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  #361  
Old 02-25-2019, 05:10 PM
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Mary Pat Campbell
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ILLINOIS
https://www.pjstar.com/news/20190224...state-pensions
Quote:
Reeder: Same ol’ same ol’ regarding state pensions
Spoiler:
SPRINGFIELD — Political courage is a rare commodity in Springfield. And new ideas are rarer still.

When politicians face challenges, they usually dig out the same tired political play books and take the path of least resistance. In regard to funding state pensions, that’s what appears to be happening now.

Governor J.B. Pritzker’s deputy, Dan Hynes, is proposing that we \“balance\” the budget in part by shorting payments to the state pension systems — again.

Such ideas become policy when governors confuse the urgent with the important. The most urgent issue on Pritzker’s desk is proposing a budget. But the most important matter is figuring out how to fund the state’s retirement systems, which are teetering on the brink of collapse.

Illinois already has the worst-funded pensions in the nation. Now Gov. J.B. Pritzker’s administration wants to reduce how much the state pays in the next fiscal year to the tune of $800 million?

Good grief. Have we lost all common sense?

Of course, Hynes didn’t use the words \“short\” or \“underfund.\”

He called it a \“modification\” of the Edgar Pension Ramp.

You see, the fiscal mess that is Illinois bears both Republican and Democrat fingerprints.

During Gov. Jim Edgar’s time in office the so-called Edgar Ramp was created, which was touted as a cure-all for the state’s pension woes.

It wasn’t. It isn’t. And it never will be.

It simply delayed the state’s Day of Reckoning.

And, in fact, it made things worse.

Back in the 1990s the state’s finances were a mess. Pensions were underfunded in part because annual payments had been skipped and the money spent on other things.

For months, Edgar, legislative leaders and union bosses hashed out how to \“solve\” this predicament.

And they gave birth to a rat.

In a nutshell, the grand compromise Edgar championed called for having low annual pension payments while he was in office and higher ones when future governors were in office.

He kicked the can down the road. He made his problem that of future governors.

And now Hynes is ripping a page out of that old playbook and talking about adding seven years onto the ramp so it ends in 2052 instead of 2045.

Bad idea.

Sure, stretching out the payment schedule would reduce short-term pension costs so the state can spend the money elsewhere. But money diverted today by not putting it into the pension funds results in investment dollars lost that will have to be put in by taxpayers years down the road.

Pritzker spokeswoman Jordan Abudayyeh did not immediately respond to requests for comment about the Hynes’ proposal.

Back in the bad old days, they called such schemes \“pension holidays.\” It’s how we got into this mess in the first place. Payments were put off and investments were not made. Unpaid pension obligations kept piling up and now we are being asked to make up the difference.

But the biggest problem with these pension holidays or \“ramp modifications\” is that they fail to address the underlying, flawed state retirement system. Illinois would be much better off if it amended its constitution to move government workers into 401k-like defined contribution plans.

There doesn’t appear to be the political will in Springfield to do such a thing. But plenty of folks are talking about raising taxes.

So, hang on to your pocket books.

https://capitolfax.com/2019/02/25/ma...medium=twitter
Quote:
Martire: “We don’t want to see a new ramp with new high payments down the road”
Spoiler:
* Carol Marin last week asked Ralph Martire, executive director of the Center for Tax and Budget Accountability, whether the governor’s proposed restructuring of the pension ramp is “just another pension holiday”…

Well, yeah. An incomplete on the pensions. Look, he didn’t publish enough material for us to weigh in on those pensions and either support or not support what he did.

One major concern we have is they reamortized, changed the ramp, the payment schedule, but they didn’t point out what the new payment plan looks like, so I don’t see what that new ramp is and we want the state to go to a level dollar, so it doesn’t always have this increasing payment obligation. That’s what strains the fiscal resources. We don’t want to see a new ramp with new high payments down the road.

Remember, the governor wants to extend the ramp by seven years. But he has yet to say how much money the state will “save” during those seven years and how much more it will cost taxpayers in the long term. Until we know that, we will have no idea if his other pension proposals (asset transfer, permanent buy-out, $200 million per year from graduated tax, $2 billion pension bond) are enough to close the gap.


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  #362  
Old 02-25-2019, 05:20 PM
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CONNECTICUT

https://www.weston-today.com/articles/190222-pensions

Quote:
Governor’s Budget Proposes Teacher Pension Sharing

Spoiler:
FEBRUARY 22, 2019 — The state budget proposed by Governor Ned Lamont on February 20 would force Weston and most Connecticut municipalities to finance at least 25 percent of pension fund contributions for current teachers. The minimum for struggling cities would be 5 percent.

The proposal complicates the task of Weston officials to minimize an inevitable rise in the mill rate. The legislature may or may not pass the governor’s plan, but because the State’s budget is enacted weeks after voters approve Weston’s, the Board of Finance will probably make decisions anticipating a worst-case scenario.

The governor’s proposal calls for phasing in town obligations over three years. Initial estimates have Weston’s annual contribution starting at $276 thousand, growing to $570 thousand the following year, and reaching $870 thousand in fiscal year 2021-22.

We believe those estimates are low. They do not appear to take into account a kicker in the governor’s proposal: an extra point that would be added for each percent a district’s average teacher salary is above the state median.

PAY MORE, CONTRIBUTE MORE
Governor Lamont gave an example in his address to the legislature. Teachers in his hometown of Greenwich are paid, on average, 30 percent above the state median. That means, according to Mr. Lamont, Greenwich would pay 55 percent of contributions to the teacher pension fund.

Weston’s average teacher salary is 24 percent above the median. That puts the town's pension fund contribution at 49 percent, almost double the estimates, phased in by thirds over three years.

The governor explained his logic. He said it is unfair to make every taxpayer in Connecticut pick up the tab when districts choose to pay teachers above-average wages. That’s the way it works now, because contributions are based on a percentage of salary and are paid by the State.

In a press briefing, Melissa McCaw, the state’s Secretary of the Office of Policy and Management, said decisions about teacher salaries are up to local school districts, but “they must have skin in the game” when those decisions impact State costs.

LOCAL REACTION
Weston Board of Finance chairman Steve Ezzes expects some version of the plan to pass, doubts its constitutionality, but has advised his board to be ready to factor it into budget deliberations.

Mr. Ezzes said he hopes Weston’s state legislators will “step up, take a stand, and vigorously oppose” the cost sharing proposal.

