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  #501  
Old 03-13-2019, 12:48 PM
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TEXAS
TEACHERS

https://www.texaspolicy.com/pension-...rs-retirement/

Quote:
Pension Reform is Critical to Securing Teachers’ Retirement

Spoiler:
In his recent State of the State address, Gov. Greg Abbott scored a standing ovation when he said, “I am declaring school finance reform and increasing teacher pay as emergency items.”

There’s no doubt that fixes to the school finance system are long overdue, but raising teachers’ pay and overhauling the state’s school funding formulas won’t happen in a vacuum. There are hidden issues that will have to be incorporated into those reforms, including evaluating how any changes would affect the state’s unfunded teacher pension obligations.

The Teacher Retirement System of Texas (TRS) currently has $46 billion less than actuaries say it needs to pay for the retirement benefits already promised to teachers. In fact, Texas only has about 75 cents for each dollar of benefits it has promised to educators.

And given the way pension benefits are accrued, Gov. Abbott’s proposed pay raises for existing teachers could also increase the retirement benefits owed to them. If those new costs exceed TRS’s prior expectations about the long-term rate of teacher salary growth, TRS’s pension debt would further grow.

Not that long ago, TRS was in good shape.

Back in 2001, TRS was secure and had $1 billion more than it needed to stay on financial track and ensure 100 percent of the pension benefits earned by teachers could be provided to them. Since then, however, lower-than-expected investment returns and insufficient contributions have driven a massive spike in unfunded liabilities—pension debt, effectively.

This debt has raised costs for school districts and the state. Payments to TRS have more than doubled since 2005. Taxpayers and teachers together contributed $6.5 billion to TRS in 2017, of which 35 percent went to pay down the unfunded pension liabilities. That equates to a whopping $2.3 billion diverted from school districts to reduce pension debt, and this scale of contribution is set to continue for decades, if not worsen.

This presents a real challenge because for every dollar TRS continues to collect in unfunded promises to educators, one is taken from taxpayers, school districts, classrooms, or directly from a teacher or retiree’s pocket book in the form of never-seen pay increases or retiree cost-of-living adjustments.

To its credit, the TRS Board of Trustees is adjusting to the changing financial landscape.

Last year, TRS lowered its expected return on investments from 8 percent to 7.25 percent. When a pension system’s investment returns don’t meet expectations, it adds debt to the system. Thus, the more conservative the assumptions about future investment returns are, the more predictable the pension fund is likely to be.

In this legislative session, some will claim that TRS’s $46 billion in debt is no big deal, pointing to a prevalent myth that being about 80 percent funded is somehow healthy for a pension system. In fact, according to the Society of Actuaries, a pension “plan’s funding goal should always be 100 percent” in the interest of long-run solvency.

For TRS to reach that goal, additional pension contributions will be required—but reforms that address the range of structural issues that caused TRS’s decline in solvency since 2005 are also needed.

Implementing more conservative actuarial assumptions, paying down unfunded liabilities faster, and expanding retirement options to better match the needs of future teachers would go a long way toward fixing the underlying problems.

Keeping pension promises that have been made to these public servants is a moral and fiscal concern for policymakers.

Morally, it is clear: Teachers should receive the retirement benefits that have been promised to them and that they’ve already earned.

Fiscally, the pension debt is eating up billions of dollars that could be going to students and classrooms and will increasingly threaten to crowd** out other legislative priorities.

It is time for state leaders and school finance reformers to recognize the long-term threat pension debt presents to Texas education, and prioritize reforming TRS as part of the upcoming discussions about fixing the state’s school finance system.


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  #502  
Old 03-13-2019, 12:48 PM
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CONNECTICUT

https://ctmirror.org/category/ct-vie...ension-reform/

Quote:
Let’s get serious about pension reform
Start by not giving former legislators inflated pensions

Spoiler:
Ned Lamont, the new governor, has continued the patronage or political welfare system practiced by his Democratic predecessor, Dannel Malloy. In his first month in office Lamont has taken at least five members of the state legislature into high paying jobs in his administration. He is still a piker compared to Malloy who elevated about a dozen Democratic legislators to such jobs.


Francis DeStefano

Serving in the Connecticut legislature is still a part-time job with a salary of about $35,000 per year. It makes you wonder why anyone would want such a position, but there is a pot of gold at the end of the rainbow. A position in the governor’s administration is a full time job usually with a six-figure salary. Moreover, legislators also get generous benefits including participation in the Connecticut State Employee pension system.

What impact will their new position have on their pension benefits?

One of the new appointees is Terry Gerratana, a former State Senator from New Britain. She has served 17 years in the legislature during which she has contributed six or seven percent of her $35,000 salary to the pension plan. If she had served three more years in the legislature, she would have been eligible for a pension of $14,000 per year (2 percent of pay for each year of service). It would require the state to come up with about $350,000 to fund her pension.

However, if she makes $135,000 in her new position, and works in the Lamont administration for only three years, her average pay for pension purposes will jump to $135,000 per year. Instead of a pension of $14,000 per year, she will be able to retire on $54,000 per year, a $40,000 increase. Instead of the state needing $350,000 to fund her pension, it will need to come up with $1,350,000. With this one appointment alone, state actuaries will have to add about a million dollars to the state’s pension liability.

