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  #1991  
Old 12-21-2018, 04:03 PM
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PENNSYLVANIA
https://www.bloomberg.com/news/artic...es-to-managers

Quote:
Pennsylvania Pension Fund Paid $1 Billion in Fees to Managers
By Janet Lorin
December 20, 2018, 12:47 PM EST
Commission recommends funds consolidate investment office
Two state pension funds hold almost $90 billion in assets


Spoiler:
Pennsylvania’s largest public pension fund paid $1 billion in expenses to outside managers in fiscal 2017 and should consolidate its investment office with the state employees’ fund, according to a study.

The recommendations come from a state commission report released Thursday that looked at ways to reduce costs at the state’s largest fund, Pennsylvania Public School Employees’ Retirement System, known as PSERS, and the State Employees’ Retirement System, or SERS.




Institutional investors including college endowments and public pensions are seeking to reduce costs by examining fees paid to managers. The report also tackled the issue of how to expand transparency in the funds’ investments and expenses.

Cost Savings
The commission, created by a state law last year, was charged with finding $3 billion in savings in the two pensions over 30 years. The commission found potential savings of as much as $10 billion in the period.

The pensions can reduce costs that will “benefit Pennsylvanians over Wall Street bankers,” Governor Tom Wolf said at a press conference.

PSERS had $55.6 billion under management as of June 30 and SERS had almost $30 billion in assets as of June 1.

Controlling Risk
The commission recommended a consolidated investment office, which would require legislative action, and reducing hard-to-sell alternative assets.

“We can control the risk we take and how much we pay to get those returns,” Treasurer Joe Torsella said at the conference.


The commission sought fees and carried interest payments. The pensions haven’t historically reported carried interest but did so at the commission’s request. SERS reported its expenses but not carried interest because the fund didn’t monitor it internally, according to the commission.

Carried interest is typically 20 percent of a fund’s profits paid to managers and makes up the bulk of their compensation -- when the funds are profitable.


http://www.philly.com/business/sers-...-20181220.html

Quote:
Apollo or no? Pa. state pension system tries to manage dissent

Spoiler:
The $30 billion Pennsylvania State Employees' Retirement System has been investing some of the people’s money with Apollo Global Management since 1996. That was six years after Apollo founders Leon Black, Josh Harris, and Marc Rowan left the failed former investment bank Drexel Burnham Lambert and started the firm.



Apollo has done well for its founders. Black, Harris, and Rowan are billionaires, and Harris is famous locally as lead owner of the 76ers.



Pennsylvania’s profit has been more modest. The state invested $210 million with Apollo from 1996 to 2001, and since 2001 has received back its investment plus $165 million in net profits through 2017, according to SERS' last annual report.



Over that 2001-17 period, that’s a return of less than 4 percent a year. You could say it’s more, since the profits started coming back years ago. But SERS doesn’t post a collected-returns rate estimate that makes it easy to compare results for these private investments in its annual reports to the state legislature.






How much has Apollo collected from Pennsylvania? That’s harder to track. In 2007, for example, SERS paid Apollo fees of around $2 million, according to that year’s report. For 2017, no fees to Apollo were reported.



But a lot of what Apollo has collected by investing SERS money hasn’t been publicly reported. Besides direct fees, Apollo has kept a percentage of the profits it earned on Pennsylvania’s money — called shared profits or carried interest. How much? SERS won’t say, though state elected officials, including Treasurer Joseph Torsella, say it should start releasing those figures.



In October -- according to a summary of board minutes that was released only this month, because it took two meetings for trustees to approve them -- the SERS board approved another Apollo investment, a commitment of up to $100 million for a new investment fund, Apollo Hybrid Value Fund L.P.



It wasn’t unanimous. Six trustees voted yes. Four voted no. One self-recused and didn’t vote.






A simple majority of those voting is required to approve these big investments, SERS spokesperson Pamela Hile confirmed. So Apollo got its $100 million by a narrow margin.



The board has been divided several times this year, including an important April vote on buying more private investments instead of plain-vanilla stocks and bonds (three said no). There have been several more since then on exotic private funds like Apollo Hybrid. Treasurer Torsella is often in the opposition, sometimes joined by Banking Secretary Robin Wiessmann, a fellow Democrat. Against Apollo Hybrid, Torsella was joined by three Republicans.



Those divisions are a departure, says Nicholas Maiale, the Philadelphia lawyer, lobbyist, and former state rep who chaired the SERS trustees under four governors from 1995 to 2014. On his watch, as SERS plunged heavily into hedge funds and other “alternative” investments, “maybe a handful were tough votes,” with more than one opposed, as Maiale recalls. “We would explain. There was regular communication between staff and board members.”