All three Weston legislators praised Governor Lamont’s budget speech and were pleased it was framed as a “conversation starter” with an “open door” receptivity to other ideas.

Senator Tony Hwang told us the part about pension fund cost sharing “is a no-go.”

“We have a duty to fund pensions and keep our word to employees and retirees,” said Mr. Hwang. “But the State should learn how to manage its own resources before imposing burdens on municipalities. Towns like Weston, which manage their finances well, shouldn’t be punished for excesses and negligence at the state level. And we shouldn’t do anything that hurts education.”

Representative Anne Hughes told us “we must remind ourselves this is the initial draft” of “an equal opportunity budget with something for everyone to object to.” Ms. Hughes plans to schedule a series of community forums and echoed the governor’s call to “get to work.”

Senator Will Haskell told us he is “still crunching the numbers and looking into how this would impact Weston.” In a statement, Mr. Haskell said revitalizing Connecticut “is going to require some outside-of-the-box thinking” and that “the road ahead is a long one, and I look forward to talking with my constituents about every item on the budget. It won’t be an easy conversation.”

All three legislators have been invited to a mid-March special joint meeting of the boards of Selectmen, Finance, and Education.

Editor's note: This article was updated on February 24, 2019 to reflect actual numbers received after the original publication. Those actuals replaced projections, which were conservative. In this edition, estimates of Weston's pension fund contributions are higher than those of the original.


https://goodmorningwilton.com/update...s-from-wilton/

Quote:
Update on Pension Pushdown: How Much $$ Gov. Lamont Wants from Wilton

Spoiler:
Late Thursday afternoon, First Selectwoman Lynne Vanderslice confirmed that Gov. Ned Lamont‘s proposed budget does call for contributions from municipalities into the state’s teacher pension fund. However, rather than drop a proverbial bombshell on towns from the start, Lamont’s proposal calls for phased-in cost sharing, beginning with FY-2020.

The first year, Wilton would be asked to contribute $463,000 toward teacher pensions; then for FY-2021 that would more-than double to $956,000; finally, in FY-2022, Wilton would be hit with a $1,389,000 request. Whatever percentage level that works out to be is where Wilton would remain each year after.

Vanderslice says she hasn’t yet seen specific numbers or calculations, but she’s being told the governor has set Wilton’s pushdown portion at 15% of the ‘normal’ portion of the pension schedule. The ‘normal’ cost is the current year’s pension obligation, not the old unfunded obligations from past years that have accumulated.

Although it’s all relative, this is slightly ‘better’ than what town officials had been led to believe after Lamont hinted at his pension cost-sharing plan earlier this week. Tuesday he issued a press release saying that each municipality or local Board of Education would assume at least 25% of the normal teachers’ pension costs that have until now been paid by the state, as well as an additional share if Wilton’s teacher salaries were higher than the statewide median amount.

At the time, Vanderslice guessed Wilton might be looking at between $1.75 million-$2.5 million in additional obligations from pension sharing costs alone. But now that more specific numbers have been outlined, the picture is a little clearer.

Still, Hartford hasn’t given the towns all the information.

“I have yet to see the details behind the calculation,” she says.

Of course, it’s important to remember that Lamont’s budget proposal is only that–a proposal. Now the governor’s, budget moves to the CT General Assembly, and will face the Appropriations Committee and the Finance Committee–both of which will likely have something to do with the question of the teacher pension pushdown. Wilton’s State Rep. Gail Lavielle sent constituents a description of just how the budget process works, which we shared on GMW.
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  #363  
Old 02-25-2019, 05:42 PM
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PRIVATE EQUITY

https://www.bloomberg.com/news/artic...for-more-deals
Quote:
Texas and California Pensions Team Up With Buyout Firms for More Deals
By John Gittelsohn and Michael McDonald
February 22, 2019, 7:00 AM EST
California teachers posted returns of 28% on co-investments
Texas Teachers boost co-investments and beef up buyout staff

Spoiler:
Big U.S. pensions are pushing deeper into private equity, seeking exclusive deals alongside buyout firms and at sweeter terms.

Texas and California teachers are ramping up their allocations to co-investments, with more staff and new offices dedicated to buyouts. And Calpers, the largest U.S. pension, discussed this week whether to take a bolder step and do deals on its own.

Public pensions already pour billions into buyout funds of firms like KKR & Co. and Blackstone Group LP and have been rewarded with a median annual return of 11.9 percent. Co-investing, in which pensions buy direct stakes in companies alongside buyout funds while paying little or no fees, promises even bigger gains.

But it also requires building what amounts to an in-house buyout team to vet deals -- an expensive endeavor that some public pensions, which are overseen by cost-conscious boards, have been hesitant to take.

“To do it well and at scale, you almost have to be a professional investor because you can’t rely on public information or market rules,” said Ashby Monk, executive director of a finance research center at Stanford University. “You’re doing corporate due diligence, meeting fiduciary standards. That’s the hard part.”

Public pensions in Canada were among the first to jump into the strategy, investing in companies such as department stores and software producers either on their own or alongside private equity giants. As early as in the 1990s, the pensions began establishing deal teams, backed by their professional boards’ willingness to pay top dollar for talent in Toronto and New York.

Deal Competition
Since then co-investing has spread in the U.S., with endowments and foundations as well as pensions angling for deals. And with buyout firms sitting on more than $1 trillion in dry powder awaiting asset prices to fall, there’s a lot of capital chasing a limited number of opportunities.

“There are so many LPs having the same idea at the same time, it’s making the competition harder,” Margot Wirth, director of private equity investing at California State Teachers’ Retirement System, told her board in Sacramento in January.

For Calstrs, which manages $224 billion in assets, the savings on fees makes the gamble worth it. Pensions typically pay a 2 percent management charge and 20 percent of gains when investing in a traditional buyout fund.

“Hundreds of millions of dollars in reduced fees and incentive payments can be realized by building a more sophisticated, higher capacity private equity co-investment program,” Wirth informed the board.

Calstrs Expansion
She proposed hiring 15 additional managers -- and opening a buyout office in a financial center like San Francisco -- to focus on co-investments. Calstrs could then double its annual commitment to the strategy, which has recently run between $500 million and $600 million.

Calstrs has already seen a bump from co-investments. The strategy returned 28.3 percent in the 12 months through March 2018 compared with 14.2 percent for its investments in private equity funds.

The pension board, composed of teacher representatives and state officials, will review a more detailed plan on the expansion of co-investing in May.

