensions (LAFPP). In June, the Fire and Police Pension Commissioners approved the plan’s actuary recommendation to lower the investment return assumption to 7.25% from 7.50%. Segal, which is also the LAFPP’s actuary, said the investment return assumption reduction was needed, primarily due to a continued decline in inflation over the past two decades. The assumption was previously lowered to 7.50% from 7.75% in 2014.

The lower investment return assumptions for both LACERS and the LAFPP will add $170 million in retirement costs to Los Angeles’ budget next year, city analysts say, according to the Times.


MARIN COUNTY
http://www.marinij.com/opinion/20171...pension-reform

Quote:
Marin Voice: We are paying the price for lack of public pension reform

Spoiler:
Most large public agencies have risk management departments. They either don’t understand defined-benefit pension plans or choose to ignore the huge risks of public pensions that have been designed with absolutely no regard for cost containment.

We are just starting to see the results of this complete and total ignorance of basic defined benefit pension principles.

These include required taxpayer contributions increasing by huge amounts each year, public entities such as the county making additional taxpayer contributions above what is required to reduce unfunded liabilities, and tax increases everywhere to provide the needed revenue for the seemingly endless contribution appetite of virtually all public pension plans.

The Tax Reform Act of 2006 addressed private union and single-employer defined-benefit pension issues and provided a framework for the sustainability of private pension plans. Public pension officials have failed to address pension reform in any meaningful way.

Following are some of the main reasons for the huge risks of the public pension system:

• Final salary plans. The private union pension plans that I administer are career-average plans — participants accrue a benefit each year that is added to their prior benefit accruals. If a participant has a large increase in benefit accruals at the end of his or her career, it affects his benefit accruals for those years only, not his or her whole benefit.

Final-salary public plans, where the participant’s whole benefit is based on his or her highest three-year-average compensation, can create huge increases in benefits and huge unfunded liabilities for participants at the end of their careers. Final-salary pension plans are extremely risky from a cost standpoint.

• Aggressive assumptions. Public plans have used assumptions that are far too aggressive. This creates negotiated benefits far too high and if those assumptions are not met, then there should be a means other than just increasing taxpayer contributions to address the inevitable resulting unfunded liabilities.

Legislators have failed to address this issue and the results are huge increases in taxpayer contributions. Our local public officials have failed to endorse any meaningful pension reform.

• Benefit increases. Compounding both of the above was the complete irresponsibility of our public officials in the early 2000s to grant benefit increases, probably illegally, in the range of 30 percent to 40 percent to all participants.

So, let me get this straight, use aggressive investment return assumptions and then spend all of the gains from the stock market run-up in the ’90s and expect taxpayers to make these plans whole when the future unfunded liabilities inevitably happen?
The lack of fiscal responsibility and disregard for risk is incredible.

Let’s look at the Marin County Employees Retirement Association. The county pension has many pensioners with over $100,000 annual pensions and these are “rich” pensions. By “rich” I mean that they have annual cost-of-living increases and provide the surviving spouse with a 60 percent survivor annuity at no additional cost to the pensioner.

The taxpayer annual cost is 26 percent of payroll and the county contributed an additional $94 million last year to help reduce its pension unfunded liability.

The city of San Rafael has a 61 percent of payroll required taxpayer contribution and the Novato Fire District has a 48 percent of payroll required taxpayer contribution.

These taxpayer numbers are offensive. It is no wonder that, in spite of huge increases in property tax revenue, the county still needs additional money for basic services.

CalPERS, CalSTRS and MCERA have recently reduced their still too high discount rates. Lowered investment assumptions require additional pension contributions, which means more money out of your pocket.

There is a direct link between those decreased assumption rates and the staggering tax, rate and fee increases that we experience regularly.

Increases in bridge tolls, school tax measures, Marin Municipal Water District rates, UC tuition, parcel taxes and bonds are in large part due to the increase in required pension contributions.

The regressive stae gasoline tax revenue will be used to fund $100,000-plus “rich” annual pensions for public employees.

It is unfair to taxpayers. We should hold all of our public officials and representatives accountable for this self-serving fiscal incompetence.

Bob Bunnell of Novato is a pension compliance manager for private companies that manage union pension plans. He is a member of Citizens for Sustainable Pension Plans, Marin’s public pension reform organization.



BENEFIT INCREASES
SONOMA COUNTY
http://www.pressdemocrat.com/news/74...its?artslide=0

Quote:
Lawsuit targets enhanced pension benefits for Sonoma County government employees

Spoiler:
A new lawsuit seeks to roll back generous pension benefits granted to Sonoma County government employees more than a decade ago that are blamed for spiraling debt and eating away at funding for basic services.

The suit filed by retired Santa Rosa attorney George Luke accuses elected officials and other county leaders of conflict of interest for approving increases in 2003 that benefited them directly and of failing to disclose long-term pension costs to taxpayers, now estimated at more than $99 million a year for the county.

It asks Sonoma County Superior Court Judge Rene Chouteau to declare the increases “illegal” and prohibit the county from making payments to fund them. It names as defendants the Board of Supervisors, the county administrator, the auditor-controller-treasurer tax collector, the human resources director and the Sonoma County Employees’ Retirement Association and its chief administrator.

“When everyone who is supposed to represent the interest of the taxpayer has their hand in his pocket, his only recourse is to seek the protection of the courts whose solemn duty is to require compliance with the law,” Luke wrote in his suit filed Aug. 28.

The legal challenge — which could affect thousands of current and retired county employees — comes amid continuing controversy statewide about pension benefits granted years ago that have threatened the financial well-being of local governments and strained their ability to pay for things like road repair and the hiring of more sheriff’s deputies.

Earlier this year, Sonoma County annual pension costs were projected to hit $146 million by 2023, a 700 percent increase since 2000. County debt from past pension bonds and long-term unfunded obligations tied to the retirement system total about $778 million, equivalent to 49 percent of the county’s annual budget.


Although reforms have been enacted over the past five years at the state and local level mandating lower benefits for new employees, critics continue to sound alarms over pension costs. A similar case pending before the California Supreme Court that arose in nearby Marin County seeks to overturn the so-called “California Rule” guaranteeing workers get the pension that was in place at the time they were hired. The legal challenge was previously struck down by two lower court judges who deemed it was filed too late or did not include employee unions. They did not rule on the merits.

Supervisors Shirlee Zane and David Rabbitt, who've been active on pension reform since joining the board in 2009 and 2011, respectively, did not respond to interview requests on Friday and instead issued a joint, written statement.

“While we share the desire for a sustainable pension system, this lawsuit is without merit and a waste of taxpayer dollars given results in Marin cases, public independent analysis of law following 2012 grand jury report, and new separate analysis of counsel,” the statement said. “Efforts to achieve policy changes should really be directed to the state Legislature.”

Luke’s suit targets the way benefits were adopted. It says the Board of Supervisors failed to comply with state law requiring it to conduct an actuarial analysis of the costs of new pension benefits and publish the findings two weeks before any vote. The allegation was raised in a past county grand jury report about procedural mistakes and was formally acknowledged by a new group of elected supervisors in 2012.
The suit also accuses the highest paid county officials, including the supervisors and retirement system executives, of failing to recuse themselves from the process and not disclosing any personal gain to the public.

County officials and union leaders at the time agreed on the benefit increases to settle a class-action lawsuit brought by employees in 2002 demanding retroactive pay increases to match those in other counties.
…..
Further, Colantuono said the suit is barred by the statute of limitations, which he said protects thousands of employees who made career decisions based on expectations of a certain level of salary and benefits.

Luke argues there is no defense based on timing because taxpayer costs are calculated annually.

The county disagrees.

Colantuono said a realistic solution must be statewide because any county that goes it alone will find it difficult to recruit and retain qualified employees who will simply go where the benefits are higher.

…..
If Luke’s suit is successful, it would be the first in the state. The county could renegotiate contracts but it would likely face lawsuits from employee unions.



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  #1323  
Old 10-02-2017, 06:06 PM
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Mary Pat Campbell
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CONNECTICUT
BUDGET

https://www.ai-cio.com/news/conn-gov...sion-concerns/
Quote:
Conn. Gov Vetoes Budget over Pension Concerns
Gov. Dannel Malloy said the budget would eliminate hundreds of millions of dollars in pension fund contributions.
Spoiler:

Connecticut Gov. Dannel Malloy has vetoed the $40.7 billion biennial budget passed by the state’s general assembly, saying it “adopts changes to the state’s pension plans that are both financially and legally unsound.”

Malloy said the proposed budget attempts to shirk the state’s pension fund obligations by eliminating $144 million in pension contributions this fiscal year, $177.8 million next year, and hundreds of millions of dollars in the following years “solely by seeking to limit the state’s authority to enter into future agreements over pension benefits,” Malloy said in his veto letter. “This budget grabs ‘savings’ today on the false promise of change a decade from now, a promise that cannot be made because no legislature can unilaterally bind a future legislature.”

The Democratic governor said the bill, which was supported by Republican lawmakers, makes unilateral changes to vested pension benefits, and would risk a constitutional challenge, as well as exposure to potential litigation, and hundreds of millions of dollars of liability.