He says he’s surprised by how SERS meetings since his departure often spill into a second day of meetings for the board, which is unpaid but is offered free meals and travel, including to investment industry gatherings. Maiale attributes some of the dissent to “grandstanding” by board members who want to be seen as defending the public purse.






After voting to hire Apollo Hybrid Value, SERS issued a brief statement noting the fund will “focus on private equity/credit investments. This investment furthers the strategic initiative of concentrating commitments to top-tier private credit managers.”



I called the five who declined to vote for Apollo to explain their actions. At first I didn’t learn much. Torsella is on record opposing private investments, while the Public Pension Management and Asset Investment Review Commission, where he’s vice chairman, has been reviewing SERS’s fee practices.



Glenn Becker is a former SERS board chairman under Gov. Tom Corbett who is inaccurately listed on SERS' website as head of Swarthmore Group, a Philadelphia investment management firm (the firm says Becker has retired). Becker didn’t return calls to his homes in Gwynedd Valley or in Hobe Sound, Fla. Also not explaining was Terry Reese, president of a Greensburg door-making company, also appointed by Gov. Corbett.



Stephen Aichele, Corbett’s former chief of staff and a partner at Philadelphia law firm Saul Ewing, told me he couldn’t say why he had voted no: “I don’t remember the specific reason. I voted as I thought appropriate.”






Wiessmann, secretary of banking and securities under current Democratic Gov. Wolf, often votes with Torsella. But she says her recusal from the Apollo vote was due to her absence from the voting session and her deputy’s conflict of interest because he is a state securities regulator.



Another Democrat who voted with Torsella and Becker (a GOP appointee) against the investment strategy back in April -- to “reduce fees,” his office told me -- turned around and split with Torsella and Becker and voted in favor of Apollo Hybrid.



That’s State Rep. Dan Frankel (D., Allegheny). He called Apollo Hybrid a “strong proposal,” and suggested it would cost SERS less than previous investments, though his brief email didn’t explain how (he noted Apollo would only keep “carried interest” when profits topped 8 percent, but as I understand it, that’s a common threshold in the industry).



After I made my inquiries, I received a copy of a note made by one of those in attendance during the Apollo Hybrid deliberations, on condition that I not identify the source. It reads: “This is a terrible investment! It combines a strategy that was 4th quartile [lowest 25 percent] in the last 2 funds, with a special-situations [troubled-company investments] strategy that was ‘proven’ with $300 million invested over 2 years,” clearly a small sample for a fund that is supposed to raise a total of $3 billion.



Why don’t these stewards of the people’s money have more to say to the people about their contested decisions?



Well, also in October, SERS adopted a “board communications policy” that among other points admonishes trustees to “speak on behalf of the board only when explicitly authorized to do so” by board leadership.



The trustees may publicly “indicate that they disagree” personally with board decisions. But they must also tell top SERS staff “if a personal position, opinion, or analysis was publicly communicated, such that it could receive media coverage.” And they must also give SERS copies of any SERS materials that a board member gives outsiders “to ensure the accuracy.” Which apparently matters less when the public doesn’t see these materials.



I have run this policy by colleagues who say they don’t remember a similar policy being imposed on other state boards. It may be a sign of current weakness: SERS management and leadership have found that they can’t keep the troops in line and need to set more ground rules.


Or maybe the divisions on the SERS board are what investment decision-making starts to look like in a democracy. If so, let’s hope that somehow translates to better pension investments returns.











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  #1992  
Old 12-21-2018, 04:10 PM
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MASSACHUSETTS

https://www.pionline.com/article/201...nts-full-bonus

Quote:
MassPRIM approves 5.3% pay raise for CIO, grants full bonus

Spoiler:
Massachusetts Pension Reserves Investment Management Board, Boston, unanimously approved a 5.3% raise for Michael Trotsky, its executive director and chief investment officer, minutes from the $71.8 billion pension fund's November board meeting show.

This $25,000 raise brings Mr. Trotsky's annual salary to $495,000.

The new pay level took effect Dec. 1. The board also agreed to give Mr. Trotsky his full annual bonus. The bonus formula is based on a performance rating by the board. Mr. Trotsky earned the highest rating, which is "far exceeds high expectations."

RELATED COVERAGE
MassPRIM earmarks $1.25 billion for 7 fundsMassPRIM returns 10% for fiscal year
"Michael has assembled the best team we have ever had at PRIM," said board member Robert L. Brousseau at the meeting, according to the minutes. "I would put our team against any of our peers."