I am not saying that Gerratana is unqualified for her new position, and I am not saying that she is the only Democrat politician to profit from such patronage. I am just using her as an example. She and the other Democratic legislators raised to high paying administrative jobs and judgeships by Malloy and Lamont have added multi-million liabilities to the state’s pension system.

A relatively small but significant first step in reforming the pension system and reducing future liabilities would be to remove State legislators from participation in the pension plan. Their existing vested benefits could be frozen and all future retirement contributions could be put into a defined contribution or 401k type plan. There is no sacrosanct union contract that would prevent Governor Lamont and his fellow Democrats who control the legislature from implementing this change.

Just consider that instead of having to come up with a million dollars over the next three years to fund Ms. Gerratana’s pension, the state would at the most only have to match her contribution to the new 401k type plan. Alternatively, state legislators could just be put into the Social Security system like the rest of us. How could newly elected “progressive” legislators possibly object to being in Social Security?

Removing legislators from future participation in the state employee defined benefit pension plan could be followed by a freeze on pension benefits for all existing state employees not covered by union contractual obligations. These employees would include non-union members and employees of the state’s executive, and judicial branches. It should also include all administrators in the University of Connecticut system.

In the future these employees could also participate in a defined contribution or 401k-type plan. This reform would still provide them with a retirement income, consisting of the vested value of the current plan as well as the accumulated value of the new defined contribution plan. This combination would still be superior to what is available to ordinary citizens in the private sector.

People often fail to realize that the millions going to fund the increased pension benefits for legislators like Gerratana are dollars that could be used elsewhere. These dollars could be used to fund better salaries for teachers and police officers. They could be used to prevent layoffs of newly hired state employees. They could be used to provide much needed programs and supplies in schools. They could also be used to shore up the social safety net so dear to the hearts of Democrats.

The enormous unfunded pension liability of the State of Connecticut was not even an issue in last November’s gubernatorial election. Unless Gov. Lamont and the legislature get serious about pension reform, the state will face further huge tax increases, cuts in services, and possibly an eventual bankruptcy.

Francis P. DeStefano, Ph.D., of Fairfield, is a writer, lecturer, historian and retired financial planner.


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  #503  
Old 03-14-2019, 04:52 PM
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NEVADA

https://mesquitelocalnews.com/2019/0...ns-in-secrecy/

Quote:
DO NOT SHROUD PUBLIC PENSIONS IN SECRECY

Spoiler:
Some lawmakers in Carson City are pushing a bill that basically declares that it is none of your business how your tax money is spent. Senate Bill 224 would make the names of recipients of pensions through the Public Employees’ Retirement System secret.

The first glimpse at the kinds of duplicity this bill invites is the fact that two of the three chief sponsors of the bill — state Sens. David Parks and Joyce Woodhouse — are currently drawing six-figure pensions from PERS, a fact that would not be known if this bill were already in law.

At a recent hearing on the bill, the third sponsor, state Sen. Julia Ratti, argued that PERS benefits are set aside for the public employees’ future use and asked, “At what point is public servant no longer a public person?”

The answer is: When that person no longer obliges the public to guarantee that pension. Right now the taxpayers are on the hook for $40 billion in unfunded liabilities, when standard accounting practices are used to make the calculation. Never mind that the taxpayers paid half of the pension contributions for that government worker retiree and all of the rather princely salary that public employee used for their half of the contribution.

Perhaps the most egregious argument made in the hearing is that the bill would cut the cost of litigation. It was PERS itself that created that cost by trying to skirt court rulings that stated the names of public pensioners and their pension amounts are public records under the Nevada public records law, which states that its purpose is to foster democratic principles by providing taxpayers with access to public records.

After the state Supreme Court ruled the records were public, PERS changed the way it kept the records, prompting Chief Justice Michael Douglas to suggest PERS had “gone out of its way to violate the spirit of the law.”

The bill’s backers are still arguing that revealing the names of pensioners might expose them to identity theft and fraud. The state Supreme Court dismissed that claim in its 2013 ruling by saying, “Because PERS failed to present evidence to support its position that disclosure of the requested information would actually cause harm to retired employees or even increase the risk of harm, the record indicates that their concerns were merely hypothetical and speculative. Therefore, because the government’s interests in nondisclosure in this instance do not clearly outweigh the public’s presumed right to access, we conclude that the district court did not err in balancing the interests involved in favor of disclosure.”

During a hearing on SB224, Robert Fellner, policy director for the Nevada Policy Research Institute, countered that the publication of public pension information has enabled the public to correct abuses of such systems. A tip to California’s fraud hotline resulted in the system recovering more than $200,000, Fellner noted, causing CalPERS to release a statement praising “the great value of the public’s assistance in CalPERS’ efforts to protect the state pension system from fraud, waste, and abuse.”

In another example, Fellner noted that the importance of disclosing names was highlighted when a Los Angeles television station discovered that a police officer who was drawing a disability pension from one city was working full-time as a police officer for another agency.

“This type of abuse will be impossible to detect if SB224 becomes law and makes secret the names of those drawing tax-funded public pensions,” he testified, adding that 20 states maintain online public pension databases.