“The state is already paying hundreds of millions in penalties for a similarly foolhardy approach taken by a previous governor,” wrote Malloy, adding that “the potential financial consequences of this maneuver increase exponentially when used as the basis to avoid meeting our obligations to fund our pensions.”

Malloy argued that prior administrations and legislatures have consistently underfunded the state’s pension obligations, which he said has amassed an unfunded debt obligation that has “increasingly stymied our ability to make the key investments necessary to strengthen and grow our economy.”

He also said the budget diverts teachers’ pension contributions to the general fund, but without offering a solution to reform funding for the teachers’ pension system. This could leave “future taxpayers at the precipice of a fiscal cliff that could reach as high as $6 billion,” he wrote. “The diversion of the teachers’ retirement contributions from the teachers’ retirement fund creates significant potential tax consequences for the employees and jeopardizes the tax status of the entire retirement fund.”

Malloy urged both parties to work together to negotiate a new budget, and warned that failure to reach a deal soon could risk federal approval for $343.9 million in increased provider tax revenue, and $366.5 million in federal Medicaid reimbursement, which he said are critical to balancing the budget and increasing reimbursements to providers.

“This budget is unbalanced, unsustainable, and unwise,” said Malloy. “Through these fiscally irresponsible changes, this budget would fail to move the state closer to fully funding our pension obligations, a stated goal of legislative leaders in both parties.”




http://www.nationalreview.com/articl...ions-democrats
Quote:
A Modest Blow for Fiscal Responsibility in Connecticut
The GOP overcomes the Democrat–union axis to stop runaway public-employee pensions — eventually.
Spoiler:
Sometimes there’s a fine line between kicking the can down the road and gradually phasing in difficult change. Not this year, not in Connecticut. The difference is a chasm. The sweetheart deal that Governor Malloy and his fellow Democrats in the General Assembly cut with state employee unions, the so-called SEBAC agreement, is protected by contract for a full decade — leaving meaningful reforms waaay down the road. The contract is the mother of all can-kicks.

Nevertheless, after the deal was struck, Republicans didn’t give up. They included in their own budget proposal several reforms starting after the expiration of the contract. Lo and behold, the GOP’s budget passed both houses of the Democrat-controlled Assembly.

Why in the world did Democrats in the deep-blue state of Connecticut vote for a GOP budget? Well, when the SEBAC contract came up for a vote in the Connecticut senate early last August, three fiscally conservative Democrats held out and voted yes only after receiving assurances from senate Democratic leadership that a twelve-point list of fiscal reforms would be instituted. Then, in the recent budget go-round, the Democrats included only three of the reforms in their budget, while the Republicans incorporated ten of the twelve. So the “threesome” voted for the GOP budget, which passed the senate by 21–15.

Five Democrats in the house of representatives followed suit, and the GOP budget passed the Democrat-controlled house by 78–72. Governor Malloy has vetoed the measure, arguing, amongst other things, that enactment of the reforms constitutes a SEBAC contract violation, even though the reforms take effect only after the expiration of the SEBAC agreement. Malloy & Co. say the budget risks an employee-union lawsuit.
So what happens now? Perhaps more Democrats will defect and the Assembly will override Malloy. If the Assembly Democratic leadership wants to block an override and pass their own budget, they’d better keep the reforms and bring the threesome back into the fold (along with their house colleagues). But wait, that runs the purported risk of a union lawsuit. On the other hand, can they pass a budget without the reforms — can they bully the threesome and the house fivesome into backing down, or buy them off somehow?

Even though the reforms take effect ten years hence, their impact is worth $322 million in savings today, according to actuarial analysis. Even though they will be realized only in years 11 through 30 of the actuarial time horizon, they impact the schedule of payments over the whole 30-year horizon, resulting in the $322 million reduction in the state’s required contribution to the pension fund over the fiscal 2018–fiscal 2019 biennium.
…..
What are the key reforms? First, the GOP budget bill eliminates overtime spiking, i.e., calculating pensions based on overtime earned in the years immediately prior to retirement, as opposed to average overtime over a full career. Spiking allows soon-to-retire employees to log extensive overtime hours in order to inflate their pensions. Second, the GOP budget requires state employees to contribute to their own pensions at the nationwide average for public employees, presently about 7 percent of salary/wages (versus 2–4 percent under SEBAC).
Third, it eliminates cost-of-living-adjustments (COLAs) for post-2027 retirees until the pension fund reaches 80 percent (presently, Connecticut is only about 35 percent funded). Fourth, for employees with salaries near and above the Social Security “tax and benefit base” ceiling ($127,200 annual earnings), it eliminates a pension supplement that “makes up” for “lost” Social Security benefits near and above the ceiling. Finally, the GOP budget mandates that future labor contracts not have a term of more than four years.

These reforms introduce basic fairness. Overtime spiking is a notorious abuse. Two other reforms bring Connecticut employees in line with national averages. The fourth simply applies to the state’s retirement program the same needs-based philosophy that governs the federal Social Security retirement program. Indeed, even after these pension reforms, Connecticut state employees will still have far more generous pension and health-care benefits than most workers in the private sector, where pensions have all but vanished and health-care costs have skyrocketed.

If these reforms are included in the ultimate budget, we’ll see if the employee unions file a lawsuit. It would be a court fight worth having. If they are not included and the “threesome” caves and votes for the budget anyway, well, so much for political courage — indeed, voters may wonder whether “fiscally conservative” means anything at all when describing Democrats.

Read more at: http://www.nationalreview.com/articl...ions-democrats

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  #1324  
Old 10-02-2017, 06:07 PM
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Mary Pat Campbell
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ILLINOIS
CHICAGO POLICE
http://www.pionline.com/article/2017...f-funds-search
Quote:
Chicago Policemen’s plan chooses 5 finalists for hedge fund-of-funds search



Spoiler:
Chicago Policemen's Annuity & Benefit Fund selected five finalists in its search for hedge funds-of-funds managers to run between $50 million and $70 million in customized long/short equity portfolios.

EnTrustPermal, J.P. Morgan Asset Management (JPM), PAAMCO Prisma, Pluscios Management and UBS Hedge Fund Solutions will present their strategies to the $2.7 billion pension fund's investment committee at an Oct. 23 meeting, said Aoifinn Devitt, chief investment officer, in an email.
Ms. Devitt said the mandate calls for a concentrated portfolio of long/short equity hedge funds and that one or two firms will be hired.



TEACHERS
http://www.pjstar.com/news/20170930/...g-but-not-soon

Quote:
New state employee pension plan coming, but not soon


Spoiler:
SPRINGFIELD — Part of the deal that ended the budget impasse in July called for creation of a new pension plan for many of those covered by state-funded pension plans.

But it’s going to be a while before that new pension plan is up and running. The head of the largest state-funded system, the Teachers’ Retirement System — the pension system for teachers outside of the city of Chicago — said it won’t be in place before the end of the state’s current fiscal year June 30.

TRS executive director Dick Ingram said the law authorizing the new system only directs that it be implemented “as soon as possible.” For TRS, that’s more than a year away.

“Our operating assumption is the earliest date we will be able to implement Tier 3 would be July 1, 2019,” Ingram said.

It’s not a matter of setting up the hybrid plan itself, Ingram said, but the fact that the system will have to produce monthly reports of earnings and contributions for members, not just annual reports as it does now.

“That will take us some time to put into place,” Ingram said. “That’s a major rewrite of our system.”

The new Tier 3 plan will apply mainly to newly hired employees who are members of TRS and the State Universities Retirement System. Judges and lawmakers — who have their own retirement systems — will not be part of Tier 3. Also, most jobs covered by the State Employees Retirement System are not affected. People already in the Tier 1 plans are not affected.

SERS said the Tier 3 plan would apply only to jobs where a person does not get Social Security benefits in addition to a state pension. Tim Blair, executive secretary of the State Retirement Systems, said that would be only about 2,400 of the roughly 61,000 active members SERS has at any time.

Currently, members of the various systems are part of a defined benefit plan. Both the employer and employee make contributions to it, and retirement benefits are based on a preset formula that includes length of service and the final average salary a person earned.

That will still be a part of Tier 3, although at a greatly reduced amount. For TRS, Ingram estimated the defined benefit portion under Tier 3 will be worth about half of what it is now, although detailed actuarial work hasn’t been done.
The rest of a person’s retirement benefits would come from a defined contribution plan that is commonly known as a 401(k)-style plan. Again, both the employer and employee contribute to it, but the final benefit depends on how much is saved and how much investment income those savings make.
There is also a provision in the bill that allows people now part of the Tier 2 system to elect to take the Tier 3 plan. Ingram said that the Internal Revenue Service has to sign off on the concept, which hasn’t happened yet. He also said people in Tier 2 have to carefully weigh if it is to their advantage to make the move.
“We’re very early in the process, but some of our rough early models would indicate in most circumstances a Tier 2 member would be better off staying in Tier 2,” he said.
There are a number of unresolved issues about creating the Tier 3 system that Ingram said he hopes can be cleared up with legislation during the upcoming veto session. As an example, he said it isn’t clear how to handle the pension of someone who has several years in the Tier 2 system and then elects to go into Tier 3, assuming the state gets permission to implement that.
“There were a lot of things that got overlooked in the process of drafting this bill,” he said.
One issue the creation of the Tier 3 system doesn’t address is dealing with the massive pension debt. A major part of that debt is years of underfunding of the systems by previous governors and General Assemblies.
The Center for Tax and Budget Accountability recently issued a report on an analysis SURS did on how the Tier 3 plan will affect the university retirement system. The organization concluded that Tier 3 “still leaves Illinois well short of resolving its pension debt problems in a meaningful way.” CTBA has long called for the state to re-amortize its pension debt to ease the pressure on the state budget.
“The reality is, the real fiscal issue is, the financial issue of trying to fix the pension funding problem is all related to Tier 1,” Ingram added. “It’s the unfunded liability related to Tier 1 members. It still exists and there’s nothing in this legislation that gets to that.”




http://www.wirepoints.com/phony-budg...fully-exposed/
Quote:
Phony budget savings of $500 million from pension change now fully exposed


Spoiler:
The JouralStar reported yesterday that the new Tier 3 pension plan can’t be implemented before next fiscal year for TRS, the state teacher’s pension which represents over 60% of the state pension system. Tier 3 is for newly hired workers in TRS and SURS and for their Tier 2 workers who opt in.