Mr. Brousseau also cited the strength of MassPRIM's investment program, responsiveness to the board's concerns and the culture he developed at the pension system as reasons to give Mr. Trotsky a pay raise.

"The PRIM culture is one to be emulated," Mr. Brousseau added.

MassPRIM returned 9.5% net of fees in the fiscal year ended June 30. It also outperformed the pension fund's benchmark of 8.1% for the year.

The pension fund's annualized three-, five- and 10-year returns as of June 30 were 8.4%, 9.3% and 6.3%, respectively, topping the benchmark returns of 7.1%, 7.7% and 5.6%.


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  #1993  
Old 12-21-2018, 04:10 PM
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ILLINOIS

http://www.news-gazette.com/opinion/...nt-follow.html
Quote:
Jim Dey | Emanuel wants to lead! Does anyone want to follow?

Spoiler:
Illinois residents who have strong stomachs are looking with anticipation to see how Gov.-elect J.B. Priztker and the supermajority Democratic Legislature address this state's serious financial woes after they take office in January.

But it's an outgoing politician — Chicago Mayor Rahm Emanuel — who last week kicked off an emotional conversation about this state's future. He called for amending the Illinois Constitution's pension clause in a way that could slow down skyrocketing costs to taxpayers.

"The truth is, going back decades, too many elected officials, labor leaders and civic leaders agreed to a funding and benefits system that was not sustainable and therefore not responsible," Emanuel said.

As mayor, Emanuel is responsible for Chicago's vastly underfunded public pensions. But the state's public pensions also are in dire condition. Just recently, a legislative commission disclosed that state pension underfunding has increased to $133 billion, a jump of about $4 billion over last year.

Emanuel called for two amendments, one to raise more revenue and the other to cut future pension costs.

His first proposal would replace the state's flat income tax with a progressive one — rising rates on rising income levels. His pension proposal would modify the state's pension clause, which states that public pension benefits "shall not be diminished or impaired."

The pension clause has been interpreted by the Illinois Supreme Court to mean that the pension benefits in place on an employee's first day can never be prospectively modified.

That's a problem because years ago, legislators — without determining future costs or how they would be paid — established annual 3 percent cost-of-living increases to retirees.

There is considerable discussion about whether modifying the pension clause is — or is not — sound public policy.


Union leaders vehemently attacked Emanuel's proposal, describing it as an immoral breach of public employees' trust.

But some public officials, as well as The Chicago Tribune, expressed quick support and urged mayors across Illinois — Danville, Peoria, Springfield, Rockford, Streator — to work for passage because the current system is unaffordable.

"Mayors and other local officials could apply leverage, too. Many of them have the clout to push their local lawmakers for change. They can see up close how pension costs are straining their budgets," the Tribune editorialized.

But, whatever the merits of these proposed amendments, it's extremely difficult to pass any constitutional amendment.

That's why state Sen. Chapin Rose, a Mahomet Republican, said that "as a practical matter. ... I don't think (Emanuel's proposal) is going to happen."

He could well be correct.

For starters, it takes a three-fifths vote in both the Illinois House and Senate to put an amendment on the ballot.

Desperate for more revenue, Pritzker favors a progressive tax amendment. But he's repeatedly said he opposes a pension amendment. At the same time, legislators with large numbers of public employees in their districts would be hesitant to vote yes.


Further, amendments require a 60 percent yes vote to pass — a significant barrier put in place to ensure consensus on serious matters like revising the state constitution.

The proposal would not be the subject of a public vote until November 2020. What do state and local officials do in the meantime?

Rose said he has some ideas — pension buyouts for younger members — but fears discussion of constitutional amendments could delay legislative action for two years.

Finally, there's a potential legal hurdle. Voters could amend the state constitution pension "contract," a term used by the Illinois Supreme Court.

But what of the U.S. Constitution's provision that protects contracts?

Article I states that "no state shall pass any law impairing the obligation of contracts."

Making matters even worse, state and local pension problems are only a part of Illinois' witches brew of financial woes. Unpaid bills and years of unbalanced budgets also hang over the heads of newly elected leaders, many of whom already have demonstrated no interest in dealing seriously with this state's financial problems.


https://www.chicagotribune.com/news/...220-story.html

Quote:
Column: Why raising Arizona is unlikely to inspire pension changes in Illinois

Spoiler:
Twice in recent years, voters in Arizona have voted to amend their state’s constitution in order to cut pension benefits for public employees in an effort to rescue ailing retirement funds.