The law that set up PERS states: “It is the policy of this State to provide, through the Public Employees’ Retirement System: A reasonable base income to qualified employees who have been employed by a public employer and whose earning capacity has been removed or has been substantially reduced by age or disability.”

Yet in a previous court case NPRI’s attorney Joseph Becker observed that there are retirees in their 40’s collecting six-figure disbursements from PERS, while still earning income from other sources. “Only through the publication of name, pension payout and related data can the public better understand how the system works and the legislative purpose be effectuated,” he wrote.

Lawmakers should reject SB224’s effort to blinder the public. If not, Gov. Steve Sisolak — who once told a newspaper columnist, this one, that public employee contracting should be transparent and that the public employee pension system was overdue for reform — should veto it.


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  #504  
Old 03-14-2019, 05:26 PM
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KENTUCKY

https://www.courier-journal.com/stor...ay/3149663002/

Quote:
Controversial school bills declared dead, but teachers not yet satisfied

Spoiler:
FRANKFORT — News that lawmakers declared two controversial education bills dead this session failed to satisfy hundreds of teachers protesting at the Capitol on Wednesday.

That's because they don't trust the men and women in power, said teacher Christina Johnson.

“We need to hear the final gavel go down,” she said.

That won't happen until March 28.

"Until we see it's really dead, we're going to be here," said Johnson, who works for Jefferson County Public Schools.

JCPS was forced to shut down a fifth time on Wednesday because a critical mass of teachers — roughly 2,000 — called out sick.

Johnson's commitment to return was shared by dozens of other teachers, signaling that more sickouts are likely — including on Thursday, when the legislature meets for the final time prior to a 10-day veto period.

Dressed in bright red, she was among a swarm of teachers chanting at representatives as they entered and exited the House chamber.

It was in that 100-member body that the education bills failed.

House Bills 525 and 205, which, respectively, would have restructured the teacher pension board and created a scholarship tax credit program, will not reach Gov. Matt Bevin's desk this session, lawmakers told the Courier Journal on Wednesday.

House Bill 525 would have reduced the Kentucky Education Association's influence over the makeup of the board that oversees the Kentucky Teachers' Retirement System.

Its sponsor, Rep. Ken Upchurch, said the legislation would not move forward this session but that he will push for the state to study the matter.

"When we do something to address the board, we want to make sure we get the right makeup," said Upchurch, a Republican from Monticello.


Read more: Why did the deal between JCPS, union fail to keep schools open?

Upchurch has filed a floor amendment to the bill to create a resolution — rather than a law — for the state to study the board's "composition, nomination and election process."

The pension board bill triggered a massive teacher sickout on Feb. 28, which forced both the Louisville and Lexington school districts to shutdown.

In the weeks since, JCPS teachers have staged four more sickouts, including Wednesday's shutdown.

Many JCPS teachers have said they came to Frankfort to protest HB 205, which would have created tax breaks for Kentuckians donating to private school scholarship funds.

But lawmakers of both parties said Wednesday that bill, too, was dead.

Kentucky teacher sickout watch: JCPS, Bullitt schools closed Wednesday

Teachers had feared the scholarship tax credit program would be slipped into a greater tax package being hammered out in a conference committee, but it was not.

After the committee meeting, co-chair Sen. Chris McDaniel, R-Taylor Mill, said there was a "very brief discussion" about adding the tax credit to House Bill 354.

But "there just wasn't enough support for it," he said.

McDaniel said he did not foresee the private school credit bill being tacked onto any other legislation in the session's final days.

JCPS teacher Joyce Henderson said she was happy to hear the news.

She was among a throng of educators situated at the base of House chambers. At the sight of lawmakers, they loudly chanted, "Red for ed!"

"I hope this is making a difference," Henderson said.

Sen. Morgan McGarvey, a Louisville Democrat, also said the bills were dead.

But he added that "teachers have a right to be distrustful of things coming out of Frankfort based on what happened last year," referring to the late-night passage of a surprise pension bill.

As for whether the teacher protests played a role in the bills' demise, McGarvey said the crowds of teachers in the Capitol represent a "culmination of effort."

"When you see people show up to Frankfort to make their voices heard, a lot of these people have already called and emailed," he said. "And there are people who aren't here who have been calling and emailing their representatives."

Had the bills made it to the Republican-dominated Senate, they would have likely passed, McGarvey said.

Nealya Foreman, a teacher at Johnsontown Road Elementary, said it was important for teachers to show up to Frankfort in person.

“How else are (lawmakers) going to hear us if we’re not here?” Foreman asked.

She and others Wednesday said advocacy by union leaders is no longer enough – teachers now want to advocate for themselves.

“Our voices are being heard,” she said.

Still, many teachers said they were disappointed by Tuesday's passage of Senate Bill 250, which grants greater authority to the JCPS superintendent, including the power to select principals.

JCPS teacher Kumar Rashad called the bill's success a "loss of democracy," because it takes final say of principal selection away from elected school councils.

Like others, Rashad said he couldn't answer whether teacher sickouts have been successful this session until the 2019 General Assembly adjourns at the end of the month.

Moving forward, teachers will likely have their eyes on a "mule" bill introduced Wednesday by Rep. Steven Rudy, a Paducah Republican and chairman of the House budget committee.