But the article didn’t connect the dots and missed the real impact.

The new state budget, recently passed along with the Tier 3 changes, assumed $500 million dollars in savings from the change this year. That clearly won’t happen (though some minor changes may be realized if SURS can implement the changes this year).

The Better Government Association wrote a piece a couple weeks ago questioning whether the savings would materialize, and we wrote about that in our earlier quicktake: “Oh, come on. The budget with the Tier 3 changes was passed six days after the new fiscal year had already started. It takes no pension expert to know that complex changes can’t be implemented immediately.”

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

Blame both Rauner and the General Assembly for the lie.

And don’t expect the changes to save $500 million next year, either. We need more data to say for sure but that, too, looks grossly inflated to me.

–Mark Glennon is founder of Wirepoints. Opinions expressed are his own.




McHENRY COUNTY
IMRF
http://www.dailyherald.com/news/2017...cials-#new_tab
Quote:
Franks proposes eliminating pensions for McHenry County elected officials


Spoiler:
McHenry County Board members are considering a proposal to eliminate pensions for future countywide elected officials -- a move Chairman Jack Franks says would encourage healthier turnover and save the county "millions."

The board passed a measure nearly two decades ago allowing elected county leaders to participate in the Illinois Municipal Retirement Fund, as long as they put in 1,000 hours per year.


While preparing the salaries and benefits portion of next year's proposed budget, however, Franks said he found a "perfect opportunity" to cut county expenses in the long-run. His proposal would end IMRF eligibility for the board chairman and eight other elected officials: state's attorney, coroner, clerk, circuit clerk, auditor, recorder, treasurer and sheriff.

The move would not be effective until the end of their terms.

"I've always said there can be no sacred cows when it comes to bringing our nightmarish property taxes under control," Franks said. "I promised taxpayers that I would demolish the status quo."

County board members opted out of the pension fund last year amid an IMRF investigation into whether they met the 1,000-hour requirement. The probe was sparked by inquiries from Franks, a state representative at the time.

In this case, Franks said he is not questioning whether countywide officials work enough hours. Rather, he says, retirement benefits intended for public employees should not apply to politicians.

"People elected to serve the public should not be eligible for perks that the public is not," Franks said.

The board's human services committee is expected to discuss the measure Wednesday. If approved, the proposal likely would be considered by the full county board in mid-October.

Board member John Jung, chairman of the human resources committee, said eliminating pensions for elected leaders seems to be a logical progression, especially with the county board's recent push to lower property taxes.

In addition to saving money, he said, the measure also could dissuade officials from staying in office term after term, as was the case with several recent retirees.

Recent retirees include Phyllis Walters, who served three decades as recorder before retiring last year. She receives an annual pension of $78,207, plus a $24,967 survivor benefit, according to IMRF records. Also, Lou Bianchi, state's attorney for 12 years, dropped his 2016 re-election bid. He now collects a $33,777 annual pension.

"I don't think these jobs were ever meant to be careers," Jung said. "Everybody talks about term limits, and without the pension, I don't think you have to worry about that."

Eliminating the pension wouldn't have stopped Walters from seeking re-election, she said, but it was "certainly a good benefit." She maxed out her pension benefits during her stint as recorder and still ran for office the following term.



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Old 10-02-2017, 06:07 PM
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Mary Pat Campbell
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KENTUCKY
CRISIS

http://www.wdrb.com/story/36496296/p...pension-crisis
Quote:
Public workers rally to bring awareness to Kentucky pension crisis


Spoiler:
LOUISVILLE, Ky. (WDRB) - Dozens of public workers rallied to bring awareness to the pension crisis in Kentucky at Central Park in Louisville Sunday evening.

Teachers, police officers, and other public workers held up signs that read 'Stop corporate welfare and fund my pension.' They want to see a solid, sustainable pension system, something they say is a critical tool for public services.

"Most state and local governments in the state as an employer, it's difficult to pay folks a good salary on the front end, so for a long time the benefit package on the back end has really been there to balance that out," police officer Nicolai Jilek said.

Without a solid pension plan, public workers say it will be hard to attract good employees and to retain them.

Thousands of other public service employees who have contributed to their retirement under Kentucky’s pension systems are fearful as lawmakers consider a number of cost-saving measures aimed at shoring up the plans, which are estimated to be nearly $60 billion in the hole after years of inadequate state funding.

Copyright 2017 WDRB Media. All rights reserved.



http://www.whas11.com/news/local/ken...plan/480031744
Quote:
Kentucky public workers rally for pension plan

Spoiler:
LOUISVILLE, Ky. (WHAS11) -- Public workers, retirees and their families joined together Sunday afternoon in Central Park looking toward an uncertain future, rallying for their pension plans waving signs reading "A Kentucky Pension is a Kentucky Promise."

"They promised us a pension plan. That's what we want. That's what we expect and we won't accept anything less," Sue Foster, one of the rally organizers, said. "It's not just a Jefferson County problem. It's not just a JCPS problem or a metro government problem. This is a state problem."

Kentucky's pension system is considered one of the worst-funded systems in the country. The Kentucky Retirement System said the primary state pension fund it operates has less than 14 percent of the funds needed for the coming years.

"We would like to be able to retire after putting our time in and be able to have a decent retirement and we feel that we've earned that," Nicolai Jilek, a legislative agent with the Kentucky State FOP and a police officer, said. "We work hard."

Lawmakers have talked about developing a new pension fund package that many of these workers are looking to with a worried eye. An independent consultant hired by Governor Matt Bevin recommended sweeping changes to address the issues concerning the pension system and its large amount of unfunded liability, which could force most current and future employees into a 401k-style retirement plan, something the workers said is not acceptable to them.

"If future employees, that's all their offered in their retirement benefit is a 401k, then I'm really concerned about the recruitment and retention of good employees that are going to be providing those services for my family moving forward," Jilek said.

"That's a major part of the benefit package that draws you to the system," Foster, who also serves as the president of JCAESP-AFSCME Local 4011, which represents more than 4,000 JCPS workers, said. "I can tell you as a 24-year employee, that's the one thing that has kept me with this system."

"I'm not a villain," Beth Vachon, a retired elementary school teacher, said. "I have been promised these things and have made financial decisions based on that."

According to the workers, they've played by the rules by putting money from their paychecks into their pension plans. Now they want the government to uphold its end of the bargain. Some workers speculate there could be movement from the legislature regarding pension reform in the coming weeks, and they said they will be watching their elected officials closely as they try to fix the pension problem. Foster said the workers are ready to mobilize to go to Frankfort if and when Gov. Bevin calls for a special session to discuss pension reform.

"That's the bottom line," Foster said. "We go to Frankfort in November of 2017. We go to the polls in 2018."

2017 WHAS-TV





http://www.kentucky.com/opinion/op-e...176237886.html

Quote:
No immortality in pension system; workers pulling the plug

Spoiler:
F.M. Esfandiary, futurist philosopher and chronic optimist, said immortality could be achieved by replacing worn-out organs with synthetic substitutes.

He died of cancer of the pancreas — a body part for which no substitute has been created and which Esfandiary denounced just prior to his death as “a stupid, dumb, wretched organ.”

If the Commonwealth of Kentucky dies or has to take the bankruptcy law, will it be because of our dumb stupid wretched organ: the old-age pension system? Where we gonna get $43 billion which our political class bestowed on itself for somebody to pay down the road?
We are about down the road. State workers are running out of Frankfort like guineas, grabbing what corn can be cracked as soon as possible.
I-64 is clogged off with white SUVs as legislators run home to become judges so that their pensions will triple after one term.

Teachers might as well retire. Many of them were crushed by the recent pronouncement by the Great Leader that the matters they taught were of no consequence — yea, even harmful — to children.

Kids need to learn more practical things, like whether or not pension plans are promises, and if they are, who has to keep them. Pensions are not much of a promise in the coal industry.

Blaming its administrators for the weakness of the Kentucky Retirement System is like blaming Oliver for not having enough gruel. Decisions about pensions and investments and such are political ones, under the supposed watch of a board. The General Assembly overloaded the wagon. It is not fair to blame the mule.