Texas Plans
The Texas Teachers’ Retirement System has done direct deals for a decade, including co-investing, which accounts for about a quarter of its private equity portfolio, an allocation it aims to boost to 35 percent. Private equity is the pension fund’s top performer, returning 15.2 percent last year through June.

The Austin-based fund has proposed almost doubling staff to 270 people in five years as it pushes deeper into direct and co-investing, including adding to its 14-member private equity team. It is contemplating an Asia office to source deals after adding a London office in 2015.

Jerry Albright, chief investment officer, said last year the pension fund could save $1.4 billion in fees over five years from doing more in house.

Read more about Texas Teachers expansion plans here

Calpers Direct

The California Public Employees’ Retirement System, which oversees about $355 billion, may go beyond co-investing and cut deals on its own, putting it direct competition with giant buyout firms. The pension is considering, among several alternatives, opening a New York office and launching two proprietary funds that would invest $10 billion apiece in long-term operating companies and late-stage tech startups.

The proposals, which were discussed this week by the board, are designed to help achieve the pension plan’s 7 percent average annual return target and overcome its unfunded obligations to retirees. Calpers allocated $44.9 billion to private equity as of Dec. 31, including $17 billion that hasn’t been invested because of the lack of opportunities, according to a board presentation.

Some board members, including State Treasurer Fiona Ma, questioned whether a new buyout strategy would meet Calpers’s parameters for risk and transparency. But Ben Meng, who started in January as the pension’s CIO, said the board needs to explore all private equity options if it expects to meet its return target.

“No pain, no gain,” Meng told the board. “Private equity is the only asset class we expect to deliver more than 7 percent.”

As other public pensions, including those in New York City, look to do more with co-investing, they face the thorny issue of paying specialists high salaries. Private equity managers earn about $500,000 to $1 million, including bonuses, which is more than double the typical public pension payout, said David Fann, chief executive officer of Torreycove Capital Partners, which advises pensions.

Pensions will need that expertise to lower the risk of making big bets on companies that turn sour.

“A co-investment is obviously riskier than a fund investment because of single-company exposure,” said Elizabeth Weindruch, a managing director within the funds and co-investments arm of Barings Alternative Investments. “Though they’re positioning themselves for enhanced returns, they’re commensurately increasing risk.”


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  #364  
Old 02-26-2019, 09:05 AM
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NEW YORK CITY

https://www.ai-cio.com/news/nyc-owns...bed-big-apple/

Quote:
NYC Owns $1 Billion Stake in Amazon, Which Just Snubbed the Big Apple
The city’s five pension plans are major stockholders in the company that is escaping from New York.
Spoiler:
Here’s a delicious irony: Although Amazon pulled out of its New York City headquarters project on Thursday, the city’s public pension programs own $1 billion of the online retailer’s stock.

The city’s five pension plans list Amazon, as of their mid-year 2018 reports, as either their third- or fifth-biggest equity holding. (Apple was in first place for them all.) That means Amazon shares make up about 1.8% of the city public retirement system’s $55 billion stock holdings—hardly a lot proportionately, but in dollar terms, not insignificant either.

The office of City Comptroller Scott Stringer, who oversees the pension system and has been hesitant on the Amazon deal, wouldn’t comment on the firm’s stock. But Amazon’s decision to open a vast complex in the New York borough of Queens has stirred up a lot of controversy. Addressing city Mayor Bill de Blasio, a supporter of the Amazon venture, Stringer tweeted “you made this deal in secret with no community input.”

Some New Yorkers had objected to the tax incentives that de Blasio and other pols had used to lure Amazon’s HQ2, its second headquarters, to the city. (The company’s other HQ2 is slated for Northern Virginia, where it has received next to no local opposition.)

None of the New York skeptics has mentioned dumping Amazon stock from the pension plans, either to protest its construction proposal there or to punish it for jilting the city. If the project had continued to roll along, though, divestiture talk could well have arisen, as it has in the past for other contentious stock holdings in public plans.

Who chose Amazon stock for the city’s pension portfolios? Technically, the city’s five pension programs decide their asset allocations, with the comptroller’s office serving as an advisor. Outside money managers do the actual selecting.

Adding Amazon shares to the portfolios, of course, was a no-brainer in the recent past. Amazon is a charter member of the FANG tech-stock bloc, which until last fall had been the market’s biggest high-fliers. Over the past decade, Amazon stock has increased more than 10-fold.

The luster, however, is off those once-golden shares. Amazon’s stock has been sliding this month, as the market overall has gained. It lost 1% on Thursday, and is down 5.5% in February. In fact, Amazon, which hit a $1 trillion market cap in September, has seen its value shrink by one-fifth since then.

If anything, the company’s stockholders should be happy that Amazon is not laying out wads of money for a Queens HQ2. That’s because of a lingering Wall Street fear that Amazon’s days of heady growth are history, and such a monster construction outlay could’ve worsened the situation.

In its Jan. 31 earnings report, the company forecast further deceleration of revenue increases. And while it logged strong fourth-quarter 2018 earnings numbers, the company also indicated it wanted to beef up spending, which in the past has cut into its profitability.

Aside from tax incentives that could’ve reached $3 billion, Amazon was going to pay billions for the 4 million-square-foot campus near the East River. For the moment, the company said it wouldn’t announce a substitute for the axed New York HQ2.


Amazon's current market cap is about $800 billion, just for comparison
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  #365  
Old 02-26-2019, 09:30 AM
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CALIFORNIA
CALPERS

https://www.ai-cio.com/news/calpers-...-organization/

Quote:
CalPERS CIO Says Pension Plan Must Create New Private Equity Organization
Plan is essential if CalPERS wants to avoid increasing its approximate $140 billion unfunded liability, Meng says.


Spoiler:
Ben Meng, the new chief investment officer of the California Public Employees’ Retirement System, is not only unequivocal in his support for a new CalPERS-backed private equity investment organization, he has told state lawmakers that it is essential to help investment returns and prevent the system’s approximate $140 billion unfunded liability from growing.

Meng told a joint hearing of the Senate Labor, Public Employment and Retirement Committee and the Assembly Public Employment and Retirement Committee on Feb. 13 that achieving the retirement system’s 7% yearly expected average annual rate of return would be “a very tall order” without building new private equity investment capabilities.

Private equity is CalPERS’s best-producing asset class, long- and short-term. In the fiscal year ending June 30, 2018, it produced returns of 16.1%.