Mule bills are commonly created as a vehicle to carry another item late in the session.

Rudy described House Bill 458 as a “just in case bill” should any problems be identified with the tax bill lawmakers hoped to adopt later Wednesday after an agreement was reached by a House-Senate conference committee.

Because all revenue bills must originate in the House, Rudy said HB 458 would simply be a “placeholder” if any problems are identified in the conference committee’s bill that need correction after it's adopted.

It passed the House 91-0.


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Old 03-14-2019, 05:27 PM
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ESG
DIVESTMENT

https://www.bloomberg.com/news/artic...ion-funds-exit

Quote:
Investors Lose a Major Justification for Holding Tobacco Stocks
By Lisa Pham
March 13, 2019, 2:00 AM EDT Updated on March 13, 2019, 6:45 AM EDT
BAT had worst year on record in 2018 amid regulatory risks
Swedish, Dutch pension funds among investors quitting tobacco
Spoiler:
It wasn’t so long ago that the stellar performance of tobacco stocks such as British American Tobacco Plc and Philip Morris International Inc. was enough justification for asset managers to hold onto their investments, despite a broader push toward socially responsible investing.

But in recent years, a flurry of European pension funds and insurers have begun divesting their holdings, putting pressure on the share prices. BAT had its worst year on record last year, slumping 50 percent, as the U.S. Food and Drug Administration toughened its stance toward the tobacco industry. Philip Morris slumped 37 percent.

Tobacco shares have lagged the benchmark index in recent years
The MSCI World Tobacco Index returned an impressive 1,437 percent from the end of 1999 through 2015, compared with just a 72 percent return for the broader MSCI World Index. But since 2016, when momentum for tobacco-free portfolios finally started to take hold, the industry has underperformed the broader benchmark.

“Clearly, selling pressure from some investor classes who have decided that it is inappropriate to invest in tobacco for environmental, social and governance reasons will have been unhelpful for tobacco share prices, given the scale of some of the institutions concerned,” Investec analyst Eddy Hargreaves said in written comments.

Bronwyn King, an Australian doctor who treats cancer patients, was shocked to discover in 2010 that her retirement fund was investing in tobacco companies. This prompted her to establish Tobacco Free Portfolios, a non-profit organization that encourages pension funds, sovereign wealth funds, banks and insurers to stop investing in tobacco.

The initiative went global: French insurer Axa SA in May 2016 announced it would stop investing in the tobacco sector due to the prevalence of smoking-related diseases. U.K. insurer Aviva Plc started selling its tobacco shares in June 2017 and no longer holds any of the stocks in its actively managed funds, the company said.


The momentum has spread further throughout Europe since then. Stichting Pensioenfonds ABP, the pension fund for Dutch government and education workers, in January 2018 pledged to sell all of its investments in the tobacco and nuclear-weapons industries within a year, while Swedish pension fund Forsta AP-fonden said that tobacco was among the industries its AP1 fund no longer invests in as of the beginning of this year.

Tobacco sector hit by tougher FDA stance, investors pulling out
The exit by pension funds and insurers added to the tobacco industry’s woes at a time when it also faced increased regulatory scrutiny from health authorities trying to limit the spread of the cancer-causing product, as well as the uncertain volume trajectories of both conventional cigarettes and so-called next-generation devices.

“We don’t anticipate a sea-change back into more positive investor sentiment for tobacco in the nearer term,” said Hargreaves, who said tighter regulation was having a bigger impact on the stocks than the divestitures.

Tobacco shares surged after the surprise resignation announcement on March 5 from FDA Commissioner Scott Gottlieb, who had indicated the agency would seek to require companies to reduce nicotine levels and restrict sales of e-cigarettes to minors and of menthol cigarettes.

Still, Credit Suisse Group AG analyst Alan Erskine warned that optimism over a potential change in FDA’s policy direction was misplaced.

“Whilst there might be a short delay in policy announcements, we think the FDA will still file, later this year, a notice of public rulemaking, proposing to ban menthol cigarettes,” Erskine wrote in a March 11 note.

Ned Sharpless, the director of the National Cancer Institute, will serve as temporary chief of the FDA when Gottlieb leaves this month, officials said Tuesday.

BAT will be holding a meeting for investors and analysts on Thursday, where the market focus will be on further detail about the tobacco giant’s plans for cigarette alternatives to counter tightening regulation and growing competition from the likes of Philip Morris’s IQOS and industry upstart Juul Labs Inc.

Meanwhile, the selloff by big investors may have further to go: On average institutions still own about 86 percent of tobacco companies’ shares, according to data compiled by Bloomberg for stocks in the MSCI World Index, compared to 76 percent of all companies in the benchmark.
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Old 03-14-2019, 05:30 PM
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KENTUCKY

https://wfpl.org/kentucky-could-make...an-even-worse/

Quote:
Kentucky Could Make Worst-Funded Pension Plan Even Worse
Spoiler:
Over the next three decades, Kentucky owes roughly 35,000 state workers more than $15 billion in pension benefits. But it has a little more than $2 billion to make those payments.

That’s less than 13 percent of what’s needed, making it one of the worst-funded public pension plans in the country.

