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  #11  
Old 01-03-2019, 03:38 PM
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OHIO

https://perspective.opers.org/index....-pension-data/

Quote:
Pew Center tracks pension data
Interactive site allows users to analyze state fiscal information


Spoiler:
By Betsy Butler, Ohio Public Employees Retirement System

Jan. 3, 2019 – Industries analyze data and tell compelling stories with the information to create better products, deliver enhanced services and even identify those at risk for chronic disease.

In the public pension industry, data is used to rank plans, giving an informative picture of the current state of pension funds.

For instance, data stewards like the U.S. Census Bureau and the State & Local Public Plans Database, administered by the Center for Retirement Research at Boston College and the Center for State and Local Government Excellence, develop comprehensive data on state and local pensions and retiree health benefits. Data for myriad variables, available in annual financial reports and actuarial valuations, are frequently updated and validated to create comparative analyses.

We can use these tools to benchmark plans’ assumptions, funding methods, actuarial costs, asset valuations, discount rates and amortization periods.

Recently, the Pew Charitable Trusts shared the data it has collected on state public pensions through a new interactive tool. Users can track plans’ fiscal health, progress in reducing unfunded liabilities, investment of assets, recent investment returns and funding levels for state-sponsored retiree health benefits. An indicators section ranks the plans on more than 30 measures.

State profiles provide a snapshot of public plans by geographic location, while a side-by-side comparison feature allows users to compare performance measures for up to three states in any year, back to 2003. A dynamic timeline provides for analysis of how funding behavior has impacted a plan’s fiscal health. Information will be updated annually as comprehensive data becomes available.

Ohio-specific data in the Pew’s tool combines information about the State Teachers Retirement System of Ohio, the Ohio State Highway Patrol Retirement System, and OPERS. Our fund’s information reasonably matches our Jan. 1, 2017, valuation results.

For the measures that reflect a plan’s funding strength and weakness, OPERS was markedly better than the other Ohio systems and pulled up the combined Ohio totals, our in-house actuary concluded. Overall, Ohio outperforms the national average on all measures. OPERS, on its own, far outperforms the national averages.

OPERS STRS SHPRS Average National average
Funded ratio 77% 67% 63% 72% 65%
Net amortization 93% 90% 75% 91% 85%
Net amortization/pay -1.0% -1.6% -7.9% -1.3% -2.5%
Furthermore, Pew considers a net amortization percentage of 100 percent or higher favorable and net amortization/payroll of zero percent or higher favorable. OPERS is very close to these thresholds on both measures.

Ranking public plans can lead to interesting content – whether in a creative research report, a thought-provoking conference conversation, or in a popular news story. When data is used clearly and effectively – and especially through partnering with the organizations producing that data – rankings show how plans are proactively avoiding or resolving issues. That’s why data is such an important part of telling an accurate story about public pensions.


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  #12  
Old 01-03-2019, 05:17 PM
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PENNSYLVANIA

https://www.ai-cio.com/news/pennsylv...s-legacy-plan/

Quote:
Pennsylvania Pension Revamp Starts, Barring New Hires from Legacy Plan
Newly hired state workers will get lower benefits and either a 401(k) or hybrid retirement plan to save tax dollars, prop up DB funding levels.


Spoiler:
A new pension reform is now in effect for most new state workers in Pennsylvania, creating two retirement options in order to cut taxpayer risk while helping shore up funding for state pension plans.

The law, known as Act 5 of 2017, puts newly hired state employees in either a hybrid plan or a full-blown 401(k) account. The hybrid plan would keep half a retiree’s money in a traditional, taxpayer-backed defined benefit fund, and the other half into a private 401(k) plan tied to the stock market. The overhaul kicks in for teachers on July 1.

While the new set-up lowers taxpayer risks, and projects to save from $43.3 million to $140 million annually over 30 years, it also lowers the retirement benefits for those enrolled in these plans.

This means new workers in the State Employees Retirement System (SERS) will lose between $6,425 and $34,048 in benefits. Teachers and school staff in the Public School Employees Retirement Systems (PSERS) will see reductions between $7,327 and $33,173.

Both figures are estimated for a 65-year-old retiring with 35 years of service and an aggregate final salary of $60,000, according to news outlet The Morning Call.

Additionally, both plan members will be charged by the companies managing their 401(k)s. Great-West Life & Annuity Insurance of Denver will handle the state workers, and Voya Financial will run the accounts of the school workers plan.

Pennsylvania lawmakers, corrections officers, and police, however, are excluded from participating in Act 5. Lawmakers can choose to freeze their old defined benefit plans and then open one of the new ones, essentially beginning a second retirement account. The deadline for those eligible is March 31.

The two retirement systems have a collective pension debt of $72 billion. The state of Pennsylvania is 53% funded.