Somebody needs to figure out how to get the state some money quick. They have about sold off those used Crown Victorias. For reasons we cannot explain, snake oil did not revive the coal industry, so we do not have the severance tax to misuse any longer.

We could have pay-per-view of Wildcats basketball games on television and a public auction of tickets. Only corporations would be at games but, hey, they are just people, too.

Or we, as a state or commonwealth — and I cannot remember the difference, but calling us a commonwealth is like the one guy in the room who answers “present” — could build our own roads and bridges with state workers, own our own blacktop plants and quarries, and run our own nursing homes.

Now that kind of stuff would save enough money to pay pensions, but you would have to sneak and do it.

Anybody who ran for office by going against road contractors and nursing-home owners will end up no more than a lobbyist, or even a lowly English teacher.

Reach Larry Webster, a Pikeville lawyer, at websterlawrencer@bellsouth.net.




That was beautifully incoherent. Dear lord.

http://www.rcnky.com/articles/2017/0...lem-keene-says
Quote:
Listen: Casinos Could Help Solve Pension Problem, Keene Says



Spoiler:
It's no secret that Kentucky faces a steep hill to climb to address it's pension crisis.
The state will need to find more than $5 billion over the next two years, it was recently announced - and about 40 percent of that will be put on the back of local governments.
But the answer could be staring Kentucky right in the face - from across the river in Cincinnati and Indiana.

Rep. Dennis Keene (D-Wilder) filed a bill, along with Rep. Rick Rand (D-Bedford), that would open up four casinos across the state and allow slot machines at horse racing tracks.
The revenue would solve the pension crisis, Keene said.
Keene joined The River City News publisher Michael Monks for an in-depth conversation about this topic on WNKR's Northern Kentucky Focus. You can listen to it in full here:





http://www.amnews.com/2017/09/28/tea...o-do-the-same/
Quote:
Teachers paid for their pensions; Kentucky failed to do the same

Spoiler:
By TIM ABRAMS

Ky. Retired Teachers Association

Bob Martin’s Sept. 21 column, “Kentucky’s pension problem stems from defined benefits system,” is poorly researched and obviously failed to examine the fiscal history and performance of our pension systems.

Mr. Martin claims that pension systems, by nature, are unsustainable retirement programs and that this is the reason for our current woes. Yet, for more than 60 years, Kentucky’s pensions were fully funded and fiscally healthy. A combination of poor actuarial assumptions and a lack of contributions by our State Government from 2004 to 2016 created this “mountain” of unfunded pension liabilities.

Yet, since establishing the Teachers Retirement System (TRS), teachers have contributed roughly 10 percent of their salary every year — no missed payments. Even with aggressive actuarial assumptions, the commonwealth didn’t even make those payments.

The State of Kentucky essentially borrowed money needed for the pensions to fund other priority projects and programs. I encourage Mr. Martin to actually read the PFM report.

Mr. Martin incorrectly claims that switching to a 401(k) defined contribution plan will basically solve our pension issues. However, three states that converted to a 401(k) defined contribution plan — Michigan, Alaska and West Virginia — all saw dramatic increases in their unfunded liabilities. When payments stop coming from new teachers and are directed into a 401(k), the problem gets worse.

Mr. Martin also presumes that you can get much more sophisticated investments under a 401(k) plan. The reality is your investment choices are limited and administrative costs more expensive. According to the National Institute on Retirement Security, Pensions deliver retirement income 48 percent cheaper than traditional 401(k) plans. Economies of scale means pension plans can invest in a much broader array of investments whereas a defined contribution plan offers limited fund investments. The TRS has averaged 8.1-percent return on investment for the last 30 years and is nationally recognized for its practices.

Pension plans are not sustainable if one of the parties — in this case, the state of Kentucky — refuses to contribute its required amount to the pension plan.

After 13 years of abdicating its fiduciary responsibility to the more than 51,000 retired teachers, now Frankfort wants teachers to bail them out by writing off its debt. While Frankfort is able to deliver almost $800 million in corporate tax incentives since 2012, they don’t have money to pay their debts.

We already had to deal with a massive bailout in 2008 — we need to teach Frankfort that they have to pay their debt like everyone else.

Tim Abrams is executive director elect of the Kentucky Retired Teachers Association.


http://www.kentucky.com/opinion/op-e...176200821.html

Quote:
On pension woes, first freeze the tax breaks


Spoiler:
What lessons can the rest of the country learn from the Bluegrass state regarding pensions?

Consider: Kentucky has a budget of $11 billion per fiscal year. Tax breaks are $13 billion per fiscal year. The pension shortfall is estimated at $33 billion, primarily because the state legislature under both Republican and Democratic leadership did not pay the agreed-upon share. The employees have paid in their share.

A fair solution would be to suspend the tax breaks for three years, saving $39 billion. That would pay the $33 billion shortfall in the pension plans and leave $6 billion to make up for all the underfunding to state agencies in the past decade. With the current budget shortfall projected at $200 million, it would put Kentucky back on its feet.

However, the governor hired a consultant, PFM Group, and naturally the consultant said the solution is to force future employees into 401(k) plans that often fail to provide secure retirements, and cut into benefits that employees have earned.
The average government retiree earns $16,161 a year and the average teacher retiree earns $36,244 a year, according to the Courier-Journal. These amounts do not equal living off the fat of the land.

State employees are key members of the middle class; they are fundamental to the economy. They don’t make a lot of money, but the work is steady and they traditionally have good benefits to make up for that lack of a high salary. They drive the economy because they have to spend to support their families.

There is no upside to driving down their pensions because we need them during retirement to drive the economy and they have earned the right to be comfortable after their work lives are over. It would be a mistake to imitate private-sector compensation methods. Most private-sector employees are under-compensated.

So what happens when pensions are not properly funded? For one thing, the bond rating of the state goes down, as it did in July. Then, naturally, people who describe themselves as conservative claim that state employee pensions are taking money away from education.

They never say that Kentucky is short of money because the wealthy and corporations have not paid their fair share. Or that tax breaks are so massive that the state has been cutting and cutting the budget for a decade.

Here are other steps Kentucky should take:

1. Ensure the legislature makes its actuarially required contribution to the pension plans.

2. Revise the corporate and personal income tax so that the wealthy and corporations pay their fair share.

3. Get completely rid of the tax breaks.

4. Take the best-funded judicial and legislative pension plans and combine them with the three most poorly funded plans. It is wrong that legislators and judges have better funded plans than other state employees.

5. Recognize that defined-benefit pensions — which pay a retiree a set amount based on pay and the number of years worked — are key to maintaining a healthy economy.

There are lessons to learn from every state, even Kentucky.

K.A. Owens of Louisville is a community organizer, public speaker and writer.





REFORM

http://www.amnews.com/2017/09/30/ken...t-be-reformed/
Quote:
Kentucky’s pension system must be reformed


Spoiler:
By BOB MARTIN

Contributing columnist

There is a crisis growing in state, municipal, and local budgets; among all states, unfunded pension liabilities total $3.8 trillion (Rauh, 2017), while their reported outstanding debt is $1.1 trillion. Further, at the federal level, Medicaid, Medicare and Social Security’s unfunded liabilities total $127 trillion, coupled with $20 trillion in outstanding federal debt.

You can see the consequences of this kind of debt load by following Puerto Rico’s bankruptcy and the looming crisis in Illinois’ budget.

In a defined benefits program, unfunded liabilities are created when 1) politicians add beneficiaries who do not contribute their fair share to the fund, 2) the government does not make the required contributions to the fund, and/or 3) the government does not accurately estimate benefit costs.

The government is not guaranteeing benefits in defined contribution plans. They just promise to match part of the beneficiary’s contribution to a third party who manages the investments. Since someone else is managing the fund, the government cannot add a beneficiary to someone’s pension nor can they fail to make their contractual contribution or borrow from the fund.

The unfunded liabilities can only be paid for by some combination of faster economic growth, an increase in taxes, more borrowing, the sale of assets, or a dramatic cut in current spending. Unfortunately, lenders may refuse to lend and an increase in taxes will slow economic growth. It is not going to be easy to fix this problem.

Kentucky has the worst unfunded pension problem of all 50 states and it ranks third in pension liabilities as a percent of revenues. Finally, previous legislators bound the current legislature with guarantees that may prevent reform. I’m sure it seemed like a good idea at the time but in the end, it may wreck the state’s economy.

Suppose the state follows “best practices” with respect to their defined benefits pension programs; they may still have unfunded pension liabilities when they fail to properly anticipate the actual costs of the benefits they promised.

The problem is the state is guaranteeing a specific outcome for their employees’ retirement. They can make an educated guess about future costs, but no one knows for sure what those costs will be. The states always have an incentive to underestimate the cost since to do so means less money is withdrawn from state revenues for pensions. Hence, the states will systematically underestimate the cost and liabilities will be underfunded.

The same principles are involved in the unfunded liabilities faced by the federal government: the government makes promises in the form of entitlements and then does not properly fund those obligations. Since the obligations are unfunded, the debt gets passed on to future taxpayers and our children and grandchildren must pick up the tab.