Wednesday, state lawmakers will likely vote to make it worse.

The legislation would let about 118 quasi-governmental entities — including public health departments, domestic violence shelters and public universities — leave the struggling pension system while paying less than what they owe. Republican Sen. Chris McDaniel, the bill’s chief sponsor, said he expects all of them to take the deal.

The retirement system says it could cost the beleaguered system as much as $1 billion — money taxpayers would have to cover. Thousands of employees for those entities would have their benefits frozen.

“The fact is they can’t pay what they owe. So we’ve got to find a financing mechanism to allow them out to pay as much as they can,” McDaniel said. “This is the best of the worst options. Because there are no good options.”

RELATED STORY
Report: Pensions Fuel Kentucky’s $54 Billion Debt
Wednesday’s vote in the state Senate embodies the tough choices facing state governments as they struggle to shore up ailing public pension plans still recovering from the Great Recession of 2008 and a history of underfunding by legislative leaders. Kentucky is so far behind that the retirement system’s board of trustees — most of which are appointed by Republican Gov. Matt Bevin — recently required that for every dollar in salary taxpayers give to a state worker they must put 83 cents into the retirement system just to keep it solvent.

State agencies made the payments because the legislature gave them the money to do it. But quasi-governmental entities don’t have that luxury. These are independent entities with some connection to state government that allows them to be part of the pension system if they want to. Years ago, when the system was flush with cash, many were eager to sign up.

Now that the system is struggling, most of them want out.

That includes the state’s local health departments. Department of Public Health Commissioner Jeff Howard said if nothing changes, at least 63 of them will have to close over the next two years.

“Kentucky local health departments can’t afford to buy out (of the system). They also can’t afford to stay in,” Howard said.

McDaniel, the state Senate’s budget chairman, says the proposal will pass the state legislature on Wednesday. Republican House Speaker David Osborne says it also has enough votes to pass in that chamber. State retirees are fretting the change will further erode their pension fund, putting their financial future in peril.

“That seems to me to be the wrong thing to do for the nation’s worst funded pension system,” said Jim Carroll, president of Kentucky Government Retirees. “If you are incentivizing folks to leave without paying off their accrued liabilities, you’re weakening the system.”

Others say the change is illegal because it would freeze pension benefits for workers in the system, breaking the state’s “inviolable contract.”

“The bill breaks the pension promise to many of the 9,075 employees currently working at quasi-governmental agencies. And it lowers benefits moving forward,” Jason Bailey, executive director of the Kentucky Center for Economic Policies, wrote in a blog post analyzing the bill.

But McDaniel and others say they have no choice. If lawmakers hold the line and require these agencies to make their full required payments, McDaniel said “you’ll see a rash of bankruptcies or people just refusing to make their payments.”

“Allowing the (quasi-governmental entities) to do this puts a lot of burden onto the retirement system and we will have to overcome that with general funds. There is no two ways about it,” McDaniel said. “I think we all recognize the reality of the situation, which is these are agencies that offer services that people expect from their government. We want those agencies to continue.”
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Old 03-14-2019, 05:32 PM
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ATLANTA, GEORGIA

https://www.ajc.com/news/local-govt-...LFCI3u7mcQgzK/

Quote:
Atlanta city pensions stuck in lackluster investment
Costs of withdrawing are too high, even though the investment violates state law, city says

Spoiler:
Atlanta’s city retirement plans sunk tens of millions of dollars into improper investments when they were misled by Buckhead investment adviser Larry Gray, a federal agency found in late 2017.

Yet today, all three of the city’s pension plans still have their money in the controversial investment pool, now run by another Buckhead consultant. And the investments have, so far, proven lackluster, carrying high fees and returning an average of only about 3.7 percent a year since 2013.“It’s just a huge under-performance,” said Edmund J. Wall, a managing director of public finance investment banking at investment firm Piper Jaffray.
What’s more, the investment pool still may not comply with Georgia law, raising questions about why the government pension plans haven’t backed out, said Wall and other finance experts who reviewed the GrayCo Alternative Partners II LP pool at the request of The Atlanta Journal-Constitution.Gray intentionally defrauded the pensions when he told them the investment pool he ran complied with state law, the Securities and Exchange Commission found. While the pension plans’ contracts locked in the investments for a minimum of 10 years, the SEC’s findings would have voided the contracts, experts say.The complex situation has pushed the retirement systems into a bit of a corner, the AJC found: It may appear to be almost impossible to unwind the deal, even costlier to try.

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Meanwhile, the company that bought the pool from Gray is being paid handsomely to keep it going. Consequent Capital Management now is paid the hundreds of thousands of dollars a year in management fees that are part of the agreements the pension plans signed. The fees, spread over the 10-year period that expires in 2022, will total millions.John Robinson, CEO of Consequent, did not respond to requests for an interview. Gray could not be reached for comment.