SERS and PSERS have $30 billion and $56.7 billion in assets under management, respectively.

Representatives from both systems were unavailable for comment.


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  #13  
Old 01-03-2019, 05:18 PM
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ALASKA

https://www.ai-cio.com/news/rising-i...and-portfolio/

Quote:
Rising Interest Rates Galvanize Change in Alaska Board’s Farmland Portfolio
Management Board switches focus from row crops to permanent crops to target outsized performance.


Spoiler:
The Alaska Retirement Management Board (ARMB) is considering significant changes to its $852 million farmland portfolio following interest rate changes and their potential effects on row crops.

Farmland is typically categorized into two main crops, row and permanent. Row crops are cultivated seasonally, with the potential to change the type of crop planted, whereas permanent crops are planted once and maintained over a long period of time, with no potential to quickly change the crop type.

While the benefit for row crops is the ability to switch crops, there are limited options for switching since row crops are dominated by five commodity crops: hay, soy, corn, cotton, and wheat.

Yield expectations for row crops are typically projected around 3-5% compared with 7-9% for permanent crops, of which the $32.5 billion ARMB’s farmland portfolio is divided between permanent crops ($136 million), and row crops ($716 million).

While “row crop returns have been excellent,” according to a report from the ARMB, “row crops are unlikely to have outsized performance going forward.” Row crop price appreciation has closely tracked interest rates, but with interest rates rising or staying flat, row crop price appreciation will be challenged, the report continued.

Additionally, permanent crops have consistently beaten or kept pace with row crops since the ARMB started investing in the asset class in 2004.

Both row and permanent crops have low betas with the S&P 500 Equity Index and the Bloomberg Barclays Aggregate Bond Index.



As a result of the study, the board received a recommendation from Nicholas Orr, investment officer for real assets, to reconfigure the target allocation from 80% row crops / 20% permanent crops to 60% row crops / 40% permanent crops.


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Old 01-04-2019, 04:40 PM
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PENNSYLVANIA

https://www.mcall.com/news/nationwor...103-story.html

Quote:
Five things about Pennsylvania's major pension overhaul that reduces benefits, but not billions in debt

Spoiler:
On Jan. 1, Pennsylvania’s new pension overhaul kicked in for most state workers and will start on July 1 for all new school employees.

Approved and signed into law in 2017, the legislation marks a historic change in the way state pensions are funded.


Here are five things about the change.

It came after years of inaction on the part of the state Legislature to deal with the state’s debt-ridden pension systems.

At the time the overhaul was passed, the state’s two big retirement systems — Public School Employees Retirement System (PSERS) and State Employees Retirement System (SERS) had a combined $72 billion in debt.

The debt was caused by three main factors. From the mid-1990s until 2010, governors and lawmakers in both parties decided not pay the employers’ full annual share of workers’ retirement benefits and they permitted school boards to do the same thing.

In that time, lawmakers also gave themselves and all other employees and retirees retroactive pension bumps that sapped assets. Then market downturns crushed those assets further.

In 2013, as the state was still in the throes of the Great Recession, then Gov. Tom Corbett issued an SOS over the pension debt, which was $30 billion lower. He pitched the idea of cutting benefits and putting state workers and teachers into a 401-k type plan.

As with other attempts over the years, Corbett ran into a wall of opposition from unions representing teachers and state workers.

Corbett also ran into opposition from the GOP-controlled House and Senate who claimed his plan was unconstitutional. Those same lawmakers then tried to ram Corbett’s plan down the throat of newly elected Democratic Gov. Tom Wolf, who had the same legal concerns lawmakers expressed a year earlier.

The new system combines ideas that were kicked about for years.

Under the new system, newly hired state workers and teachers will no longer receive fully backed pensions. They will have two options.


One is a hybrid plan that puts about half the retirement savings in a traditional, taxpayer-backed fund. The other half goes into a private sector 401(k) that rides the stock market’s ups and downs.

The other option lets workers put all their retirement money into a 401(k) account.

The law will save money but do nothing to erase the pension debt that generated the pension reform mantle.

The new pension options will save taxpayers $43.3 million to $140 million annually over 30 years, according to a financial analysis conducted by the Senate.

Gov. Tom Wolf called that amount “a significant achievement.”

Because the plans are not mandatory for existing elected officials and personnel, they will not lower PSERS’ and SERS’ debt, which is now said to be about $74 billion.

Rep. Mike Tobash, R-Schuylkill, one of the law’s main architects, agreed the debt will remain. However, he said, taxpayers will experience less risk of higher debt because the plans are not fully backed by taxpayers.

“It’s shifting the risk,” Tobash said recently.

State workers and teachers would have less money in their retirement.

Pension benefits would fall 18 percent for new school employees, and 6 percent for affected state workers, compared to employees hired since 2010.