CalPERS has an existing $28 billion private equity program, consisting mostly of co-mingled buyout funds run by external general partners, but it makes up only 8% of the pension plan’s $345.7 billion portfolio. It also has been shrinking as the pension system competes with other institutional investors to become part of new funds.

Just eight weeks into his job, Meng has championed a plan first proposed by his predecessor, Ted Eliopoulos, in the summer of 2017. CalPERS would back two funds, Innovation, an investment vehicle that would invest up to $10 billion over a decade in late-stage venture capital investments, and Horizon, which would invest up to $10 billion over the next 10 years by taking buy-and-hold stakes in established companies.

Meng is not just pushing the plan before state lawmakers, who have no say in the actual decision to create Innovation and Horizon. On Feb. 21, Meng told the system’s investment committee, who will cast a vote on the expansion plan, that private equity is the only CalPERS asset class that is expected to generate a return above 7% in coming years, with an assumed average investment return of 8.3%.

He said stocks are only expected to produce a 6.8% average annualized return. Meng has made enacting the private equity program a major part of his eight-week tenure, first advocating his support for the program at CalPERS’s semiannual retreat meeting in January.

“If you are trying to achieve a 7% return—and there’s only one asset class that is forecasted to deliver more than 7% of return—you need that asset class in the portfolio, and you need more of it,” he told the investment committee.

Without an expansion of the private equity program, Meng told the investment committee that CalPERS could be forced to lower the expected rate of return under 7%, which would increase the system’s unfunded liability by billions of dollars, and raise contributions for the hundreds of cities, towns, special districts, and school districts that are part of CalPERS.

Those groups are already dealing with increased contributions from CalPERS investment committee’s decision to lower the expected rate of return in 2016 over three years to 7% from 7.5%

CalPERS, the largest US pension plan, is only around 68% funded.

A vote on the private equity plan could come as soon as next month.

Most board members have been supportive of the plan to create Innovation and Horizon, but its structure has become part of a controversy. Originally, in 2017, Eliopoulos proposed a direct-style private equity investment organization similar to Canadian pension plans, which often invest in private equity directly without external general partners.

That proposal has changed to making Innovation and Horizon CalPERS-funded, but actually run by external general partners who would invest solely for CalPERS. Compensation of the investment officials of the two funds would not be disclosed and they would not be subject to public disclosure laws.

Meng told the investment committee that eventually CalPERS might be able to run its own private equity organization, but not now. He said the pension plan does not have the in-house expertise and its location in Sacramento, which is not a global financial center, would deter world-class investment professionals from joining.

“I do not view that as a viable option,” he said of CalPERS running a direct private equity investment organization in the near future.

Former CalPERS board member and investment staffer J.J. Jelincic, a critic of the new private equity plan, told CIO that a lack of transparency about the planned organization is troubling. He also said CalPERS officials haven’t revealed enough specifics of the plan to make him comfortable.

“The fact that they have not defined the exact structure, makes me believe they have not thought it through,” he said.

Some CalPERS investment committee members have discussed similar concerns at public meetings, but the majority of the 13-member committee seem willing to let Meng call the shots. None have been as vocal as Jelincic, who has been a regular attendee at CalPERS meetings attacking the plan.

Jelincic also rejected Meng’s statement that CalPERS couldn’t attract the investment talent to run a direct investment program because it is located in Sacramento.

Jelincic said CalPERS investment teams could be located in cities other than Sacramento, a practice of other global pension plans, who often have offices in varied locations.

Meng rejects the transparency issues.

Meng told the investment committee and state lawmakers that the new program would be more transparent than CalPERS’s current legacy private equity funds run by general partners, and ultimately fees would be less, though he has not offered details. CalPERS generally pays a management fee of up to 2% to private equity general partners and gives up 20% of the profit.

In his discussions with the CalPERS investment committee, Meng conceded that the new private equity plans has risks and might not generate the investment returns that are anticipated. He said, however, that given CalPERS’s underfunded status and a slowing global economy that would impact investment results in a negative way, “doing nothing is not an option.”


https://www.nakedcapitalism.com/2019...ty-scheme.html
Quote:
Wall Street Journal Story Confirms That CalPERS Plans to Overpay Grossly in Its New Private Equity Scheme
Spoiler:
We had hoped to leave CalPERS alone for a bit, but a new Wall Street Journal confirms a post we published earlier this month. We discussed how the fees for its private equity scheme that CalPERS presented to the board as if it were a great deal are in fact so high as to amount to a roughly $80 million payday, per new fund, per year, for the fund owner(s).

It was alarming to see the architect of the private equity plan, John Cole, so badly mislead the CalPERS board. It says he is either utterly clueless or complicit in a plan to loot CalPERS.

Recall that the centerpiece of CalPERS’ plan is to set up two new fund management efforts, one of which would operate a “late stage venture capital” fund, the other which would run a “Warren Buffett style fund”. Buffett, if he had deigned to take notice, would vehemently disagree with the claim. This industry fad for marketing funds with longer holding periods bears virtually no resemblance to how Buffett invests. As his just-released annual shareholders’ letter makes clear, Buffett looks at taking 5-10% stakes in public companies along side evaluating acquisitions of entire companies. Buffett is also willing to sit pat if there are no investments at what he regards as good prices (and his black eye with Kraft shows he can get it wrong). He hasn’t bought a big company in the last few years and warned he might not this year either.

Most important, Buffett is allergic to paying fees:



Yet CalPERS being so willing to continue to overpay to invest in private equity, and on top of that, even when it admits that the “Warren Buffett strategy” fund will underperform conventional private equity funds. This makes no sense, yet staff keeps prattling on to the captured board that this sort of destruction of value is necessary and desirable.

The Journal’s story, BlackRock’s $12 Billion Bid to Become a Private-Equity Giant Is Behind Schedule, recounts how the giant fund manager has pinned its efforts on launching a mega “Warren Buffet style” fund as its apparent first major offering. Attentive readers will recall that BlackRock had been courting CalPERS hard. Bloomberg broke a story in September 2017 that in secret, CalPERS was in secret discussions with BlackRock about outsourcing their entire private equity program to BlackRock. Caught out, CalPERS tried putting lipstick on that pig via a sham beauty contest designed to favor BlackRock. The plan then was for CalPERS to put a big chuck of its monies in a private equity funds of fund program. That idea was indefensible by virtue of having CalPERS pay an unnecessary layer of fees, which as Buffett underscored above, takes a big bite out of returns over long periods of time. That plan fizzled out. CalPERS management quietly abandoned it; the scuttlebutt is that BlackRock sought fees so much higher than those of the other bidders as to make it impossible to go forward (raising the obvious question of why CalPERS didn’t proceed with one of the others on its overly short solicitation list if this was actually a good idea, as CalPERS staff had maintained to its board).