This development has been greeted with enthusiasm in some quarters here because Arizona’s state constitution contains robust language similar to the language in the Illinois constitution saying public pension benefits, once granted, can’t be “diminished or impaired.” And the courts in Arizona, like the courts in Illinois, had routinely batted down legislative efforts to reduce payments to retirees.

ADVERTISING


inRead invented by Teads
Could it happen here, home of the nation’s biggest unfunded pension liability?

Will Illinois voters facing service cuts and tax increases to cover benefits to state retirees rise up to amend the state constitution?

Here are four reasons not to get your hopes or fears up.

1. Arizona was not a revolution.

It was a tweak. In two statewide referendum votes, one in May 2016 and one in November 2018, voters OK’d amendments to their constitution that allowed lawmakers to trim pension benefits in systems covering police, firefighters, corrections workers and elected officials — only about 10 percent of workers covered by state pension systems.

2. There was very little organized opposition to the ballot initiatives in Arizona.

Even most of the impacted employees and pensioners seemed to be in agreement that the payout formula in these particular systems was unsustainable. Not to get too far into the weeds, but for decades the annual compounded percentage increases in the retirement systems in question were based in part on the investment returns of the pension funds, so that, paradoxically, good years in the market had even more long-term crippling effects than bad years because everyone’s baseline payments soared.

The typical annual raise was 4 percent, but according to the Phoenix-based Public Safety Retirement System, some retirees saw occasional annual increases exceeding 15 percent.

The concession — increases linked to the local consumer price index and capped at 2 percent — was sold as a reasonable compromise that reduced volatility in the system and promised to save hundreds of millions of dollars in the long run. Seventy percent of voters OK’d the 2016 measure (though just 52 percent OK’d the 2018 measure that added elected officials and prison guards to the amendment).

The idea that voters in Arizona are eager to make the sort of sweeping reductions to public pension benefits that some are proposing for Illinois has not been put to the test.

ADVERTISING


Any proposal to amend Illinois’ constitution to attack the state’s $133 billion pension shortfall by allowing for a reduction in the 3 percent compounded annual increase in public-retiree pensions — about double the average cost-of-living increase over the past decade — would almost certainly meet with strong opposition from public-sector unions, which have much more power under our laws than they have in Arizona.

3. There was unanimous bipartisan support in the Arizona legislature for the changes.

Enabling legislation passed without a single “no” vote. In Illinois, in contrast, Democratic Gov.-elect J.B. Pritzker has frequently repeated his belief that a pension is a promise and that he will not support any effort to cut benefits. The Democrat-dominated Illinois General Assembly has voted up some cost-saving ideas in the past — all summarily rejected as unconstitutional by the courts — but has shown no interest in altering the pension-protection clause in our constitution.

4. It’s comparatively easy to amend the Arizona constitution.

Arizona is a state that encourages citizen initiatives. Article 21 of its constitution allows for citizens to propose any and all constitutional amendments via petition drive. If those amendments are approved by simple legislative majorities, they are submitted to the voters, who can approve the amendment with a simple majority vote.

Illinois, in contrast, discourages citizen initiatives. Article 14 of our constitution limits petition-based amendment proposals to “structural and procedural” aspects of the legislature. All other amendments must begin in the General Assembly and be approved by a 60 percent supermajority of the members of each chamber. After that, 60 percent of voters who weigh in on the proposal (or a majority of all those who voted in the election) must approve the amendment for it to become law.

We can debate all day whether Illinois should follow Arizona’s lead, inexact as the analogy between the two states may be. But the strong likelihood is that it won’t. The better debate remains over what’s fair and achievable here.


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Old 12-21-2018, 04:11 PM
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OREGON

https://www.oregonlive.com/news/2018...s-pension.html

Quote:
PERS Q&A: How a serial killer kept receiving $3,600 a month from Oregon PERS in prison

Spoiler:
Q: How was John Ackroyd, a longtime state highway mechanic who is linked to four killings and one rape near Highway 20, allowed to collect a public employee pension even while in prison for aggravated murder?

Ackroyd was convicted of one crime, the aggravated murder of Kaye Turner in 1978. His trial took place in late 1993 in Jefferson County. He was sentenced to life and died in 2016 at the Oregon State Penitentiary.

The lives of his victims, Marlene Gabrielsen, Kaye Turner, Rachanda Pickle, Melissa Sanders and Sheila Swanson, were the subject of “Ghosts of Highway 20,” an Oregonian/OregonLive series published last week.

Top 20 PERS recipients in Oregon

Ackroyd had worked as a state employee from Jan. 13, 1978 through July 31, 1992, when he was fired by the Oregon Department of Transportation. The agency terminated him after he was indicted on murder charges. Ackroyd had worked as a mechanic for the agency’s Highway Division.