That translates into retirement reductions of $7,327 to $33,173 for school workers served by PSERS. Benefits would fall $6,452 to $34,048 for new state workers covered by SERS.

Those figures are for a 65-year-old who retires with 35 years of service and an average annual final salary of $60,000.

The 401(k) is not free, either.

Future state workers will be charged $24 a year, plus an annual asset fee of 0.07 percent, from the company SERS hired to run the 401(k), according to the contract. That company is Great-West Life & Annuity Insurance of Denver.

State lawmakers exempted themselves from having to follow the new system.

Lawmakers, who were sworn into office for the 2019-20 legislative session, are excluded from mandatory participation in the reduced plans. Lawmakers also excluded state law enforcement and corrections officers.

Rather, lawmakers gave themselves and all existing employees the option of freezing their old plans, and then opening one of the new plans. Those eligible have until March 31 to decide.

“There’s no chance all or even a majority of the state’s 253 lawmakers will line up for the new pension plans, said Barry Shutt, a retired Agriculture Department worker from Lower Paxton Township, Dauphin County, who advocates for lawmakers to pay off the state’s full pension debt.

“They are not inclined to do anything to damage their future benefits,” Shutt said.


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  #15  
Old 01-04-2019, 04:41 PM
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NEW JERSEY

https://www.northjersey.com/story/ne...ed/2465735002/
Quote:
Former Passaic County judge's pension revoked

Spoiler:
A disgraced Superior Court judge in Passaic County who was barred from the bench last year will lose her state pension for aiding an intern in a child custody dispute and lying to authorities.

The state Supreme Court dismissed Liliana DeAvila-Silebi in September from her seat on the bench for violating the state's Code of Judicial Conduct. In early December, members of the New Jersey State House Commission followed with a rare vote to strip DeAvila-Silebi of her pension, the first time that has happened in at least 10 years, according to state Sen. Gerald Cardinale, a commission member.

“We had never seen a case like this before,” Cardinale said of the commission, which oversees judicial pensions.

DeAvila-Silebi came under fire in 2015 for helping Vivianne Chermont, a former judicial intern, win custody of her child for Mother's Day weekend. State investigators found that DeAvila-Silebi placed a phone call to Fort Lee police, informing them that Chermont had a court order to have her 5-year-old son on Mother's Day weekend, but the father took custody instead.


The order, however, never existed. DeAvila-Silebi also misrepresented to police that she was the presiding judge over the Bergen County case, when she was actually a civil division judge in Passiac County.

The state Supreme Court found that DeAvila-Silebi misused her position to "advance the private interests of a litigant," made "false statements under oath" and "altered telephone records" to cover her tracks.

Cardinale said the state commission reviewed the Supreme Court order before voting.

“What’s striking is that she continued to provide cover stories as time went on,” he said. “There’s no respect for the law.”

More: Passaic County judge faces misconduct charges for wading into custody case

More: Judge under fire for allegedly lying to help friend win custody of child for Mother's Day

Cardinale, Assemblyman Paul Moriarity, Assemblyman John DiMaio and Deputy State Treasurer Catherine Brennan voted to strip DeAvila-Silebi of her pension. State Sen. Bob Smith, Justin Braz, Gov. Phil Murphy’s deputy chief of staff for legislative affairs, and David Ridolfino, the acting director of the Office of Management and Budget, voted to allow the former judge to keep her benefits.

The bipartisan commission controls the sale and leasing of state-owned properties but is also the trustee of the state’s pension fund for judges.

Cardinale, who has served on the commission for the past decade, said they approved dozens of other pensions at the same December meeting without argument.

DeAvila-Silebi can still reclaim her contributions to the pension in a lump sum, he said. She can also appeal the vote to the court system.

Before serving in Passaic County, DeAvila-Silebi was the presiding judge for criminal cases in Bergen County from 2010 to 2015. She was nominated to the court in 2008 by Gov. Jon Corzine, a Democrat, and nominated for tenure by Gov. Chris Christie. DeAvila-Silebi, of Waldwick, requested a transfer out of Superior Court in Hackensack because of an unspecified dispute with the former county prosecutor, John L. Molinelli.


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  #16  
Old 01-04-2019, 04:42 PM
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ALABAMA

https://www.abqjournal.com/1264251/a...per-chain.html
Quote:
Alabama pension fund now sole owner of local newspaper chain

Spoiler:
MONTGOMERY, Ala. — Alabama’s employee pension fund, with nearly 360,000 members and some $44 billion in managed assets, has become sole owner of one of the largest chains of local U.S. newspapers, the company said Thursday.

CHNI LLC has been acquired by the Retirement Systems of Alabama, the company announced in a statement. The newspaper group includes 68 daily newspapers and more than 40 non-dailies plus websites in 22 states.