The Journal story by Dawn Lim is germane to CalPERS not just for showing how ludicrously rich the fees are for the deals CalPERS wants to strike for its new fund, but separately how other major investors are balking at the idea of committing large amounts to an untested private equity fund manager.

Bear in mind that new private equity funds housed in BlackRock would pose far less startup risk than the ones that CalPERS is trying to set up. BlackRock is providing lots of managerial support: accounting, compliance, office space rental, equipment purchasing, and so on. That means the professionals aren’t burdened down with tadministrativa that would distract the leaders of the CalPERS funds.

But even with the BlackRock imprimatur, the dogs don’t want to eat the dog food:

BlackRock Inc. in 2018 set a goal of raising at least $12 billion to buy and hold long-term stakes in companies, replicating the approach of Warren Buffett. The world’s biggest money manager is still waiting for its first check…

But an experiment with private equity is proving to be a tough sell for some investors. A major Chinese sovereign-wealth fund and the state investor for Alaska’s oil wealth passed on a new BlackRock fund known as Long Term Private Capital, according to people close to those organizations. Florida’s largest public pension fund and Minnesota State Board of Investment are in talks with BlackRock, but no deal is done, said people close to those institutions.

BlackRock officials now hope to secure initial funding later this quarter after missing internal deadlines in 2018. The architect of Long Term Private Capital said the launch has taken longer than expected partly because of the fund’s unusual approach. Its fees are cheaper than many in the industry, but it doesn’t have a deadline for returning money to investors.

Help me. Some big brand name private equity funds managers, such as KKR and Carlyle, have been able to cash in on the “Warren Buffett style” fad. But the didn’t refuse to give an expected fund horizon as BlackRock has, nor did they seek to raise such a presumptuously large amount of money. From the Financial Post in 2017:

A few years ago, private equity managers were growing tired of sitting on the sidelines, watching Warren Buffett’s Berkshire Hathaway make landmark investments in Kraft Heinz and BNSF Railway. They wanted to get in the game.

Stop here. The invocation of Kraft should serve as a big red flag. Back to the story:

So a few of the biggest names in the industry, Carlyle Group, Blackstone Group, and KKR, set about building their long-*duration private equity businesses, hiring teams and raising multibillion-*dollar funds (or forming long-life partnerships) to buy companies that are projected to perform well over a longer time frame than the short hold period of a standard buyout fund.

So a few of the biggest names in the industry, Carlyle Group, Blackstone Group, and KKR, set about building their long-*duration private equity businesses, hiring teams and raising multibillion-*dollar funds (or forming long-life partnerships) to buy companies that are projected to perform well over a longer time frame than the short hold period of a standard buyout fund.

Let’s stop again. The difference between the target holding period for these newbie funds (the article cites ten years as a typical expectation) is actually not that much longer than that of a “standard buyout fund”. While the period of ownership once averaged four to five years, post-crisis, the norm is now six years. Back to the article:

In 2016, Carlyle raised $3.6 billion for its long-dated Carlyle Global Partners fund…Carlyle has so far struck six deals for the long-duration fund…

Blackstone Group LP has raised $4.8 billion to date for its long-term fund….

European firm CVC Capital Partners closed a $4.4 billion pool for a long-term strategy, with backing from the firm’s part owner, the Government of Singapore Investment Corp.

KKR & Co., whose co-founder Henry Kravis in 2009 described Berkshire Hathaway Inc.’s style as “the perfect private equity model,” is also dabbling….

The field is largely limited to these big players, the industry’s precious few household names with a track record and bench of players deep enough for investors to trust them with their cash for two decades. “I think it will be a very limited number of people who can raise a fund of this duration,” says Jim Treanor, head of North America advisory services for Pavilion Alternatives Group LLC.

Aside from the risks of being locked to a manager long-term, being held by a private equity firm for an extended period could also affect the portfolio company’s performance and investor returns, according to Treanor. “It’s hard for one GP to be able to continually add value at every stage of that development of the company,” he says. “It’s going to be the bigger GPs that have bigger networks and a variety of value-add” tools…..

And at a time when many investors like U.S. public pension systems are struggling to meet their expected rates of return, accepting lower returns — even in return for long duration and lower fees — isn’t appealing for everyone, he says.

Notice what is supposedly takes to succeed at this sort of investing (not that anyone has been at it long enough to be deemed a success): a big firms’ wide-ranging network and their extensive skills. There is no way that the small team that CalPERS plans to set up will have that.

And investors aren’t persuaded that even a mega-firm like BlackRock has the chops. The fact that it has been flogging this fund for so long and has not a single bite is damning. The target for fundraising for 2018 was $4 billion, and let us not forget that this is a white hot market for private equity. Nevertheless, BlackRock CEO Larry Fink says he’s not deterred and doesn’t see “the speed of a first close” as critical.

Notice that the Financial Post story pointed out that lower funds are a standard inducement for this strategy. It’s a sop to investors to compensate for the lower expected returns. But it still works for the fund professionals. By doing deals much less often and by begin spared raising funds every four or ive years, these long-term funds can operate with far fewer professionals than a similar-sized conventional fund. The Journal report seemed unaware of this design factor, and treated BlackRock’s fees as a special inducement, as opposed to a norm for this approach. From the story:

Long Term Private Capital is offering to charge clients a management fee below 1%, and 10% of profits, and its management fees would fall as the fund gets bigger. Private-equity funds across the industry charge clients a 2% management fee and 20% of profits, according to median figures from Preqin.

Lim is doing readers a huge disservice with this comparison. There are many very small private equity funds. The median size is on the order of $300 million, and for a fund of that size, a 2% management fee is reasonable because it corresponds well to how much it costs to run the business. But if you were to dollar weight the average, it’s way higher, and the corresponding typical fee levels would be lower. And that’s before you factor in that mid-sized to mega funds offer tiered pricing, with larger commitments getting lower fees.