Some former and current pension leaders told the AJC that they wanted to withdraw from the pool but were advised by legal experts to stay put. The costs associated with a withdrawal, they were told, would harm the plans.Atlanta Councilman Howard Shook said it was viewed as risky to try to terminate the contracts. Shook oversees the city’s finance committee, which makes recommendations to the pension boards.“The issue with ‘firing’ the firm is the exposure of the city to breach of contract and potential legal action taken by the firm and investors,’’ Shook wrote in a response to questions from the AJC.State, federal violations Gray was serving as the pension plans’ investment adviser in 2012 when he began his investment pool. Shortly after starting it, Gray persuaded the Atlanta General Employees’ Pension Plan, the Police Officers’ Pension Plan and the Atlanta Firefighters’ Pension Plan to invest.It was the first year Georgia public pension systems were allowed to invest in alternatives, such as private equity, hedge funds, real estate and distressed businesses. But the law authorizing the investments carried certain restrictions meant to curb risks and discourage politically connected arrangements.The law limits any one pension from holding more than a 20% stake in an alternative fund. It also requires that an alternative fund have at least four other investors and at least $100 million in assets before a government pension fund could buy in.Gray’s fund of funds violated all three state requirements, the SEC said in a 2015 complaint. He then violated federal law by making two specific material misrepresentations about the investment pool to the board of the general employees’ plan, the agency said.
“Once you give these funds money, you can’t get it in 10 years. It’s a mess trying to get it undone.” —Edmund J. Wall, chairman of the DeKalb County Employees Retirement Plan
Gray claimed that the alternative investment “was consistent with the law.” He also told the board members that four other pension plans already were invested when the deals had not been executed. Three of those, in New York, Chicago and Michigan, never invested in the plan, the SEC complaint said, and the other had not yet invested.Today, despite the combined $64.5 million investment by the three city retirement plans, the investment pool still apparently does not meet the state criteria, experts said. The SEC’s 2017 order showed the fund had not yet reached the $100 million requirement and that two of the city pension plans had more than 20 percent stakes.“State law says it has to be $100 million for any of us to invest in,’’ said Wall, who is also the chairman of the DeKalb County Employees Retirement Plan. “So, Atlanta may be violating state law by investing pension money in a fund that doesn’t have $100 million.”Cannon Carr, chief investment officer at CornerCap Investment Counsel in Atlanta, said that points to lax oversight.At a minimum, the pension systems should have taken steps to comply with state law after the SEC’s findings were made public, he said. “Whatever the particulars, there should be someone who should be looking at those state parameters to make sure the fund is in compliance,’’ Carr said. “It’s pretty straightforward.”Falling through the cracks But it can be a tricky business to get out of alternative investments.The investments are loosely regulated, provide little transparency and can fall into areas that investors know little about. Often, their underlying assets can be hard to value and even more difficult to dump.That’s why many pension leaders avoid them in the first place.Wall said he doesn’t think Georgia public pensions should even be allowed to invest in these types of funds. “It’s so expensive, the fees are so very high and they’re very illiquid,” Wall said. “Once you give these funds money, you can’t get it in 10 years. It’s a mess trying to get it undone.”

Consequent Capital Management was formed in 2016 and acquired assets of Gray Financial, another Buckhead investment firm. The company’s website shows the company is led by John C. Robinson.
Photo: The Atlanta Journal-Constitution
Because of the complexity and high risk, a higher level of due diligence is demanded by those that do invest, the experts said.“If you’re not up to the game, you just shouldn’t be investing in alternatives,” Carr said.Atlanta may not have been up to the task. One month after the SEC suspended Gray, two of the three pension boards sued the city over an ordinance that replaced their pension leaders with a new governance board. The pension plans lost the suit, then it took several months for the new board to elect leaders.It wasn’t until September that the new board had a fully-seated quorum. Two months later, the new board received its first update on the progress of investments.The new board is still in the middle of evaluating a new consultant to oversee investments.------------------Gray’s role in question Atlanta Journal-Constitution investigations in 2013 led to investment adviser Larry Gray resigning from his role as consultant to three Atlanta pension boards. In resigning, he cited media coverage raising questions about his firm’s dual roles advising the pensions on investments and touting investments in his own fund. In 2015, the Securities and Exchange Commission filed a complaint against Gray, accusing him of misleading the pensions about the fund he created. But his firm still managed the fund, GrayCo Alternative Partners II, through sometime in 2016. Then, in a June 2016 letter to the pension boards, Gray said that his firm would become part of a newly created company, Consequent Capital Management. Gray wrote that he was a minority owner of the new company, but once the transaction was completed, the GrayCo fund would be managed by Consequent’s senior management team, not by anyone from Gray’s firm. “Mr. Gray will not have rights to control Consequent related to this ownership interest,” the letter said.In early 2017, Consequent said it had acquired the assets of Gray Financial. Then in November 2017, the federal Securities and Exchange Commission suspended Gray and his firm from associating with any broker-dealer, investment advisor or credit rating agency for two years. He will have to reapply to SEC before he can be reinstated. It’s unclear if Gray still has an ownership interest in Consequent. Neither the company nor Gray could be reached for comment. But he no longer has a role with the GrayCo fund, said Richard “Bud” Light, a former member of the Police Officers’ Pension Fund now a member on the City of Atlanta Pension Investment Board, which was established last year to oversee investments for police, firefighters and general employees. The firefighters plan now lists the fund as Consequent Alternative Partners II, L.P. “He doesn’t have anything to do with the investment, nor is he allowed to,’’ Light said. The SEC’s 2017 order also requires Gray and his firm to pay $476,298 in fines and disgorgement to harmed investors. Last month, the SEC said it needed more time to work out a plan to distribute the money to the investors. ----------------- Why it matters The city of Atlanta’s pension plans are short hundreds of millions of dollars needed to pay retirement obligations. The plans rely heavily on the performance of their investments to reduce the shortfalls, so the burden won’t fall on taxpayers. According to reports the three pension plans submitted to the state auditor, investments are expected to earn average annual returns of 7.25 to 7.5 percent. An alternative investment fund so far has averaged about 3.7 percent.
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Old 03-14-2019, 05:35 PM
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PHOENIX, ARIZONA