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The Montgomery, Alabama-based newspaper group is being spun off Raycom Media Inc., which is being purchased by the Atlanta-based Gray Television Inc. Raycom was owned by the retirement system.

CNHI, which began as a small newspaper group in 1997 and previously operated with the state retirement system as its creditor, will gain stability through the acquisition, chief executive Donna Barrett said in the statement.

“We are very excited about working with RSA again because of its dedication to the crucial role of newspapers in keeping the public informed on what is happening in their communities and beyond,” she said.

Among CNHI’s newspapers are the Valdosta Daily Times in Georgia, The Tribune Star in Terre Haute, Indiana, the Gloucester Daily Times in Massachusetts, The Meridian Star in Mississippi and the Niagara Gazette in Niagara Falls, New York.

Financial details weren’t announced. The chief executive of the pension fund, David Bronner, said the Alabama system has been invested in the newspaper group for decades, “and we are very comfortable with the investment.”

Alabama’s pension fund has other non-traditional investments including golf courses, airliners and the largest office building in New York City, 55 Water.

Gray Television, which began as a regional broadcaster, owns or operates stations and digital properties in 91 television markets nationwide with the acquisition of Raycom Media.


https://www.ai-cio.com/news/alabama-...us-news-chain/
Quote:
Alabama Retirement System Acquires Major US News Chain
News outlet CNHI is being spun off by Raycom Media, which is being bought.


Spoiler:
Alabama’s $36.7 billion employee pension fund’s non-traditional investments now include one of the largest local US newspaper chains.

The Retirement Systems of Alabama recently acquired CNHI LLC from Raycom Media, which the plan owned. Raycom has been bought by Atlanta-based Gray Television. Gray TV is spinning off the news outlet, which contains 68 daily newspapers and more than 40 non-dailies and websites in more than 20 states, to the fund.

The state retirement system also has been a creditor of the news organization, according to the Associated Press. Donna Barrett, CNHI’s chief executive, said the move will provide stability for the company.

Financial details were not disclosed.

“We have been an investor in CNHI for decades, and it later merged with Raycom Media,” an Alabama Retirement System spokesperson told CIO in an email. “As you can see from the press release today on Raycom Media, it was purchased by Gray TV. CNHI was not a part of that deal so we reacquired CNHI and are happy with the investment.”

The Alabama pension system’s other non-traditional investments include golf courses, airliners, and New York City’s largest office building. The state retirement system covers four pension plans, the Teachers Retirement System ($24.4 billion), the state and local Employees Retirement Systems (collectively $12 billion), and the Judicial Retirement Fund ($299 million).

The fund began adding non-traditional investments to its portfolio in the 1970s, when David Bronner became the then-badly underfunded system’s head. He was given creative freedom by his superiors to turn the organization around, so he began to take advantage of that to devise a strategy still used today.

“Alabama has tremendous beauty, tremendous assets, and tremendous people, yet it hangs out as the fifth-poorest state in the country, so something had to be done to change the dynamics,” he said in an interview with American Airlines’ worldwide flight magazine. “In a state like this, if you are going to keep the pension fund sound, you have to make the whole state financially better off. My philosophy was the stronger that I could make Alabama, the stronger the pension fund would be.”

According to the fund’s most recent Comprehensive Annual Financial Report (2017), the teacher’s system allocated 56.99% to domestic stock, 13.51% international stock, 10.41% domestic fixed income bonds, 9.85% real estate, 3.54% money market securities, 3.17% US government guaranteed income, 1.88% mortgage-backed securities, and 0.65% to US agency securities.

The employee system’s allocations were 58.50% domestic stock, 12.22% international stock, 10.39% domestic fixed income bonds, 9.69% real estate, 3.50% money market securities, 3.09% US government guaranteed income, 1.95% mortgage-backed securities, and 0.66% US agency securities.

Lastly, the judicial fund allocated 54.92% to domestic stock, 15.07% international stock, 9.28% domestic fixed income bonds, 8.07% US government guaranteed income, 5.51% money market securities, 4.40% mortgage-backed securities, 1.38% US agency securities, and 1.37% real estate.


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  #17  
Old 01-04-2019, 04:44 PM
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KENTUCKY

https://www.wkyt.com/content/news/Go...503865301.html
Quote:
Gov. Bevin says pension problem too big for marijuana legalization to solve

Spoiler:
FRANKFORT, Ky. (WKYT) - Governor Matt Bevin said legalizing marijuana is not going to be the sole solution to fixing Kentucky's underfunded pension system.


Bevin spoke on the Leland Conway Show Thursday morning to talk about what many call one of the worst-funded pension systems in the country just weeks after calling a special session to fix the problem. Lawmakers would end the session less than 24 hours later without passing any reform.