With this long-winded introduction, let’s return to a February 5 post and see how the Journal has validated it:

Cole slipped his announcement about the crazy-high costs past the board using a tried-and-true tactic of investment managers when they are trying to obfuscate the fees, that of using percentages rather than mentioning any dollar amounts. Here is Cole’s response to a question from Steve Juarez, who was acting as the representative to Treasurer John Chiang. From the December transcript:

Investment Director John Cole: What that leads to is that in an early environment, or an early term of setting up the entity, when assets are relatively small, let’s say a billion or $2 billion, relatively small in CalPERS sense, that the percentage of that amount will be high. And that as that matures over the course of a few years, then it — that and that becomes a much lower percentage. So that by the time we get to, say, $5 billion, that the equivalent of that percentage to the 2 and 20 world is pretty close.

By the time you get to $10 billion, it’s about half — half of what we would be paying otherwise. And all of that is going to be subject to exactly how the calculation

Recall that the management fee is the biggest fee that private equity fund managers receive and that they get it regardless of how the fund does. It is prototypically described as 2% of the amount committed, but in reality, the level is much lower on large commitments, and the $5 billion per fund here is off the charts in terms of size.

Cole says that the applicable percentage varies with the size of the asset base but is 2% when the asset base is $5 billion dollars. Note that two percent of five billion dollars is $100 million, so Cole is saying that the management fee at that point will be $100 million. He then goes on to say that the management fee is roughly half the 2% at $10 billion dollars, which would be 1%. Again, 1% of $10 billion is $100 million. Note how Cole emphasizes the reduction in fee percentage as if these are actual cost savings, when the reality is that the formula will cause the total dollars paid by CalPERS to remain flat. And recall that Cole notes in passing that the percentage will be higher before the $5 billion level is reached, so the management fee in dollar terms may well be near or at $100 million from very early on.

The excessiveness of a two percent management fee on a single investor committing $5 billion dollars is obvious from the fact that, as we’ve already discussed, CalPERS’ peers (as well as CalPERS itself) routinely pays 1.0% to 1.25% management fees for much smaller commitments of around a billion dollars, and survey data supports that conclusion.

But showing either cheekiness or ignorance, Cole justified the absurd fee amount by claiming that, in essence, CalPERS had looked at a proposed firm operating budget of the investment managers and was satisfied that the $100 million was necessary to run the businesses on a lean basis:

Cole: In our construct, in our belief, we will be — go back to the original purpose [of a management fee] and provide the cost and expenses necessary to run the business on an agreed-upon operating budget. So that operating budget would be made up of compensation, that’s comp — this is salary-type compensation, or base compensation — and then as well as those costs associated with running the business – rent, travel, engagement of outside people to help in deal making. And that that number will be in place of a management fee.

This claim is laughable on multiple levels….

The post continued to debunk Cole in detail; please read the full treatment if you have time, since it gives a peek into private equity firm economics.

But all you need to remember is the bottom line.

BlackRock is offering a similar fund with management fees of less than 1% and they get even lower over time. By contrast, for a ginormously larger commitment, CalPERS is paying more than twice as much in the opening years and still more even at year 10.

CalPERS should be getting rock bottom fees, and that means lower than any in the marketplace, not just by virtue of its huge commitment but also by virtue of paying the startup costs

CalPERS’ teams won’t have the deal flow of a KKR or Blackstone, and it’s unlikely even to have the deal flow of a BlackRock, and they won’t have that level of institutional support either. That would argue for an even lower management fee and more in carry fees.

Of course, it’s possible that this whole cockamamie scheme is just a big show to give CalPERS an excuse to again try to hand its private equity business off to BlackRock.
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Old 02-26-2019, 09:31 AM
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KENTUCKY

https://www.ai-cio.com/news/new-cios...haul-kentucky/

Quote:
New CIOs, Possible Teachers Pension Overhaul for Kentucky
Amid acrimony and a deadlocked legislature on the retirement plan issue, small signs of change are welcome.
Spoiler:
Despite the acrimonious stalemate over how to fix the Bluegrass State’s $43 billion-plus teachers pension deficit, there are small signs of progress: new leaders for the Kentucky system and a bipartisan proposal to fix the problem, or at least part of it.

Rich Robben will finally get the Kentucky Retirement Systems’ corner office on April 1 when he becomes its chief investment officer after serving in interim status since 2017, when David Peden left the CIO post. The organization initiated a search in November before determining Robben was the man all along.

Robben will continue to oversee the fixed income, equity, and alternative assets for the $18 billion organization, while Andy Kiehl will aid him as the new deputy CIO. Kiehl, who also starts his new job April 1, is currently the director of investments for the fund’s real estate and real return classes. Both joined the Kentucky plan in 2015 and were appointed at its Thursday board meeting.

And in the face of partisan squabbling over the teachers plan’s fate, a GOP and a Democratic lawmaker have come up with a possible way to sort out the pension mess. How it will fare in the legislature is unknown, but the attempt at least is heartening for those fed up with the partisan warfare over the issue. The measure would allow teachers to keep their defined benefit plan and imposes new age requirements.

Scott Lewis, a Hartford Republican and former Ohio County Schools superintendent, and Travis Brenda, a Cartersville Republican, drafted a bill last week that attempts to partially fix Kentucky’s pension mess. If passed, the changes would create a two-tier retirement model while still keeping beneficiaries in a defined benefit plan, and add an age minimum for new teachers hired in 2020.

Under this proposal, teachers would contribute to both a traditional defined benefit plan and to a new “supplemental” plan—a cross between a defined benefit plan and a 401(k) plan.

Educators hired after Jan. 1, 2020, would also have to be at least 55 years old in order to qualify for full benefits. Kentucky law currently requires just 27 years of service for educators.

That means new teachers will get smaller pensions than the old guard, and contribute 13.75% of their salary, which is slightly more than the 12.85% they already do.

The document was filed Wednesday, one of the last days for submission in the current session. Lewis, who estimates this would save $335 million over 20 years, had received advice from teachers unions and other education groups.

Another bill, filed Thursday by Rep. Jerry T. Miller, also a Republican, called for a level-dollar funding structure for teachers as a way to gradually increase higher pension contribution rates from cities and counties.

The efforts come after a contentious 2018, when a sewage bill turned pension reform by Gov. Matt Bevin looked to end defined benefits for new teachers, instead moving them into a hybrid 401(k)-style retirement plan, among other things. This not only drew the ire of unions, but also the Attorney General, Andy Beshear, who sued Bevin immediately. The law was struck down by the low court, and later by the state Supreme Court.

The two politicians will face off again in November, in the governor’s race.