Europe has similar unfunded pension liabilities and their obligations will be coming due at the same time as ours. What will happen as we try to refinance our unfunded liabilities?

Since the federal government has its own debt problems, it cannot act as “lender of last-resort” in this situation. Furthermore, the Fed’s balance sheet is a wreck and it will be of little help.

The governor and the legislature promise current retirees and those close to retirement will have their benefits preserved. It will be important for the state to start the transition to defined contributions retirement by enrolling new hires in defined contributions programs; however, they must make it clear to new hires that their contributions cannot be mixed with the existing retirement funds. The existing retirement funds must be brought up to date with new revenues.

Bob Martin is Emeritus Boles Professor of Economics at Centre College.




http://www.bipps.org/bluegrass-insti...hern-kentucky/
Quote:
Bluegrass Institute Pension Reform Team presentation tonight in Northern Kentucky

Spoiler:
Bluegrass Institute Pension Reform Team leader Dr. William Smith will present “Sound Solutions for Kentucky’s Pension Crisis” at tonight’s meeting of the Northern Kentucky Tea Party at 7 pm at the Holiday Inn at 7905 Freedom Way in Florence.
While much of the discussion about pension policy has centered on legislative funding and investment returns, the Bluegrass Institute is calling policymakers and taxpayers to focus on the underlying cause of the $48 billion unfunded liability plaguing the commonwealth’s retirement systems.
This presentation was made recently to the state’s Public Pension Oversight Board and is drawing interest from around the commonwealth.
For a preview of this presentation and to hear some of the comments made by the Institute’s team at the PPOB, click here.
Q&A will be included as part of the presentation.
Please come and bring someone with you to hear this important presentation.
For more information on scheduling a Bluegrass Institute Pension Reform Team presentation, contact Bluegrass Institute President and CEO Jim Waters at jwaters@freedomkentucky.com or 859.444.5630.



Presentation: http://www.bipps.org/bipps-pension-t...thats-problem/
Powerpoint slides: http://www.bipps.org/wp-content/uplo...4.22.17-2.pptx



PARK HILLS
http://www.rcnky.com/articles/2017/0...ange-financial

Quote:
Facing Steep Increase in Pension Costs, Park Hills is Advised to Change Financial Practices

Spoiler:

A review of the City of Park Hills's budget shows a need to address growing expenses.
David Baker was brought in as a consultant by city council to take a look at the Park Hills finances.
"I found some things that showed that expenses will overtake revenues at some point in the future," said Baker at this week's caucus meeting. "There are two ways to avoid that: increase revenues or decrease spending, or both."
He also recommended that the city create at least a ten-year capital improvement plan to plan adequately for the future.
Baker said he would like the city to change the way it accounts for money, telling council that the 12 special funds are like "buckets of money", and saying he wants to pare those down, making them look a little more like regular governmental divisions of funds. He acknowledged that the city was trying to separate the funds so they could only be used for the purpose they were set up for, but under the governmental definition of Special Revenue, council can put all the money in one fund and still have it earmarked for a specific project.
"That way it puts everything in the general fund where it belongs, and then it has the correct carry-forward," said Baker. "The state says cities have to have a balanced budget, and the funds can't go below zero."
Baker explained that he wanted the city to make adjustments to apply to the budget and to plan for the future. He said that usually a city manager can do all that he is recommending, because they are usually skilled at tracking revenue and expenses, as well as at securing grants. But, he agreed that the city is not at a point where it can support the hiring of a city manager, something council debated earlier this year.
The city can account for all its funds and will be more transparent after implementing the changes, Baker said.

Councilwoman Pam Spoor asked city attorney Todd McMurtry about the contract for Baker, wanting to know if there is an exit clause where either of the parties can terminate the contract with notice, and McMurtry said he would look it over.
Baker said he is a forward-looking person, and he thinks the city should be forward-looking and plan for the future.
Meanwhile, one major concern about the city's finances - its pension contribution - is expected to grow as the state faces a more than $5 billion shortfall across the pension systems over the next two years.
"We have paid into (County Employee Retirement System) everything they told us to pay, on time, but the state is not a good steward for the money," said Mayor Matt Mattone. "This is not a city disaster, but we will bear all the burden of resolving it. It is going to be really painful."
He went on to say that because the legislature did not fund the pension system like they insisted the cities and counties do, their system, KRS, is only about 14 percent funded, whereas the CERS is approximately 70 percent funded.
Mattone told council that everyone in the city who employed in a hazardous duty role, pays approximately 31 percent of their salary into the retirement system, and non-hazardous pays about 18 percent of their salary into retirement. The city currently pays $115,000 per year into the fund. The Kentucky League of Cities has come up with numbers on how the payments will increase, and conservative numbers show the payments will go to $183,000, while other numbers take the payment up to $209,000.
"One the low side our payments will increase $67,000, and on the high side it could be $93,000," said Mattone. "Now I sometimes think they might be trying to scare the bejesus out of us, but the can's been kicked down the road for awhile, and by no fault of our own we are in this mess."
He said the city has to figure out where the money is going to come from, and if the legislature has a special session in October like he thinks they will, a plan to step in the debt relief remedy could roll out next year. Still it is a very heavy burden for the cities to bear, especially on top of the price for the new digital emergency communication radios that the entire Northern Kentucky area is required to purchase.

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NEW JERSEY

http://www.njspotlight.com/stories/1...-own-pensions/
Quote:
TOP DEMOCRATIC LEADERS WANT COPS, FIREFIGHTERS TO MANAGE THEIR OWN PENSIONS
JOHN REITMEYER | OCTOBER 2, 2017
Sweeney, Prieto gear up for another push to create new board for PFRS — the Police and Firemen’s Retirement System



Spoiler:
Frustrated by state government’s handling of the New Jersey public-employee pension system, police officers and firefighters launched a major push earlier this year to gain more control over how their own retirement funds are managed. The effort won broad support in the Legislature from both Republicans and Democrats, but ultimately hit a road block when Gov. Chris Christie rejected their favored legislation.

But now Democratic legislative leaders say they’re preparing to breathe new life into the legislation, seeking to create a new board of trustees to manage the New Jersey Police and Firemen’s Retirement System (PFRS), eyeing early next year for the bill’s reintroduction.

Senate President Stephen Sweeney, the PFRS bill’s primary sponsor, announced the plan to reintroduce the legislation during a recent firefighters’ convention in Atlantic City, and Assembly Speaker Vince Prieto, the sponsor of the PFRS legislation in the lower house, said soon after that he’s also ready to try again in early 2018.

The legislative leaders’ new timeline conveniently coincides with Christie’s pending exit from the State House in January. It also means Sweeney and Prieto have decided not to try to override the Republican governor, something they’ve never been able to do successfully since Christie took office in early 2010, thanks largely to GOP lawmakers who’ve stayed loyal to the governor — even on bills that have received veto-proof majorities, like the PFRS legislation.

No slam dunk
Yet just because the new plan for the bill guarantees Christie will no longer be the main obstacle to passing it, that doesn’t mean its enactment in 2018 is going to be a slam dunk. That’s because the two leading candidates in this year’s gubernatorial election — even as they’ve been feuding over what to do about a key property tax reform that impacts police officer and firefighter salaries — have both yet to endorse the PFRS bill that failed to win Christie’s signature back in May.

Introduced by Sweeney (http://www.njspotlight.com/stories/1...ployee-system/) last February, the PFRS bill was strongly supported by New Jersey’s police officer and firefighter unions as a logical response to their members’ growing frustration with the threat that the state’s chronic underfunding of the public-employee pension system has posed to their retirement accounts. The measure also emerged as the public-safety unions and other labor groups were groaning about the performance of investments managed by the state Division of Investment following the Great Recession, under policies set by the New Jersey State Investment Council.

Building a board
Sweeney’s legislation called for the creation of a new, 12-member board to oversee the PFRS, with seven members representing the interests of police officers and firefighters, and five representing the interests of state, county, and municipal-government employers. The proposed PFRS board would also take over management of the retirement fund from the state, getting the power to hire its own executive director, actuary, chief investment officer, and ombudsman. Decisions related to pension contributions would also fall to the new board under the version of the bill that breezed through the Legislature earlier this year.

In fact, the measure won widespread support from both Republicans and Democrats in both houses of the Legislature when it was sent by lawmakers to Christie’s desk near the end of March.

But the bill was not universally supported, and representatives of the New Jersey League of Municipalities and the New Jersey Association of Counties argued that it would have given too much power to the unions at the expense of taxpayers, who already foot a larger percentage of the overall pension obligation. They also raised concerns that if the new board’s investment decisions soured, it would be up to taxpayers to bail out the PFRS.

Christie, a two-term Republican, ultimately issued a conditional veto in May that didn’t dismiss the idea outright, but offered up a series of conditions that would have to be met in order to win his approval.

Christie’s conditions
For example, he suggested the proposed PFRS board be expanded to a 14-member panel, with equal representation among the unions and government employers. He also insisted that in exchange for gaining more control over their retirement fund the police officers and firefighters should be forced to accept a cap of $7,500 on unused vacation and sick time. In the wake of Christie’s conditional veto, both Sweeney and Prieto expressed disappointment — and even though the PFRS measure passed both houses with more than enough votes from both Democrats and Republicans to sustain a gubernatorial veto — the two Democratic leaders ultimately decided not to attempt an override.