"We live in a state where historically people have promised things that they didn't have the ability to back up in exchange for political favor and the ability to get re-elected and the ability to be liked," Bevin said.

The special session was called shortly after the Kentucky Supreme Court ruled a pension reform law passed in the 2018 regular session was unconstitutionally passed.

Bevin also dismissed the idea of legalizing marijuana to help fix the problem, as he estimates that revenue alone would take hundreds of years to eventually replenish the pension system.

"How big is this problem? Bigger than people can get their heads around," Bevin said.


The governor did say debates about potential revenue streams should and will likely happen. However, he believes changes to the structure of the systems must happen first. "I personally see some of these things as 'it looks good, sounds good' but doesn't even begin make a real dent in the issue without the structural changes," explained Governor Bevin.

House Minority Leader Rocky Adkins, D - Sandy Hook, was a critic of the Republican-led efforts in 2018, and he wants to see a more bipartisan approach for the next effort to reform pension.

"When you are talking about a complex issue like this, don't come with a piece of legislation that is going to drive a wedge. Bring the stakeholders to the table, and let them have input," Adkins said.

Adkins senses Republican lawmakers are divided on the issue, while Bevin says people need to not be afraid to make unpopular decisions if it means helping the state's finances in the long run.





https://www.wymt.com/content/news/Go...503865971.html

Quote:
Gov. Bevin still plans to tackle pension reform in short General Assembly

Spoiler:
FRANKFORT, Ky. (WYMT/WKYT) - The 2019 General Assembly convenes Tuesday just a couple weeks after a brief special session, and Governor Matt Bevin still plans to tackle pension reform.


problem-too-big-for-marijuana-legalization-to-solve-503865301.html">Lawmakers will only have 30 days to get things done, starting January 8, sister station WKYT reports.

Gov. Bevin is still adamant that changes to the state retirement systems are necessary. But Democrats said the reform passed in 2013 is working.

"It's still hard to predict what the House Republicans who have a supermajority are going to do on pensions," said House Minority Leader Rep. Rocky Adkins. "I think they are very divided."

Kentucky's pension system faces a $37 billion shortfall.

"We can't keep promising something that we know we cannot deliver on," said Bevin on WLAP radio. "It is immoral frankly, it is unethical. Let's put it that way, it's certainly unethical. I will let people debate the morality of it, but I will say it is immoral to intentionally, it is certainly unethical to intentionally lie to people. To promise them something that you know the state has no ability to deliver on. Why would we promise a future employee something we can't deliver on?"


The governor said he is open to looking at other legislation if lawmakers are able to make a deal on pensions.

"We (the governor and legislators) are now in positions where we've got to make hard decisions," said Bevin. "They are going to be unpopular, they aren't going to be easy. This is going to be a time of tough decisions, tough love frankly."

Leader Adkins tells WKYT he hopes to see other issues touched on during the session, such as modifications to the tax reform, medical marijuana and expanded gaming.

"I think we should have that debate, I think we will have that debate," said Gov. Bevin. "I personally see some of these things as 'it looks good, sounds good' but doesn't even begin to make a real dent in the issue without the structural changes."



https://www.bgdailynews.com/opinion/...e7719e99c.html
Quote:
Too late for Richards to demand transparency in pension process

Spoiler:
After 40 years of being a state legislator, Jody Richards has now decided to advocate for transparency in government? The pension system has gone to pot during his tenure and now he wants to make sure that anything that happens from this point forward is transparent?

It seems idiotic that after all this time, with the pension system going to the crapper under his guidance, he now wants to insist on transparency in pension reform when he won't be around to be held accountable for whatever happens.

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Old 01-04-2019, 04:47 PM
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CALIFORNIA

https://californiapolicycenter.org/c...-5-trillion-2/

Quote:
California’s State and Local Liabilities Total $1.5 Trillion

Spoiler:
We estimate that California’s total state and local government debt as of 6/30/2017 totaled just over $1.5 trillion. That total includes all outstanding bonds, loans, and other long-term liabilities, along with the officially reported unfunded liability for other post-employment benefits (primarily retiree healthcare), as well as unfunded pension liabilities.

Our findings may appear to contradict reports of state surpluses. The state’s spare cash and rainy day funds pale before the mountain of long-term liabilities California governments at all levels have accumulated. Moreover, if the stock market continues to drop, personal income tax and capital gains tax revenue will decline precipitously, wiping out these surpluses.

Our analysis increased the amount of estimated unfunded pension liabilities by $530 billion, to a total of $846 billion, by using a more appropriate discount rate. This is more than twice the official estimate of $316 billion. As will be explained, we have high confidence in this greater total. But even using only the officially reported estimates, California’s state and local governments are about $1.0 trillion in debt.