http://www.eastvalleytribune.com/new...030812da4.html

Quote:
2 DiCiccio-supported initiatives now on August ballot

Spoiler:
Ahwatukee residents will get to vote in August on two initiatives championed by Phoenix Councilman Sal DiCiccio after his “Responsible Budgets” initiative was certified for the ballot.

While DiCiccio personally helped launch the budget initiative, he also has supported a second that has been certified for August – putting the brakes on any extensions of the light rail system

The Responsible Budgets initiative would require that new spending growth be limited to the increase of population plus inflation and that every dollar above that must be used to pay down the city’s unfunded pension obligations that now exceeded $4.5 billion.

It would require an annual accounting of city pensions, using the historical 10-year average rate of return and real-world business accounting principles” and require that the first pension debt to be satisfied would be that owed first responders.

The budget initiative also forbids Phoenix officials from curbing the hiring of police and firefighters or altering their pensions to comply with the spending restrictions it imposes and would require elected officials to pay out of their own pocket for their pensions.

“Right now the way the system is rigged,” DiCiccio said in a Facebook post celebrating the Responsible Budgets initiative’s certification for the ballot. “No one here at city hall actually knows how big our problem might be, not even our mayor and council.”

“The crazy rich politicians in Phoenix are fighting this initiative because it will force them to pay for their own retirement and not use a single penny of your money,” he wrote. “Right now, Phoenix politicians get a taxpayer paid pension AND a taxpayer paid 401k … This initiative will force them to use their own money for these Cadillac benefits. You and your family should no longer be forced to pay for Phoenix politicians to receive sweetheart pension and retirement deals.”

The budget initiative is part of former Utah Congressman Jason Chaffetz’s nationwide effort to address “the out-of-control, unpaid pension liabilities that are destroying cities from coast to coast,” according to a release.

“Unfunded pensions are the single greatest crisis of our time. It consumes the back halls in our nation’s Capitol, and yet virtually nobody is doing anything about it,” Chaffetz said, noting the problem affects all levels of government. “None of us have the means to pay for the promises we made.”

At the time Chaffetz and DiCiccio launched their campaign for the initiative, they called attention to the “hard choices necessary to avoid a financial collapse.”

Chaffetz is the honorary chair of the national Responsible Budgets campaign, and calls the overall problem of unfunded public employee pensions “the greatest fiscal crisis of our time.”

“Almost every state, county and city is drowning in pension debt that puts their very solvency in question, and there’s no one for cities to run to for a bailout – the federal government is in the exact same position,” he said.

Earlier this year, the nonprofit Truth in Accounting released its annual look at the debt burden of hundreds of cities in the United States and gave Phoenix’s finances a “D” grade.

“Phoenix’s elected officials have made repeated financial decisions that have left the city with a debt burden of $2.7 billion,” it said. “That equates to a $5,900 burden for every city taxpayer. Phoenix’s financial problems stem mostly from unfunded retirement obligations that have accumulated over many years. Of the $9.1 billion in retirement benefits promised, the city has not funded $4.5 billion in pension and $185.5 million in retiree health benefits.”

Voters also are tentatively slated in August to vote on the future of light rail, although that initiative is being challenged in the court by the Associated General Contractors of America, which is suing to keep it off the ballot.

A Superior Court judge is expected next month to hold a hearing on the association’s contention that the petitions signed by citizens to get the question on the ballot left out critical details.

The initiative was launched last year by a group of light rail opponents called Building a Better Phoenix.

Created in the aftermath of some fierce public opposition to the construction of a light rail extension into South Phoenix, the group wants Phoenix to divert its share of light-rail construction costs to other transportation improvements, primarily buses and road repairs.

The city’s light-rail money comes from a $31.5 billion, 35-year transportation plan funded by a sales tax increase that voters approved in 2015.

About 35 percent of the funding is currently dedicated to light-rail expansions, while 51 percent goes to buses and the remaining 14 percent to street repairs.

Valley Metro opposes the initiative and said it could cost the region $3.5 billion in federal funding for light rail. The agency also said it would not stop work on the South Phoenix line despite the upcoming vote.


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Old 03-15-2019, 10:38 AM
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NEW JERSEY

https://www.njspotlight.com/stories/...eid=264ccc1575

Quote:
OP-ED: NJ’S PENSIONS ARE NOT EXPENSIVE, SO LET’S STOP PRETENDING THEY ARE
BRIAN ROCK | MARCH 15, 2019
The state has to be serious about paying the debt that it owes, and this might require some tough choices

Spoiler:
New Jersey has a pension problem.