Sweeney’s strategy
Sweeney (D-Gloucester) divulged his plan to reintroduce the bill late last month during the firefighters’ convention, telling attendees he still considers the bill to be a “model for public pension systems that have been systematically underfunded by entities controlled by governors and state treasurers.” In response, Eddie Donnelly, president of the New Jersey Firefighters Mutual Benevolent Association, said he’s on board with Sweeney’s new strategy.

“For far too long the voices of the stakeholders, the men and women that trust their dollars to the PFRS, and rely on them for retirement security, have been silenced when it comes to how their savings should be managed and invested,” Donnelly said. “Senate President Sweeney has been a welcome partner in our efforts to change this, and we are glad that this thoroughly researched and vetted bill will remain a top priority in the new Legislature.”

Sweeney, who is up for reelection this year, has also received endorsements from both the state Policemen’s Benevolent Association and the state Fraternal Order of Police since making the announcement.

Prieto committed to plan
Meanwhile, Prieto, the Assembly leader who also enjoys strong backing from the state’s public-sector unions, told NJ Spotlight last week that he’s also committed to getting the PFRS bill passed in early 2018.

“I will absolutely be posting this legislation again and give it another chance,” said Prieto (D-Hudson).

But what will happen next is still not clear, even with the upcoming changeover in the governor’s office.

A spokesman for Democrat Phil Murphy, the gubernatorial contest’s current frontrunner, said Murphy recognizes the concerns of the police officers and firefighters, and added “the state has simply not lived up to its end of the bargain.” But Murphy spokesman Derek Roseman did not respond when asked if the candidate is fully committed to signing the current PFRS bill.

“Phil supports efforts to protect our pension system while providing safeguards for taxpayers,” Roseman said.

And while Guadagno’s campaign website indicates she supports the idea of transferring management of police officer and firefighter pension funds over to a new entity, her campaign spokesman, Ricky Diaz, also declined to give a full endorsement of the current version of the PFRS bill.

“She believes the bill had merit, and she’s confident a version can pass with tweaks that provides accountability and also protects taxpayers,” Diaz said.




http://www.njspotlight.com/stories/1...blem-is-large/
Quote:
BUDGET BASICS: EMPLOYEE RETIREMENT BENEFITS — THE PROBLEM IS LARGE
A series that details the fundamentals of New Jersey's budget, as well as its current budget woes
This is the seventh in a 10-part series outlining New Jersey’s fiscal fundamentals. The goal is to demystify some of the state’s financial challenges, and put them in context of the broader issues New Jersey faces. This series is also intended as a way to underscore the importance of state government in a year that will see a new governor and a new Legislature chosen by voters. Follow this link to see the other stories in this series.
Spoiler:

Background
Most state employees are enrolled in state-sponsored defined-benefit pension systems. Unlike defined contributions plans —like 401(k)s — in these systems employees and employers make annual contributions and the employees are promised a specific pension amount based on years of service and salary level. The employee contribution is specified as a percentage of their salary, the employer contributions are annually determined by actuaries based on the earnings of pension investments and the characteristics of the workforce.
The state sponsors seven different defined-benefit pension systems for public employees. As a result of (1) lower than required annual appropriations by the state for an extended period of time, (2) lower than expected investment earnings, and (3) benefit enhancements enacted in 2001, the financial condition of the pension funds have significantly deteriorated — and absent action by the state will soon be depleted.
Information indicating the state has a net pension liability of $115 billion (based on accepted GASB 67/68 disclosure standards) is alarming enough, but misses the point. The state’s October 2017 bond prospectus indicates that if current trends continue, one of the major systems (teachers pension) will be depleted of all assets within 12 years and another major system (judges) in five years.
In addition, the unfunded future liability for retiree health benefits is $69.3 billion — or a total of $184.3 billion. This is more than five times the state’s total bonded debt of $35 billion.
Each year the state’s independent actuary determines how much money the state should appropriate to fund properly the systems — assuming certain investment returns, a level of contribution by employees, and the projection of future costs. But for many years the state failed to appropriate the required amount — in some years the appropriation was zero.
The state also contributes to the retirement program — a 401(k)-type system — for professors and other employees at the state colleges and universities( 8 percent of base pay), and the state pays for their group life insurance and long-term disability — in fiscal year 2017, $170 million was appropriated.
One could write extensively about this history and enumerate the bad actors, but that is not the goal of this article. Rather, one needs to understand the dimensions of the current problem, and what actions could be taken to address the underfunding.
Key Points to Be Recognized
Four points need to be recognized to understand fully the issue of employee benefits and its effect on current and future budgets:
1) As noted, the state also pays all or a major portion of health benefits for retirees. But, unlike pensions, no dollars have been set aside for future commitments; rather future payments are on a “pay-a-you-go” basis.’ The unfunded liability of future health benefits is $69.3 billion.
The state previously pre-funded future health benefits, but this was discontinued in 1995. In 2002, all existing funds — totaling $450 million — were taken from the fund and used to balance the budget.
2) The state pays the school districts’ share of pension contributions and post-retirement health benefit for all K-12 teachers. The current payments for both are $3.1 billion. In addition, the state pays the school-district share for Social Security — $758 million in the current year.
Almost $4 billion of state payments are made each year on behalf of local school districts. Absent these appropriations, property taxes would increase.
3) The state also administers the pension funds for municipalities. But except for a small amount of state support of approximately $110 million, local municipalities provide funds from local budgets. Furthermore, unlike the state systems the local systems are better funded — at 77 percent — and for the past eight years the full required contributions were made. Curiously, the state “requires” the municipalities and counties to fund their system, while failing to fund its own systems. Further, the local systems would now be 100 percent funded if the Legislature and governor had not directed the local governments to underfund their systems during a five-year period to minimize property-tax growth.
4) Dating back to 2005, there have been numerous changes to the pension and health-benefits systems to reduce costs, long-term liabilities, and benefits for employee. For example, the age for full benefits was increased to 65 — early retirements to age 62 (with penalty); the funding calculation factor was reduced by 9 percent; and cost-of living increases (COLAs) curtailed (until the systems reaches an 80 percent funding level) for all current and future retirees.
Further, employee contributions have been significantly increased from 1.5 percent of salary to a current high of 7.5 percent — based on graduated income. Also, the base for current employee contributions for health benefits was changed. Instead of paying 1.5 percent of salary, the employee now pays a percentage up to 35 percent (based on salary) of the cost of the policy — similar to private industry. Without these expanded employee contributions, the unfunded liability would be materially higher.
In addition to retiree costs -- the state also funds health benefits ($1.3 billion) and the employer’s share of Social Security ($526 million) for the current work force. So, in total, in fiscal 2018 the state will spend over $7 billion (21 percent of the budget) for current and retired employees for pension contributions, health benefits, and social security.
Projections indicate that this amount will increase to approximately 32 percent or higher of the total state budget if all commitments were fully funded.
The Problem Revisited
When the legislature and governor and employees reached an agreement in 2011 to address the retirement-funding problems, it was assumed the problem was solved. Sizable givebacks were made by current and retired employees, including the curtailment of the COLA and a host of other changes (as noted). In return, the state agreed to fund annually an increasing amount over seven years — such that full funding would be achieved.
Unfortunately, the full “annual required contribution” (ARC) was made for only two years as other budgetary pressures and revenue shortfalls limited payments — the state failed to uphold its part of the bargain and fell back to its old practice of underfunding the pension systems.
A recent analysis by J.P. Morgan (May 2016) indicates the cost of meeting all future obligations accrued to date in New Jersey would approach 38 percent of the budget. They suggest one of three solutions would be necessary: sizable (26 percent) increase in taxes; significant (24 percent) reductions in program spending; or a quintupling of contributions by workers. And this would not be a one-time event; it would be kept in place for 30 years.
Is There a Solution?
Most public employees would argue that it is the responsibility of the state to fund properly the pension and health-benefit systems. When employees were hired, these benefits were promised and were part of the hiring agreement. Further, when the systems were underfunded and projected to be in financial trouble, public-employee unions agreed to reduced benefits, and substantial increases in contributions. They were promised the state would make the required payments.
As noted, the state did not fund the agreement. The unions and some legislators have recommended increases in the top income tax rate for millionaires. The estimated effect would be an increase of approximately $600 million — well short of what is required to address the shortfalls with related impacts.
Further, Gov. Chris Christie established the NJ Pension and Health Benefit Study Commission on August 1, 2014 to examine the existing pension and health benefit systems and develop solutions. The reports are extensive and provide detailed information about projected costs and past bad decisions.
In short, the major recommendations are: 1) freeze existing pension plans such so that only benefits earned to date would be retained; 2) initiate a new “cash balance plan” — similar to a 401(k) —for new employees and for those current employees whose existing plans were frozen; 3) align health plans (in other words “reduce” ) to private-sector levels; 4)apply these same changes to local government employees and school teachers; and 5) lock in pension funding with a constitutional amendment. No changes were proposed for existing retirees.
In the fiscal 2018, the Lottery was transferred into the pension system. It is projected that the assets of the Lottery will generate $37 billion in funding over 30 years and provides an immediate increase in the funded ratio.
However, as part of this transfer, approximately $1 billion was reduced from the proposed fiscal year 2018 pension budget. In effect the total fiscal 2018 contribution to the pension system is the same as proposed in the original budget — $2.5 billion. It’s simply being funded in a different manner. The stated benefit is that the pension system now has a predictable flow of monies. But, in fact, in the long run it will only have an impact if the state makes the full required contribution — specifically, to increase appropriations by an additional $2.5 billion — for a total of $5 billion, plus the Lottery proceeds. Current state revenues would suggest this is unlikely. Moody’s Rating Agency indicates that the transfer “does not alter the burden on the state’s credit profile.”
No further actions were taken to address the $67.5 billion of unfunded liabilities associated with retired health benefits.
Final Observation
Problems faced by New Jersey are replicated in many states, but New Jersey’s underfunding problem is at the top of the list. Some states are taking similar actions. For example, Pennsylvania is gradually shifting a portion of pension risks to future employees. Tennessee implemented a hybrid plan for new employees, while Oklahoma moved to a defined-contribution plan for new employees. As noted above, New Jersey has already taken some of these actions and still has a major problem,
The large gap between resources and increasing costs for retirement systems is the largest single fiscal issue facing the state — and has been the root cause for reductions in the state’s bond rating.
Unless significantly more annual monies are paid into the pension systems — or changes such as those proposed by the New Jersey Health Benefit Study Commission are implemented — the pension systems will soon be depleted of all assets. At such time the state will face a constitutional crisis and will have to answer the question, is it required to make annual payment to retirees even if no funds remain in the system — or do retirees receive smaller or no pensions?
The NJ Supreme Court has not specifically opined on this issue, but in several related opinions, including “Burgos v. State” (2015), the wording in the text and in related footnotes suggest that the state has a duty to make the state pension system sound. If ultimately ruled in that manner, the state would face a huge annual and recurring appropriation (at least $10 billion) to meet such requirements. It is critical that the pension issue be addressed in a timely manner.
Richard F. Keevey is the former budget director and comptroller for New Jersey, appointed by two governors from each political party. He was also the CFO for the U.S. Department of Housing and Urban Development and the deputy undersecretary of defense. He is currently a senior policy fellow at the School of Planning and Policy at Rutgers University and a lecturer at the Woodrow Wilson School, Princeton University.