California’s Total State and Local Government Debt – 6/30/2017 Estimate

Depicted below are the totals for California’s state and local government debt as of 6/30/2017. Without any revision to the officially estimated total for unfunded pension liabilities, the total is $981 billion. We have added to that total another $530 billion, however, to reflect what may be a more realistic estimate of total pension obligations.



Moody’s, the credit rating agency, discounts pension liabilities with the Citigroup Pension Liability Index (CPLI), which is based on high grade corporate bond yields. When Moody’s first introduced its pension methodology a few years ago, the CPLI was 5.67%. More recently, CPLI has fallen: in June 2017, it was 3.87%.

Using the CPLI discount rate, we estimate that the real unfunded actuarial accrued liability (UAAL) for California’s state and local employee pension systems is $846 billion, which is $530 billion more than the officially reported (the method for restating UAAL based on a different discount rate assumption is described here). An alternative approach used by the Stanford Institute for Economic Policy Research (SIEPR) is to discount the liabilities by a rate closer to the risk-free rate. In a recent report, Stanford researchers used a discount rate of 3%. Using Stanford’s methodology, we estimate a UAAL of $1.26 trillion.

California’s largest pension system, CalPERS, has already announced to their participating agencies increases to required employer contributions.

A California Policy Center analysis released earlier this year extrapolated those officially announced rate increases to estimate that in aggregate, California’s state and local government employers will be required to nearly double their annual pension contributions between 2017 and 2024, from an estimated $31 billion in 2017 to $59 billion in 2024.

Comparisons to Previous California Policy Center Debt Studies

This is the third time the California Policy Center has produced a compilation of all California’s state and local government debt. Because our methodology has evolved over time, our current estimate is not fully comparable to previous estimates. For example, in this study we included approximately $42 billion of “other long-term liabilities” that we previously excluded. These other long-term liabilities include unpaid employee sick leave (known as “compensated absences”), workers compensation claims payable and pollution remediation obligations.

While a precise comparison between the current and previous studies is not possible, we can note a couple of overall trends. Bonded debt obligations have risen very modestly during the last few years, as new issues have been largely offset by repayments of existing bonds. Pension obligations have risen mostly because of lower discount rates. The CPLI declined from 5.67% on June 30, 2011 the relevant date in our first study to 3.87% on June 30, 2017. CalPERS, CalSTRS and many other California pension systems have made smaller reductions in their assumed rates of return used to produce official pension liability estimates. Finally, we have seen an increase in unfunded OPEB obligations as healthcare costs rise.

Heavily and lightly indebted local governments

Debt burdens vary greatly across agencies. One way to compare debt burdens between agencies of different sizes is to use the ratio of the entity’s long-term obligations to total revenue. Most California governments have reported debt-to-revenue ratios below 200%.

One local government with an especially large debt load is Los Angeles Community College District. In the 2017 fiscal year, LACCD reported $1.4 billion in revenues, mostly from property taxes as well as state and federal aid. The district’s balance sheet includes $4.2 billion of bond and capital lease obligations – yielding a debt to revenue ratio of 300%.

But if we also consider pension and OPEB debt the situation is even worse. LACCD’s balance sheet includes $641 million of net pension liabilities, but these are calculated using CalPERS and CalSTRS discount rates which were about 7% in 2017. If we recalculate these obligations using Moody’s methodology, the district’s pension debt triples to around $2 billion.

LACCD’s balance sheet also shows a $100 million OPEB liability. But this is just a fraction of the district’s Unfunded Actuarially Accrued OPEB liability of $568 million. Starting in the 2018 fiscal year, LACCD will be required to reflect the full liability on its balance sheet under new governmental accounting standards.

Finally, the LACCD has over $60 million in other long-term liabilities including compensated absences, workers compensation and a supplementary retirement plan. All told, the district’s long-term obligations can be fairly estimated at $6.8 billion or almost five times revenue. It is notable that despite LACCD’s apparently dire finances, its general obligation bonds carry relative strong credit ratings: AA+ from Standard & Poor’s and Aa1 from Moody’s. Because these bonds are serviced by a lien on properties within the district boundaries, they would continue to be serviced even if LACCD went bankrupt, lost accreditation or faced some other extreme circumstance.

Not all community college districts are so deeply indebted. At the other extreme, Feather River Community College District reported $14 million in long term liabilities versus $25 million in revenue. Although the pension portion of its debt would increase sharply if restated using Moody’s methodology, most of its unfunded OPEB liability is already on the district’s balance sheet. Feather River only pays a portion of the medical benefits for retirees before they become eligible for Medicate and nothing thereafter. Only relatively small Community College districts like Feather River have low debt levels; LACCD’s high debt burden is more typical of California’s larger Community College districts.