While incarcerated, he continued to collect an annual $43,488 pension from the Oregon Public Employees Retirement System.

The state pays pension benefits to anyone who has applied for them and qualifies, said Marjorie Taylor, senior policy director for PERS.




That goes for convicted murderers serving life in prison because criminal convictions don’t affect a retirees’ eligibility.

“He was due a benefit, he earned a benefit and we had to pay it,” Taylor said.


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  #1995  
Old 12-21-2018, 04:13 PM
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https://www.pionline.com/article/201...17-8211-moodys

Quote:
Local government pension liabilities rise 9% in 2017 – Moody’s

Spoiler:
Adjusted net pension liabilities for the 50 largest local governments totaled $481 billion at the end of fiscal year 2017, up 9% from the previous year, a report from Moody's Investors Service said.

Adjusted net pension liabilities are the biggest source of balance sheet leverage for the 50 largest local governments, almost tripling the $166 billion in unfunded liabilities for other post-employment benefits for the 50 largest local governments reported in fiscal 2017. Of those same 50 local governments, 19 saw net direct debt exceed adjusted net pension liabilities.

The five entities with the highest adjusted net pension liabilities as a percentage of operating revenue were:

Chicago, 782%.
RELATED COVERAGE
State pension funding little changed in quarter, past 12 months – reportStatewide races shining spotlight on public funds Wilshire: City and county pension plan funding ratio rises to 71% in 2017Public pensions look abroad for returns
Dallas, 562%.
Los Angeles, 424%.
Phoenix, 397%.
Houston, 367%.
Meanwhile, local governments reporting the lowest adjusted net pension liabilities as a percentage of operating revenue were:

Wake County, N.C., 39%.
Washington D.C., 43%.
Philadelphia Schools, 64%.
Frisco (Texas) Independent School District, 73%.
Moody's reported that the combination of debt service, pension and retiree health-care payments consumed more than 30% of some governments' revenues, but less than 15% for others. In measuring government pension contributions, only 10 of the largest 50 exceeded Moody's "tread water" indicator in fiscal 2017.

Moody's predicts that favorable investment returns and revenue growth will drive lower adjusted net pension liabilities and leverage ratios through many governments' fiscal 2019 reporting. Pension reforms in such cities as Dallas and Houston are causing liabilities to fall in those cities.

Moody's report also looked at the probability of pension investment losses in a given year amounting to 25% or more of a government's operating revenue. For nine of the 50 entities reviewed, the probability of this happening was 10% or greater in fiscal year 2017 due to the size and estimated volatility of their pension assets, the report said. Houston and Los Angeles faced the highest probability of losses.


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Old 12-26-2018, 09:47 AM
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MATTOON, ILLINOIS

https://jg-tc.com/news/local/percent...7.html#new_tab

Quote:
80 percent of Mattoon levy revenue will go to pensions

Spoiler:
MATTOON -- Approximately 80 percent of the $4.6 million in property tax revenue sought by the city's new levy will go to covering pension costs.

The Mattoon City Council heard this report before approving the proposed levy at its meeting Tuesday night. The council also heard that plans related to extending the city's recreation trail west to downtown and adopting a bicycle route plan for Mattoon will be moving forward early next year.

City Finance Director Beth Wright said approximately 80 percent of the new levy's revenue will be set aside for fire and police pension costs and about 10.5 percent will go to funding the Mattoon Public Library, leaving the remainder for other city funding needs. The new levy will seek $4.6 million, 7.9 percent more than the $4.3 million collected by the previous one.

Wright said the equalized assessed valuation (EAV) of all the taxable property in the city limits is projected to increase, so the tax rate applied to individual properties will decrease. She said the increased EAV will result in a slight decrease in the city's share of tax bills. For example, she said the bill for a $100,000 home is projected to decrease by about $7.13.

In other matters, Public Works Director Dean Barber said the city will seek bids in early January for demolishing the former public works building along Richmond Avenue in March.

The demolition will be funded by the city's remaining infrastructure bond revenue. This Richmond property will be used to help extend the Lincoln Prairie Grass Trail west from 10th Street to the Mattoon Area Family YMCA. The recreation trail project will be funded by a federal grant administered by the Illinois Department of Transportation.

Mattoon's portion of the trail will be incorporated into the community bike route plan that the Ride Illinois nonprofit group is developing with funding from the Lumpkin Family Foundation. Council member Rich Hall said the proposed bike plan will be presented to the council in January.