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NEW YORK

http://nypost.com/2017/10/02/city-is...lity-pensions/
Quote:
City is denying 9/11 first responders disability pensions

Spoiler:
Fire Department paramedics and EMTs who responded to the 9/11 attacks and now suffer from medical illnesses say the city is forgetting about them.

The medical first responders, who are employed by the FDNY, breathed the same toxic air at Ground Zero as firefighters and many have been diagnosed with the same respiratory diseases and cancers.

But sick paramedics and EMTs are denied the more lucrative, three-quarters, tax-free disability pensions at a far higher rate than firefighters, New York City Employees Retirement System records obtained by The Post show.

“It’s a crime what they’re doing to EMTs and paramedics who got sick. It’s a game of attrition,” said Gary Smiley, 53, a retired paramedic with asthma and PTSD, whose disability claim was rejected by NYCERS. “They want you to go away and die.”

While pensions held by paramedics and EMTs are governed by the NYCERS system, firefighters and officers are under the auspices of the FDNY Pension Fund.

The NYCERS board has rejected nearly half of the disability claims filed by EMTs and paramedics — 56 out of 116 over the past year.

By comparison, the FDNY Pension Fund has approved 75 percent of disability claims stemming from the World Trade Center attacks, a spokesman said.

The average disability pension benefits are $75,043, while the average for a regular service pension is $44,659.

Nearly two-thirds of firefighters and officers who retired last year had pensions of more than $100,000, many of them for disabilities.

EMTs whose disability claims have been denied are crying foul, and the state Senate is now investigating the disparity.

Smiley was one of the first paramedics on the scene on 9/11 and became trapped for two hours by the crumbling north tower.

A judge ordered the NYCERS board to reconsider the denial of Smiley’s case. By law, a judge can’t impose a disability payment, because it would overrule recommendations of medical doctors.

NYCERS, Smiley said, denied his disability claim a second time.

EMT Mike Abramowitz, 56, who was also at Ground Zero, was diagnosed with restrictive airway disease and gastroesophageal reflux disease, or GERD.

“I was told I was done. I had to retire,” said Abramowitz, whose claim was denied by NYCERS.

Although denied disability pensions, both men were deemed disabled by the federal government and qualified for Social Security disability assistance, they said.

Asked about the criticisms, NYCERS general counsel Ilyse Sisolak, said, “NYCERS has no comment because it is confidential, since the inquiry pertains to medical conditions of its members.”

Sen. Martin Golden (R-Brooklyn), who chairs the committee that oversees government-worker and pension legislation, is investigating the claimed disparity.

“Why is this happening?” he said. “Why do EMTs have a 50 percent rejection rate There’s something wrong with this picture.”




https://www.usnews.com/news/us/artic...n-bribe-scheme
Quote:
Ex-N.Y. Brokerage Executive Avoids Prison for Pension Bribe Scheme

Spoiler:
NEW YORK (Reuters) - A former managing director at broker-dealer Sterne Agee was sentenced on Friday to six months' home confinement after she pleaded guilty to bribing a former portfolio manager at New York state’s retirement fund in exchange for tens of millions of dollars’ worth of business.

Deborah Kelley, 59, was sentenced by U.S. District Judge Paul Oetken in Manhattan, who also ordered her to pay a $50,000 fine and perform 1,000 hours of community service.

The charge against Kelley emerged from the latest pay-to-play case involving the third-largest U.S. pension fund, following a scandal a decade ago that sent the state comptroller to prison.

The $184.5 billion New York State Common Retirement Fund is the investment arm of the New York State and Local Employees’ Retirement System and the New York State and Local Police and Fire Retirement System.

Kelley said at Friday's hearing before being sentenced that she was "remorseful" for her actions.

"As hard as I try, I cannot understand why I did this," she said. "It was the worst decision of my life."

Oetken said his decision not to give Kelley any prison time was affected by a large number letters supporting her from friends and family.

"There is no question in my mind that Ms. Kelley is a good person who has been a hugely positive force in her family and her community," he said.

Kelley pleaded guilty in May, admitting that between 2014 and 2016, she paid bribes to Navnoor Kang, former director of fixed income and head of portfolio strategy at the Common Retirement Fund.

Oetken said at Friday's hearing that the bribes took the form of paying for two vacations for Kang and his girlfriend, and amounted to about $19,000.

Prosecutors have said that Kang reciprocated by steering state pension business to Kelley’s firm - doing about $156 million in trades with the firm in the fiscal year ending March 1, 2015, and about $179 million in the fiscal year ending March 1, 2016.

Kelley received 35 to 40 percent of the hundreds of thousands of dollars in commissions the firm earned on those trades, according to prosecutors.

Kang was also charged with corruption. He pleaded not guilty in January.



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OREGON

https://www.seattletimes.com/nation-...-25-3-billion/

Quote:
Oregon’s public pension deficit reaches $25.3 billion

Spoiler:
PORTLAND, Ore. (AP) — A new valuation by the actuary for Oregon’s public pension determined that the system’s deficit has ballooned to $25.3 billion, meaning higher costs will be coming.

The growing deficit will cost schools and local and state government an additional $1.4 billion, according to the valuation by the Milliman Inc. actuarial and consulting firm.


The increase was likely caused in part by the Public Employees Retirement System Board’s decision to lower its assumption of how much it will get from investments from 7.5 percent to 7.2 percent, taking the deficit from $21.8 billion to $25.3 billion by the end of 2016, the Oregonian/Oregon Live reported (http://bit.ly/2yL321V ) Wednesday.

The board has allowed employers to underfund the system by billions of dollars.

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“We’re not paying anywhere close to what we should be paying, and if we did it would absolutely decimate schools,” said Jim Green, executive director of the Oregon School Boards Association.

The additional $530 million school districts will have to pay because of the rising deficit is equivalent to the cost of 2,650 teachers or 11 instructional days.
Local and state governments will be drawing 40 percent of the additional money they will need from state’s general fund, which is speculated to result in a budget deficit in 2019.



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RHODE ISLAND
INVESTMENTS

http://www.thewesterlysun.com/news/b...lgorithms.html
Quote:
R.I. pension fund improves, with a boost from algorithms


Spoiler:
PROVIDENCE — The state employees’ pension fund recorded investment gains of $64.2 million in August, Treasurer Seth Magaziner reported last week, bringing the fund’s value to $8.17 billion.

Magaziner said that the fund’s performance reflects the “Back to Basics” investment strategy he announced a year ago, which is moving the state out of most hedge funds and into more traditional investments that he said were intended to grow when markets are up and provide stability when markets are down.

Some critics of former Treasurer Gina Raimondo, now the governor, have said that under her stewardship the Employee’s Retirement System of Rhode Island became over-reliant on hedge fund investments.
The fund earned 0.79 percent net of fees in August, the treasurer’s office reported, outperforming its own 0.77 percent benchmark and beating a traditional 60 percent stock, 40 percent bond portfolio, which would have delivered a 0.58 percent. “Similarly, the fund’s one-year return (for the year ending on Aug. 31) is 11.27 percent, beating the plan’s benchmark which stands at 10.95 percent and beating by more than 1 percent a 60-40 bond-stock portfolio, which would have returned 10.21.”