Debt also varies widely among the state’s cities. Santa Paula, a small city in Ventura County, reported $160 million in long term liabilities, more than quadruple municipal revenue. Most of the debt took the form of water and wastewater revenue bonds. Reported OPEB obligations were less than $1 million while pension debt was just under $23 million. The reported pension obligation is based on a discount rate of 7.65% and would more than triple if the more conservative Moody’s discount rate was applied.

The city’s debt service requirements may have contributed to its decision to turn its fire department over to the Ventura County Fire Protection District. According to a Ventura Local Agency Formation Commission staff report, the city has been unable to afford fire station upgrades or an additional station.

Other cities with high debt/revenue ratios include Cathedral City, West Covina and Woodland. By contrast, the City of East Palo Alto has relatively little debt despite its modest economic circumstances. The city’s median income is lower than the statewide average and well below that of neighboring communities. As of June 2017, East Palo Alto had no outstanding municipal bonds and did not offer retiree medical coverage. Pension debt accounted for most of the city’s $12 million in reported long-term liabilities, which represented about 30% of municipal revenue. Other cities with low debt burdens included Danville and Lafayette – which don’t provide defined contribution pension benefits – and Rancho Cucamonga – a city whose OPEBs are fully funded.

What does this all mean?

California’s state and local governments have done a surprisingly good job at managing their conventional debt growth over the past five years, but this progress has been more than offset by the growth in unfunded pension liabilities.

Taking into account what we consider to be more realistic discount rates to calculate unfunded pension liabilities, California’s total state and local government debt as of 6/30/2017 of $1.5 trillion was equal to 54 percent of California’s total gross state product in that year.

When added to publicly held federal debt as a percentage of US GDP, 75 percent, the overall state, local and federal government debt/GDP ratio for California is 129 percent. This amounts to a total per individual California resident of $38,344. Based on IRS Statistics of Income, it equates to a total per individual California taxpayer of $85,087. Put another way, if every California taxpayer were to make principal and interest payments on $85,087, based on a 30-year, 5 percent loan, it would cost each of them $5,520 per year prior to paying taxes for any ongoing government operations.

A recent survey by the Public Policy Institute of California (PPIC) found that most respondents preferred to spend California’s current surpluses on healthcare and community college, while only 21% wanted to pay down debt. Perhaps if Californians understood the true magnitude of government debt in our state, they would adopt a different point of view. We hope that our study of government financial statements and related documentation will help educate Californians about the true extent of our public debt.

About the authors:

Marc Joffe is a senior policy analyst at Reason Foundation. He is the former Director of Policy Research at the California Policy Center. In 2011, Joffe founded Public Sector Credit Solutions to educate policymakers, investors and citizens about government credit risk. His research has been published by the California State Treasurer’s Office, the Mercatus Center at George Mason University, the Reason Foundation, the Haas Institute for a Fair and Inclusive Society at UC Berkeley and the Macdonald-Laurier Institute among others. He is also a regular contributor to The Fiscal Times. Prior to starting PSCS, Marc was a Senior Director at Moody’s Analytics. He has an MBA from New York University and an MPA from San Francisco State University.

Edward Ring is a Contributing Editor and Senior Fellow with the California Policy Center. He is also a regular contributor to American Greatness. His work has appeared in the Los Angeles Times, the Wall Street Journal, Forbes, the Economist, Real Clear Politics, Politico, City Journal, Zero Hedge, and other media outlets. Ring has an undergraduate degree in political philosophy from UC Davis, and an MBA in finance from the University of Southern California.


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Old 01-04-2019, 04:48 PM
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ILLINOIS

https://www.ilnews.org/news/state_po...0c409498d.html

Quote:
First round of pension buyout plan being offered but no money available to pay

Spoiler:
The state’s Teachers Retirement System is offering the first round of pension buyout plans for Tier I pensioners as a way to lower the system's unfunded liability, but there’s no money yet, and a public finance watchdog worries things could go south.

State lawmakers included pension buyout plans as part of this year’s budget, Lawmakers said the buyouts could save hundreds of millions of dollars over time. The plans would vary, but essentially would give the option to different classes of employees to accelerate some pension payouts in exchange for lesser overall benefits over time.

TRS Communications Director Dave Urbanek said the first round of accelerated pension benefits is being offered with a second round later this year, but those opting in after getting all their benefit changes calculated will have to wait for the check.


“Money for these checks will come from a state bond sale and the state has not yet sold the bonds,” Urbanek said. “We’re not sure with the change of administration what’s going to happen with any of this.”

The incoming administration of Gov.-elect J.B. Pritzker takes office Jan. 14.

An Illinois Auditor General financial report released Thursday showed TRS’s funded ratio was up seven-tenths of a percent to 40 percent funded, but that was with a soaring stock market six months ago.

Truth In Accounting Research Director Bill Bergman said if a stock market decline continues, it’s problematic.