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Old 12-26-2018, 09:55 AM
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ILLINOIS

https://www.daily-journal.com/news/l...9.html#new_tab

Quote:
David Giuliani: Taxes upset you? Look at pensions

Spoiler:
If you’re upset your taxes are so high, then public pension spending in Illinois ought to concern you. It is the biggest driver of rising taxes in Illinois.

One of the biggest reasons for the growth in pensions is the 3 percent annual, compounded increases pensioners get every year. Active workers don’t see those kinds of raises.

In recent weeks, local government bodies have approved union contracts granting pay raises of about 2 percent per year, which is common around the state.


Let’s do a comparison: An active worker making $50,000 in 2008 would see his income rise to $58,400 by 2018 if increases only kept up with the rate of inflation. With a public pension, a person’s income would rise to $67,200 during the same time, nearly double the increase of the active worker’s pay.

Under the Illinois Constitution, the state cannot diminish employees’ pensions. The state Supreme Court interprets this to mean that the terms of an employee’s public pension benefits must stay exactly the same from the very first day of employment.

In 2011, the state made changes to the pension systems for employees who started in 2011 or later — known as Tier 2. When they retire, they’ll get noncompounded, annual increases of 3 percent or half the consumer price index, whichever is less.

When Tier 2 folks start retiring, our state likely will see its pension costs grow less rapidly — or perhaps start to fall. But we’re decades away from that rosy scenario.

In the meantime, more and more people are leaving the state. That means fewer taxpayers are staying around to pay the growing pension bills.

Solving that problem will not be easy. But it’s long past time we start figuring it out.

BIGGER PAY RAISES

While many current workers are getting raises near the cost of living, some are exceeding that.

The other day, I checked out how much the salaries of top officials in the Kankakee’s environmental services utility increased from 2015 to 2017. One official saw his pay increase to $75,238, from $63,744, an 18 percent increase, according to OpenTheBooks.com. Another official’s pay increased to $126,659, from $117,911, or 7.5 percent, during that same period. Still, another got a 12.7 percent hike, from $98,922 to $111,485.

This is the same department where the longtime chief, Richard Simms, got increases every few months. It’s unclear who authorized Simms’ raises or the reasons for them. But we’ll keep trying to find out.

NO DEFERENCE?

This week, Daily Journal columnist Alan Webber wrote a column on media bias against conservatives. To bolster his case, he examined a Chicago Tribune headline, “Trump’s revolving door spins again.”

In a number of ways, he said, the headline was biased against President Donald Trump. One of his reasons, though, didn’t hold water.

He questioned why the Trib failed to include “President” before Trump’s name in the headline.

“No deference given to the office or the man,” he said.

My first thought: Just about all media refer to presidents by their last names in headlines. This practice is even followed at Breitbart News, probably the most pro-Trump outlet around. In print media, we can only fit so many words in a headline. Even online, we want our headlines to be snappy.

My second thought: The president defers to the people, not the other way around. The Constitution’s framers wanted a government where the people are in charge.


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Old 12-26-2018, 11:13 AM
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CALIFORNIA

https://www.sacbee.com/news/politics...5.html#new_tab
Quote:
Jerry Brown predicts ‘fiscal oblivion’ if pensions are off limits for government employers

Spoiler:
Gov. Jerry Brown warned this week that public agencies in California are on a track to “fiscal oblivion” if they’re barred from adjusting retirement benefits for their employees.

He issued the warning in an interview with The Sacramento Bee three weeks after his attorneys defended his 2012 pension law at the California Supreme Court against a challenge from the union that represents state firefighters.

The lawsuit is a test of the legal precedent known as the California Rule, which bars government agencies from reducing promised retirement benefits without offering some kind of new compensation.

Brown in his first term as governor signed laws that expanded collective bargaining rights for unions, including ones that represent government workers. Unions now have a significant voice in state politics, and have fought efforts to adjust pension obligations.


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Brown took office amid the Great Recession in his second run leading the state, and signed the law in 2012 that reduced potential retirement earnings for government workers hired after Jan. 1, 2013 and required them to kick in more money from their pay checks to fund their pensions.

The law ended especially generous retirement formulas that state agencies began offering in the dot com boom, including ones that allowed public safety employees to retire at 50 with pensions that gave them 3 percent of the final salary for each year of employment. Brown in the interview called those formulas an “overreach.”

Cal Fire Local 2881, the Cal Fire union, is challenging the law by trying to force state government to reinstate a perk called air time that Brown’s law prohibited. Air time allowed government employees to buy up to five years of service credit for their pensions, swelling their retirement income as if they had worked over that time.

The union argues that Brown can’t eliminate the perk without breaking the so-called California Rule and unleashing “chaos” by making formerly rock-solid pension promises appear uncertain.