A bipartisan group of lawmakers assigned to study the pension predicament was created in January. The group has convened seven times between January 15 and February 5, but has not yet made any recommendations for possible solutions. The Public Pension Working Group, which both Lewis and Miller are part of (Miller as a co-chair), has until March 30 to make reform suggestions to the General Assembly.

The state of Kentucky is 31% funded, according to a study from Pew Charitable Trusts.



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ESG

Quote:
Pension funds getting more involved with CEO pay – report
Spoiler:
More pension funds and other large shareholders are voting against CEO pay packages considered excessive, but it will take more involvement to fix the problem, according to a report released Thursday by As You Sow, a non-profit shareholder advocacy organization in Oakland, Calif.

The report — "The 100 Most Overpaid CEOs: Are Fund Managers Asleep at the Wheel?" — is the organization's fifth year of research that focuses on the link between overpaid CEOs of the S&P 500 and shareholder activity holding those companies accountable.

The report found that, worldwide, pension funds with $100 billion or more in assets have more than doubled the number of CEO pay packages they vote against, reaching 40% in 2017. The largest U.S. pension fund, California Public Employees' Retirement System, Sacramento, has increased its votes against S&P 500 CEO pay packages by nearly eightfold.

RELATED COVERAGE
Report cites gap between exec pay, FTSE 100 company performanceBlackRock, Vanguard less likely to vote against CEO compensation – reportBlackRock offers more details in its corporate governance efforts
The report also shows that pension funds give CEO pay packages more scrutiny than mutual fund asset managers, and that European-based investment funds vote against CEO pay packages at a greater rate than those based in the U.S.

Other U.S. asset managers are more likely to vote against CEO pay, when excluding votes from the world's three largest asset managers — BlackRock (BLK), Vanguard and State Street Corp. (STT), which together control 15% or more of U.S. companies. "Their refusal to vote against more than a very, very few CEO pay packages stands out," the report said.

"Private conversations, known as engagements, are insufficient to deal with the systemic problems," said Rosanna Landis Weaver, the organization's program manager of executive compensation, who is encouraged that more pension funds are getting active on the CEO pay issue.

CEO pay continues to increase, growing to an average of $13.6 million in 2017 from $11.5 million in 2013, despite underperformance by the 10 most overpaid CEOs identified in the report. The report found that the 10 firms underperformed the S&P 500 index by 15.6 percentage points in 2017. The most overpaid CEOs were at Fleetcor Technologies, number one at $52 million a year, followed by Oracle, Broadcom, Mondelez International, Wynn Resorts and The Walt Disney Co.

"Quite a lot has changed, but not quite enough," said As You Sow CEO Andrew Behar, who noted on a call with reporters that U.S. pension funds have more asset under management than even the largest asset managers — and should do more.

Former Secretary of Labor and economist Robert Reich said on the call that numerous researchers have found that companies with the highest paid CEOs "really do underperform for shareholders. There is simply no excuse for the level of CEO pay we are now witnessing."

European pension funds are more active on this issue, Mr. Reich said. "U.S. pension funds need to step up."
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Old 02-26-2019, 10:19 AM
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FORT WORTH, TEXAS

https://www.nbcdfw.com/news/local/Fo...506337111.html
Quote:
Fort Worth Reaches Deal on Pension Plan

Spoiler:
After more than three years of trying to find a pension plan compromise and a solution to fix a $1.6 billion shortfall, Fort Worth city employees voted to accept a pension compromise, solving the crisis and avoiding sending the matter to state legislators.

In a tweet Monday afternoon, Fort Worth Mayor Betsy Price tweeted that the voting results were in and the "employees overwhelmingly voted in favor. Fort Worth successfully solved this locally."
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Betsy Price

@MayorBetsyPrice
I am thrilled to announce @CityofFortWorth pension results are in and our employees overwhelmingly voted in favor. Fort Worth successfully solved this locally.

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Under the city’s newly approved plan, employees agree to increase their contribution into the fund.


https://dfw.cbslocal.com/video/40358...t-of-new-plan/
Quote:
Pension Fund For Fort Worth Employees Saved By Overwhelming Vote In Support Of New Plan

Nearly 75 percent of employees voted in favor of the plan. They'll start contributing more to the fund starting in July and the city will contribute more as well.
[news video]
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Old 02-26-2019, 10:21 AM
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CONNECTICUT
TEACHERS

https://goodmorningwilton.com/vander...earing-agenda/
Quote:
Vanderslice: Gov’s Teacher Pension Pushdown Bill ALSO on Friday Public Hearing Agenda
Spoiler:
The following is a post from Wilton’s First Selectwoman Lynne Vanderslice. She wants to draw attention to the recently announced plan from Gov. Ned Lamont to push teacher pension costs to municipalities, something that will increase town taxes. The Education Committee, which will hear testimony on the also-controversial school regionalization proposals on Friday, March 1 will also hear testimony on the teacher pension cost sharing proposal at the same hearing.

UPDATE ON HB 7150, the Governor’s implementer bill for his TEACHER PENSION SHARING proposal: The Education Committee public hearing on the bill, which requires local school district/municipal participation in the cost of the annual pension contribution for their current teachers, is being held this Friday, March 1 at 1 p.m. in conjunction with the public hearing on the school regionalization bills. If you are writing or speaking on one of those bills, you might also want to make separate commentary on this bill, which you can find online. Please note the bill consists of the current statutes, with the proposed changes underlined.

Here is a short summary and some facts about what it will mean for Wilton:

Non Distressed Municipalities must contribute 25% of the plan’s normal (current teacher) contribution, plus 1% for every 1% the municipality’s average teachers’ salary exceed the state median pensionable salary.
According to the Governor’s budget, Wilton’s average teachers’ salary exceeds the mean by 25%, so Wilton’s share would be 50% of the normal.
Proposed three-year phase in costs are as follows: $463,000, $956,000 and $1,389,000.
We have been expecting this push down for a number of years. The State’s contribution, on behalf of Wilton teachers, has grown from $7.1 million in FY2015 to $14.7 million in FY2018.

There is plenty of blame to go around starting back in the 1930s when the state began offering pensions, but didn’t make the required contributions. Also it was a poor decision to negotiate pension separately from wages and other benefits, but that is where we are with the State negotiating the pension and the Board of Education negotiating wages, and the other elements of our contract with the teachers. If Wilton is going to be forced to pay, our elected representatives must have a say in the negotiations. They currently do not.

With all this said, there is the potential for a larger share or a change. Remember, Gov. Malloy proposed a larger share of both the normal and legacy costs, which the Legislature opposed. Will this be more palatable for some legislators, as the 25 municipalities identified as distressed are only required to contribute 5%?