It’s been a subject of debate for years. The state’s contribution to the pension system seems to increase every year, and the unfunded liability is a mind-boggling amount.

So I wouldn’t blame you if you thought that the system was unaffordable. After all, how can New Jersey continue to plow billions of dollars into this system each year?

But here’s the thing. It’s all a simple bait and switch.

All the politicians who are harping on how we need to reform the pension system focus on two things — the unfunded liability and the state’s annual pension payments.

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When you hear that the governor is proposing to appropriate $3.8 billion for pensions, you get sticker shock. But this number doesn’t represent the actual cost of the pension system. It represents the cost of the state paying down its debt, incurred by years of underfunding.

If the state had simply made its normal contribution each year, we wouldn’t be in this mess. As it turns out, that normal contribution isn’t a whole lot. If you look under the hood at the last actuarial report for the TPAF — the Teachers’ Pension and Annuity Fund — you’ll see that it covers about 141,000 active members with a total payroll of $10.6 billion. To cover the ongoing costs of these members’ accrued pension obligations — what’s known as the Normal Cost — the state owes less than $400 million.

No room left to cut benefits
This is less than 4 percent of salary. That number doesn’t elicit sticker shock. It sounds reasonable.

In December 2017, New Jersey Policy Perspective released a brief on pensions that compared New Jersey’s system with those in other states, and it found that the Normal Cost of TPAF was average — 35th out of the 69 pension systems they compared it to. Meanwhile, New Jersey’s other main pension fund, the Public Employees’ Retirement System (PERS), was even cheaper. Its Normal Cost is equivalent to 2.4 percent of salary, the 13th lowest rate of these 69 pension systems.

The answer to our problem is not to further reform the pension system. Public employees have already seen their contributions increase to 7.5 percent of their salary. Meanwhile, the headline of NJPP’s brief was, “New Jersey Public Pensions Rank Among Least Generous in the Nation,” so it’s not like there’s any room left to cut benefits.

The answer to our problem is also not to shift new employees to a 401k-style plan. This doesn’t eliminate the state’s unfunded liability — the real cost driver of New Jersey’s pension problem. And in the long term, it doesn’t save the state any significant amount of money. New Jersey is already committed to contributing 3 percent of an employee’s salary if they participate in the state’s Defined Contribution Retirement Program (DCRP), and that’s not altogether different from the Normal Cost of the pension system. The only thing this would accomplish is shifting risk from the state — which has the capacity to tolerate risk — to individual people who could be devastated if they happen to approach retirement age during a downturn in the stock market.

Governor is serious about full funding
If we value the middle class and we want to ensure retirement security for New Jersey’s public employees, then the answer is simple.

The state must be serious about paying the debt that it owes. In the long term, once that debt has been repaid and the pension funds are fully funded, the state’s pension payments will drop precipitously.

Luckily, we have a governor who takes that responsibility seriously, and Gov. Phil Murphy’s proposed budget would continue to move the state toward making a full payment to its unfunded pension liability.

This might require some tough choices, like levying a tax on income over $1 million or re-evaluating how the state doles out tax incentives. But one thing is certain. New Jersey’s public employees have been bled dry, and we have nothing left to give.

Brian Rock is a social studies teacher in East Orange and secretary of the Essex County Education Association. He was a 2016 Fellow with New Leaders Council NJ and was also a 2014 Governor's Executive Fellow at the Eagleton Institute of Politics. He writes a blog about civics education, The Civic Educator.



https://burypensions.wordpress.com/2...ing-actuaries/
Quote:
Danger of Trusting Actuaries

Spoiler:
An op-ed in today’s njspotlight argues that NJ pensions are not expensive:

If you look under the hood at the last actuarial report for the TPAF — the Teachers’ Pension and Annuity Fund — you’ll see that it covers about 141,000 active members with a total payroll of $10.6 billion. To cover the ongoing costs of these members’ accrued pension obligations — what’s known as the Normal Cost — the state owes less than $400 million.

If that’s the case then…..


let’s scrap the defined benefit pension and give each teacher $2,837 a year.
.


.
Obviously ridiculous and it all comes from trusting public plan actuaries, which I have warned against, and your own prejudices as abetted by bought ‘research’.


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Old 03-15-2019, 11:59 AM
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Originally Posted by campbell View Post
NEW JERSEY



https://burypensions.wordpress.com/2...ing-actuaries/
An op-ed in today’s njspotlight argues that NJ pensions are not expensive:

If you look under the hood at the last actuarial report for the TPAF — the Teachers’ Pension and Annuity Fund — you’ll see that it covers about 141,000 active members with a total payroll of $10.6 billion. To cover the ongoing costs of these members’ accrued pension obligations — what’s known as the Normal Cost — the state owes less than $400 million.

If that’s the case then…..


let’s scrap the defined benefit pension and give each teacher $2,837 a year.
.


.
Obviously ridiculous and it all comes from trusting public plan actuaries, which I have warned against, and your own prejudices as abetted by bought ‘research’.
For some reason, proponents of taxpayer funded defined benefit pensions are always against the idea of the government paying the employee the normal cost of the benefit, or purchasing an equivalent annuity from an insurer and removing any further liability from the taxpayers.
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