The system serves about 60,000 active and retired state employees, judges, the State Police, teachers, and municipal, police and fire employees from participating communities.

Detailed information about the fund’s investment strategy, performance and managers are published online as part of Treasurer Magaziner’s ‘Transparent Treasury’ initiative at: investments.treasury.ri.gov

The website contains a wealth of information about the fund’s asset allocations and cash flow. U.S. public equity such as stocks accounted for 31 percent of the total allocation as of the end of July, with 16.3 percent of that amount in conventionally managed stocks and the remaining 14.8 percent invested under a so-called QVM Tilt. A spokesman for Magaziner explained that the QVM portion “uses algorithms to try to (slightly) outperform the indexes that a typical index fund would only seek to track.”

Such mathematical wizardry is common among hedge funds, which tend to charge hefty fees. “For the purposes of analyzing our portfolio composition there is really no distinction between the QVM and our other stocks,” the spokesman said. In terms of performance, however, there was a significant difference as of July 31, with the QVM (quality, value, momentum) segment showing nearly a 5 percent positive “variance to target” — highest among the 15 investment categories.

The targets are set by the State Investment Commission and apply to a diversified set of assets that range from equity stakes and direct lending to private companies, to real estate, bonds, credit securities, and cash.

The pension system pays out more in benefits than it receives in contributions each year. “Because of this negative cashflow, steady investment returns are particularly important to the system,” the treasurer’s website says. There is considerable variation in the monthly cash flow. The most recent figure, posted for April, was minus $36.4 million, but looking back to 2016, it’s been as low as $52.5 million in June 2016.




https://www.ai-cio.com/news/rhode-is...illion-august/
Quote:
Rhode Island Pension Fund Earns $64.2 Million in August
Despite outperforming its benchmark, the returns were less than half that of July.


Spoiler:
The Employees’ Retirement System of Rhode Island (ERSRI) earned $64.2 million in investment gains during August, bringing the fund’s total asset value to $8.17 billion.
The returns translate to gains of 0.79% net of fees for the month, which outperformed its benchmark of 0.77%, and a 60-40 fund, which would have only returned 0.58%. However, despite the outperformance, the returns were less than half that of what the fund earned the previous month, when it returned 1.7% and added $137 million in asset value.
For August, the total portfolio value increased by approximately $11.8 million, and the $64.2 million in positive investment performance was offset by $52.4 million of transfers to meet pension payroll in excess of pension contributions, according to ERSRI.
The fund’s one-year return for the 12-month period ending on Aug. 31 was 11.27%, which surpassed the plan’s benchmark of 10.95% as well as a 60-40 portfolio, which would have returned 10.21%.
“Our ‘Back to Basics’ investment strategy continues to deliver positive performance for retirees and taxpayers,” said Rhode Island Treasurer Seth Magaziner in a statement. “I am committed to strengthening the state’s finances for all Rhode Islanders and that includes bringing added stability to the state’s pension fund.”
The so-called “Back to Basics” investment strategy, which was unveiled last year, moves the state’s investments out of most hedge funds and into more traditional investments that are designed to grow during bull markets, while providing stability during down markets. Just last week, the Rhode Island General Assembly passed legislation that will create a legal requirement to maintain the investment policy, which also requires investment managers to publicly report fees and performance.
For the calendar year-to-date, the total portfolio has increased by $474.4 million, with net gains of $716.3 million that were offset by $241.9 million in pension payments. The portfolio’s 9.42% net return was below the strategic benchmark of 9.43%, and a 60/40 fund, which would have returned 10.31%. For the fiscal year-to-date, the total portfolio value increased by approximately $129.3 million.
Over a three-year period, the ERSRI portfolio returned 4.98% net of fees, compared with the plan benchmark of 4.84%, and a 60/40 portfolio, which would have earned 4.55%. Over five years, the ERSRI portfolio earned 7.79% net of fees, outperforming the plan’s benchmark of 7.69% and a 60/40 benchmark of 7.21%.
The fund’s assets are allocated 57.6 % in equity, 11.9% in fixed income, 3.3% in cash, and 27.2% in “others,” which includes investments such as real estate credit and absolute return funds.




CRIMINAL OFFICIALS

http://www.providencejournal.com/new...le-for-pension
Quote:
Judiciary says disgraced Judge Ovalles not eligible for pension



Spoiler:
PROVIDENCE, R.I. — Administrators for the state judiciary have determined that embattled District Court Judge Rafael A. Ovalles is not entitled to a pension, a courts spokesman said Friday.

“It’s the Administrative Office of the State Courts position, on the advice of general counsel, that he is not entitled to a pension,” courts spokesman Craig N. Berke said.

Ovalles on Thursday submitted a resignation letter to Gov. Gina M. Raimondo Thursday, saying he will resign effective Oct. 31. He wrote that events over the last few years led him “to conclude that the honorable course of action” was to retire.

Berke said Ovalles’s resignation came after talks between his lawyers and court General Counsel Julie Hamil. He would have had to serve until 2025 to be eligible to receive a pension, Berke said.

It seemed Friday, however, that Ovalles wouldn’t be giving up any benefits without a fight, in what appears to be a matter of first impression in the state.

“Judge Ovalles was an active and contributing member of the State retirement system for over 12 years and will continue to defend his rights to retirement benefits which he is entitled to upon reaching the age of 65. Rhode Island law only allows for the revocation of a pension in the case where a public employee has been convicted of a crime related to employment,” said his lawyer and former Providence Mayor Angel Taveras.


He is facing dismissal for 41 findings of judicial misconduct that included sexually harassing female staff and lawyers, napping on the job and mistreating those who appeared before him. The state Commission on Judicial Tenure and Discipline launched an investigation in 2014 based on two complaints. Over the course of the probe dozens more allegations surfaced.

In early August, the 14-member body of judges and lawyers released a 240-page report detailing persistent mistreatment of those who appeared before Ovalles; sexual degradation of female staff members and lawyers; napping on the job; widespread abusive conduct; and incompetence. It recommended that Ovalles be dismissed.

He was cleared of an allegation that he had his pants off in chambers in the presence of female staff members.

A native of the Dominican Republic, Ovalles, 52, was named to the bench in 2005 by then-Gov. Donald L. Carcieri. District Court Chief Judge Jeanne E. LaFazia relieved Ovalles of his judicial duties in the wake of the investigation, although he continues to receive his $160,018 annual salary.



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SOUTH CAROLINA
http://www.greenvilleonline.com/stor...tem/715988001/
Quote:
South Carolina can't afford Its state pension system


Spoiler:
The Greenville News reported that Gov. Henry McMaster wants to abolish the state's defined-benefit pension system and replace it with a 401(k)-style plan, making state employees responsible for their own retirement income planning. Generations of future South Carolinians who understand what's at stake are turning cartwheels. I urge you to support this initiative and let your legislators know your feelings.

Why? Because South Carolina, like most public entities, has created a monster that must be slain. Private sector companies realized this decades ago and have for the past 20 years been dismantling their defined benefit pension plans. This wasn't a mean-spirited move to deprive future retirees of an income, but rather ensuring the survival of the enterprise - pure and simple.

Let's look at some facts. South Carolina's overall pension system, which includes state civilian employees, police, legislators, judges and national guardsmen, is underfunded by over $20 billion (yes, with a "b"). That's over $4,000 that every man, woman and child in South Carolina owes to present and future state retirees. The current (inadequate) funding that is going into this system is 20% of eligible workers' salaries, split between themselves and the state. These numbers take my breath away.

The reasons this and most public entities' pension systems are under water are the same reasons the private sector has been scrambling to exit their defined benefit plans. First, that people are living longer. These plans were built in the 1940s when life expectancy was 63 years. Some workers were expected to die before retirement and those who didn't were expected to receive benefits for only 5-10 years. Imagine how pensioners living to be 80 and 90 explodes the amount of money needed to keep our promises to them.

Secondly, legislators looking for votes sweetened up the benefits along the way, including cost-of-living adjustments that further ballooned the liability. They wrote checks we can't cash. Finally, these plans were based on investment returns much higher than recently achieved on lower-risk investments such as bonds. Ask any fixed income investor how that's been working out lately. Those three forces alone, together with some past mismanagement of the SC pension system have put it in functional bankruptcy. If the $20 billion liability were fully represented on the state's balance sheet we would be an additional $13 Billion in debt, beyond the $14 Billion we've owned up to.

The News article stated that "advocates for state workers warned that ending one of the few perks for underpaid workers would lead to an exodus of employees at already understaffed state agencies." Now, that's some interesting logic. We can't afford to pay competitive wages now, but we can afford to pay those same people for a couple of decades after they retire? Albert Einstein once said, "We cannot solve our problems with the same thinking we used when we created them." Who knew he was talking about our state pension system?

Gov. McMaster has proposed a thoughtful, rational, "soft landing"approach to winding down this monster while being fair to past and future state employees. Please let your legislators know you're behind putting this financial time bomb to sleep.


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