This proposal requires union concessions, which will be a big hurdle.

Without comments, legislators may feel it is acceptable as is.


https://patch.com/connecticut/wilton...r-pension-bill
Quote:
Vanderslice Warns on Teacher Pension Bill
Wilton could be on the hook for half of the overall teacher pension contribution, once covered completely by the state
Spoiler:
WILTON, CT — The state legislature's Education Committee will take testimony Friday on a bill that would result in Wilton kicking in money for teacher pensions previously contributed by the state.

HB 7150, the Governor Lamont's implementer bill for his teacher pension sharing proposal, would require local school district/municipal participation in the cost of the annual pension contribution for their current teachers.

"Non-distressed" towns, of which Wilton is one, would contribute 25 percent of the plan's normal current teacher contribution, plus 1 percent for every 1 percent the municipality's average teacher's salary exceed the state median pensionable salary. For Wilton, that would be 50 percent, according to First Selectwoman Lynne Vanderslice. The costs would be phased in over three years, in payments of $463,000, $956,000 and $1,389,000.

"There is plenty of blame to go around starting back in the 1930s when the state began offering pensions, but didn't make the required contributions," Vanderslice wrote on Facebook. "Also it was a poor decision to negotiate pension separately from wages and other benefits, but that is where we are with the state negotiating the pension and the BOE negotiating wages, and the other elements of our contract with the teachers."

Towns currently have no say in pension negotiations, and Vanderslice reckons they should if they are going to get stuck with part of the tab.

The proposal requires union concessions, "which will be a big hurdle," Vanderslice wrote.
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Old 02-26-2019, 10:23 AM
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MASSACHUSETTS
MBTA

http://www.metrowestdailynews.com/ne...ees-and-riders
Quote:
MBTA pension fund falls short, posing risk to retirees and riders

Spoiler:
Pensions take up about 24 percent of the authority’s operating budget, up from 15 percent three years ago. “That is an unsustainable trajectory,” General Manager Steve Poftak said.

After the MBTA’s pension fund absorbed losses in 2018, officials warned Monday that the burden of covering retirement for thousands of T employees remains “a really crucial issue.”

The fund has been the subject of scrutiny for several years as the MBTA grapples with budget concerns. New figures, discussed at the authority’s board meeting Monday, did not alleviate the pressure: the fund paid out $100 million more to retirees last year than it collected in contributions from current employees, and it also lost $50 million in the financial markets. After a return of more than 15 percent in 2017, the fund fell 2.9 percent in 2018.

Pension payouts are contributing to struggles at the MBTA with keeping expenses growing in line with revenues.

“This is a really crucial issue facing the MBTA,” General Manager Steve Poftak said. “As we’ll detail next week when we take a look at the operating budget, the pension payment out of the operating budget has gone up from 16 percent to 24 percent (since 2015). That is an unsustainable trajectory.”

If the system is not stabilized, it could create problems for both employees and transit system users.

“It eventually deteriorates the amount of service we can put out to the public, so it has those dire consequences,” said FMCB Chairman Joseph Aiello, who urged the board to “accelerate” its search for a solution. “I wouldn’t want to be halfway into earning a pension when the numbers look like this. We’re putting employees who come in every day, doing what they’re supposed to do, providing results, at risk that their pension isn’t going to be there.”


https://www.salemnews.com/news/state...2fc487d86.html
Quote:
MBTA pension fund faces hard times after 2018 losses

Spoiler:
BOSTON – After the MBTA pension fund posted losses in 2018, officials warned Monday that the burden of covering retirement for thousands of T employees remains "a really crucial issue."

The fund has been the subject of scrutiny for years as the MBTA grapples with budget concerns. New figures, discussed at the authority's board meeting, did not alleviate the pressure: the fund paid out $100 million more to retirees last year than it collected in contributions from current employees, and it lost $50 million in the financial markets. After a return of more than 15 percent in 2017, the fund fell 2.9 percent in 2018.

Pension payouts are contributing to budget struggles at the MBTA, which after years of deficits has prioritized keeping expenses growing in line with revenues.

"This is a really crucial issue facing the MBTA," General Manager Steve Poftak said at the meeting. "As we'll detail next week when we take a look at the operating budget, the pension payment out of the operating budget has gone up from 16 percent to 24 percent (since 2015). That is an unsustainable trajectory."

The poor performance in 2018 was the first time since at least 2011 the T's retirement fund had a negative investment return, though the target rate of 7.5 percent has only been reached in three of those eight years.

In the last decade, total liabilities increased by about a third, and many plans remain underfunded, according to MBTA CFO Paul Brandley. The federal Pension Protection Act does not cover the MBTA, but Brandley said if it did, trustees would likely be required to enact a rehabilitation plan to navigate out of "critical status" within the next 10 years.

Both employees and the MBTA itself are contributing more to the fund than ever before, according to the figures discussed at Monday's Fiscal and Management Control Board meeting. Employees contributed 4 percent of their salary in fiscal year 2008, while the agency paid 9 percent of salary. In fiscal year 2019, employees contributed 8 percent and the MBTA 23 percent.

"This pension contribution is making it increasingly difficult for us to keep that ratio of revenue growth to expense growth intact," Brandley said.

Frequent retirements create financial liabilities for the agency. Since 2010, more former employees have drawn pension funds from the MBTA than current employees have contributed. In 2017, an agency report found the fund would need $3 billion to support all liabilities through 2035.

Officials warned that if the system is not stabilized, it could create problems for both employees and for public transit riders as a whole.

"It eventually deteriorates the amount of service we can put out to the public, so it has those dire consequences," said FMCB Chair Joseph Aiello, who urged the board to "accelerate" its search for a solution. "I wouldn't want to be halfway into earning a pension when the numbers look like this. We're putting employees who come in every day, doing what they're supposed to do, providing results, at risk that their pension isn't going to be there."

Not all parties shared those concerns, though. Jimmy O'Brien, president of the Boston Carmen's Union Local 589 that represents about 4,100 MBTA employees, said in a statement that "claims by the MBTA that the fund is in crisis are simply not true."

O'Brien called the MBTA's concerns "a public scare tactic" and suggested that under current models, the fund will be fully supported by 2039.

"The truth is that the MBTA enticed employees into retirement in order to balance the budget and claim a public victory, now they act shocked that those same employees are collecting pensions," O'Brien said.


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