Brown contends that position is a shackle for California government that could over time suppress employee wages and jeopardize government services.

”In order to maintain the defined benefit, there has to be the power of management to make modifications,” he said. “If we do it right, people who have a pension and what they’ve earned will never be changed. But you can’t say that five minutes after you sign your employment application, for the next 30 or 35 years that not one benefit can be changed. That’s a one-way ratchet to fiscal oblivion.”


Local government agencies and some school districts are struggling to keep up with climbing bills from the California Public Employees’ Retirement System, known as CalPERS, and California State Teachers’ Retirement System, known as CalSTRS.

Both pension funds have acknowledged that expect to earn less money over time from their investment portfolio, causing them to raise the rates they charges to government agencies. Both funds have assets worth about 70 percent of what they owe over time to California public employees and retirees.

“These are very valuable pensions, very generous,” Brown said. “But they’ve got to be managed and there will be modifications. You have to be able to modify some of the benefit structures that were put in place without fully taking into account the cost.”

Union leaders counter that government agencies have authority to negotiate concessions that have public employees paying more money than required to fund their pensions. They want each agency to bargain for those concessions independently rather than end the California Rule and weaken unions’ position across the state.

The California Supreme Court is expected to release a decision in the case in early 2019.


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Old 12-26-2018, 11:15 AM
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MISSISSIPPI

https://www.newsobserver.com/news/bu...223420315.html
Quote:
Analysis: Pension plan outlook rosier with funding increase

Spoiler:
After mandating an increase in employer contributions to Mississippi's public pension system, projections reported to the Public Employees Retirement System show its finances look to be in good shape — at least for now.

But that assessment comes with a caveat. Investment returns, economic conditions or state employee levels could change over the next 30 years and changes in any of those could change the projected outcomes.

"The results, collectively, are positive," said the system's executive director, Ray Higgins said last week after a presentation to the board by actuaries. "PERS is stable, but we're not perfect."

The whole goal with PERS is to improve its current position — where actuaries project its $27.7 billion in assets is 61.8 percent what's needed in the future to pay off benefits employees and retirees have already earned. The board wants to reach at least 80 percent funding by 2047.

The PERS board, with projections showing it wouldn't make that goal, voted in June to require employers to pay 17.4 percent of a worker's salary to the system beginning July 1, 2019, up from 15.75 percent now. That money will mostly come from taxpayers, since PERS' beneficiaries are employees of the state, public schools, local governments, community colleges, universities and other agencies such as hospitals. The employees themselves will keep contributing 9 percent of salary.

City and county governments have already set aside money to pay their increases, because their budget years run through Sept. 30. Lawmakers need to add about $75 million in the coming legislative session to cover increased contributions for state and education agencies. Gov. Phil Bryant asked for the money, and current revenue projections show it should be available. But top lawmakers adopted a proposed budget that basically says they'll decide later.

With higher contributions pumping in $100 million more each year, projections show PERS should reach 96 percent funding by 2047. The ratio is projected to climb slowly for the next decade, and then more rapidly.

"We've got to weather this baby boom retirement bubble in the next 10 years," actuary Ed Koebel told the board. "If we withstand that, this plan begins to strengthen."

The projections rely on key assumptions. The most important is how much the system will earn on investments each year. The fund projects it will earn 7.75 percent each year. But there's a lot of pressure from credit rating agencies and others who believe such a high rate of return will be unrealistic in the future, expecting low interest rates and low economic growth. If PERS returns drop to 7 percent annually, it would only be 57 percent funded in 2048.

Less important, but still significant, is what happens if the number of active contributing employees keeps shrinking, or if their pay raises are less than expected. The plan assumes the number of overall employees will stay flat and that pay will grow at 3.25 percent a year, but employee numbers have shrunk and pay barely budged in recent years.

The other worry is the power of one bad year in the market, especially early on. If the fund loses 7 percent this year, total assets would barely increase over three decades, even if every other year meets expectations. Part of the current hole stems from the bad years PERS had in 2008 and 2009, though returns since then have been good.

But the one thing most true about the projections — nothing will go exactly as planned for 30 years. Adjustments will be necessary.

"We're here to monitor this every year," Koebel said, "and we're going to monitor this every year."


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Old 12-26-2018, 11:34 AM
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PENNSYLVANIA
https://www.post-gazette.com/news/ed...s/201812200129
Quote:
Pennsylvania’s underperforming pension funds need new investment approach, state warns

Spoiler:
Pennsylvania needs a new investment office with better strategies to replace the underperforming offices that manage state and public school pension plans, a commission tasked with recommending changes to the retirement systems with a combined deficit of $75 billion told lawmakers Thursday.