“It cements a citizen’s concern that these plans are still a threat to the taxpayer,” Bergman said.

The TRS report was for the fiscal year that ended June 30, 2018. The Dow Jones Industrial Average was on an upward swing at 24,200. Near the close of business Thursday, the Dow was at 22,700 and seeming to trend downward over the past month.

Urbanek said TRS covers itself in all areas “so when bonds go up and stocks go down, we’re also covered.”


Bergman said taxpayers should go to StateDataLab.org to get the full taxpayer cost of public retirement.

Including retiree health care, Illinois' unfunded liability for all retirement benefits is estimated at more than $200 billion. Truth In Accounting puts each taxpayer in Illinois on the hook for $50,800 to pay off that debt.

The Auditor General released financial audits for the State Universities Retirement System Thursday as well. SURS' funded ratio ticked down about eight-tenths of a percent to 41.2 percent funded.

With actuary associations saying 100 percent funded is the goal, financial analyst website Wirepoints President Ted Dabrowski said Illinois’ pension ratios are abysmal.

“I think it’s really immoral that politicians force workers to be in one type of plan, a plan that’s managed by the politicians, they’ve done a horrendous job of it,” Dabrowski said.

Urbanek said state law requires teachers, or their school district employers, to put in 9 percent to the pension funds. He said over the decades, state lawmakers have diverted the taxpayer portion from the pension systems to other budget items they see as higher priorities.

“It’s immoral and what the self-managed plan in the state university system allows employees to do is to have control over their own retirements,” Dabrowski said.


Dabrowski said the 20,000 public university employees who opted for the self-managed plans since 1998 don’t have to worry about collapsing pension plans.


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ARIZONA

https://www.ai-cio.com/news/arizona-...t-investments/

Quote:
Arizona Evaluates over $1.5 Billion in Private Credit Investments
System liquidates entire high-yield portfolio.


Spoiler:
The Arizona State Retirement System (ASRS) is evaluating over $1.5 billion in private credit investments to fulfill its 20% target to the asset class, according to a recently released report from the $40.8 billion institutional investor.

As of October 24, 2018, the system had a 16.9% allocation to the Credit Asset Class against its target, with a range of 10-30%. The portfolio is diversified between private debt (12.3%), distressed debt (3.6%), and other credit (1.0%). The benchmark for the portfolio is the S&P/LSTA Leveraged Loan Index (about 6% as of September 2018) plus 250 bps, with the basis points reflecting an assumed illiquidity premium.

This means the expected return of the benchmark is approximately 8.5%, however staff at the retirement system noted that “over time, we believe the credit asset class could generate a 10% IRR.”

In its current search, the system outlined key attributes that any fund manager hoping to do business with the pension must have, including scalable commitments, early termination rights/liquidity options, customized investment restrictions, and an evergreen holding period.

“We believe there are compelling investment opportunities to exceed the expected performance of the credit asset class benchmark over time in private debt, distressed debt, and other credit,” a report on the investment plan noted. “These opportunities are almost exclusively in private rather than public markets or are in areas of the market, such as distressed debt, which are best approached in locked-up investment vehicles with limited liquidity.

“We do not believe that attractive investment opportunities exist in the public credit markets that will deliver expected returns that will meet the expected return of the Credit Asset Class benchmark over an extended period of time,” the report added.

The ASRS added that the $1.5 billion of new investment opportunities have expected net returns of 12-15%, all of which are in various stages of consideration, due diligence, or legal documentation.

Recently, the retirement system expanded its commitments in the asset class, inclusive of $250 million to expand an existing middle market lending partnership in Europe; $200 million to expand an existing lending partnership in the US for middle market CLO investments; and $300 million for a new partnership to provide small-ticket, lease financing to small or medium-sized enterprises in Europe.

In addition, the pension liquidated its remaining investments with its two high-yield managers from August to October, noting that they were unlikely to meet the credit asset class benchmark going forward. The two partnerships were separate accounts managed by Columbia Threadneedle and J.P Morgan, respectively, and had aggregate returns of 3.8% (one year), 5.2% (three years), and 5.0% (five years). They’ve also begun to withdraw funds from two existing private debt strategies.

The ASRS projects that the credit asset class will grow from 16.6% of the total fund at the end of FY 2018 to 18.4% at the end of FY 2019, and subsequently reach the 20% target by the end of FY 2020. “We expect that nearly all of allocation will be in private markets strategies,” the report noted.

Some of the largest commitments in the credit portfolio are Sonoran Private Credit Opportunities ($1.2 billion), Cactus Direct Lending Fund ($850 million), and Monroe Private Credit Fund A ($850 million).

The pension’s funded ratio increased to 80.4% as of June 30, 2017, according to the most recently released comprehensive annual financial report.


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