A single office would help the State (SERS) and Public School (PSERS) Employees' Retirement Systems cut investment costs, boost pension profits, and reduce pension expenses that currently eat up more than 10 percent of the state budget, according to a new report from the commission.

The bipartisan, five-man Pennsylvania Public Pension Management and Asset Investment Review Commission, headed by State Rep. Mike Tobash, (R., Schuylkill Haven) also urged the state (aided by local school districts) to continue paying more than 30 cents into the pensions, for every dollar paid in wages, as the state’s “employer contribution” to help erase past deficits. Tobash said that's 10 times what private business typically spends on retirements.

Under Govs. Tom Ridge and Ed Rendell, the state had cut its pension funding even as legislators, teachers, state troopers and other public workers retired in larger numbers, with bigger pensions, and lived longer than projected — saddling future taxpayers with growing costs.

The commission also urged legislators to force SERS to follow PSERS in starting to publicly disclose how many billions of dollars have been collected by hedge fund managers and other private contractors who manage the state’s pension assets.

The state should make both funds do a better job managing risk and adopting “stress tests,” so they can avoid the massive losses SERS suffered in the 2008 market collapse because the funds, weighed down with hedge funds and other private investments, instead of hedging against stock and bond losses as their well-paid private managers promised, “performed worse.”

PSERS risk has "nearly doubled" in recent years, with nearly half its invested or committed assets now tucked away in "illiquid" private assets and unavailable for sale in an emergency; the school pensions are now a "greater cause for concern" than SERS, according to the report.

The commission urged SERS and PSERS to dump any remaining "actively-managed" stock or bond funds they own, in favor of indexed funds.

The report also said SERS and PSERS investments have long performed poorly compared to dozens of other, similarly-sized pension plans, and blamed the shortfall in part on over-investment in expensive, underperforming private investments.

SERS and PSERS ranked 49th and 50th, out of 52 state funds measured by the commission, for their investment returns over the past 10 years. They also trailed most state funds over the past one-year, three-year and five-year periods.

Gov. Tom Wolf and state treasurer Joe Torsella, the commission’s vice chairman, made grand claims for billions of dollars in potential savings through what Wolf called lower fees “to Wall Street,” which they said would follow adoption of these reforms. Cost saving is the commission’s stated goal.

But the report stopped short of recommending the state sell its private-equity, venture-capital, private real estate, hedge fund, commodities, junk bond, and other “alternative” investment portfolios, as Torsella and Wolf have sometimes recommended during their election campaigns.

Chairman Tobash pointed out that any savings would not result in new money available to the state’s annual budget. Instead, effective reform will help keep the long-term pension deficits from growing larger, stabilizing state and school districts' annual payments after a decade of rapid increases.

In a brief interview after the report was released, SERS' executive director, Terry Sanchez, said her system has been asking its hundreds of hired private money management firms for permission to tell Pennsylvanians how much of the profits private contractors make on state investments is kept by those managers as part of their compensation.

But Sanchez couldn’t say whether SERS will begin disclosing that information in state budget hearings later this winter, or in its annual report next year, or anytime in particular. There is no timetable, she said.

Tobash joined vice chair Torsella and fellow Democrat, Gov. Wolf, along with other commission members and state officials to unveil the recommendations.

The pension review commission was set up by the General Assembly when it passed curbs on guaranteed pensions for future state hires and began steering them toward 401(k)-style pension plans, whose values rise and fall with those of the investment markets, leaving taxpayers off the hook for part of the shortfall when pensioners' investments lose value. These revised pensions take effect for new state hires starting in January.


http://www.witf.org/state-house-soun...t-strategy.php

Quote:
Officials urge indebted public pension funds to consolidate, change investment strategy
Spoiler:
(Harrisburg) -- Pennsylvania's treasurer, governor, and a group of lawmakers unveiled a new report Thursday that recommend a slew of changes for the state's two largest public pension funds.

The State Employees Retirement System and Public School Employees Retirement System are--thanks in large part to political decisions to boost pensions more than a decade ago--extremely underfunded.

The state officials think the situation will at least improve if the funds stop paying exorbitant fees to private funds and investment managers.

The practice can be lucrative, but the investments are typically riskier and more expensive than traditional ones.

The report is advising the funds move a lot of their investments to index funds and at the very least, renegotiate their private equity contracts.

It also advises the legislature to approve consolidating the two funds' investment offices as a way to save money.

Treasurer Joe Torsella estimated those changes might save the funds nearly $10 billion over 30 years.

"While we can't control what those markets do, we can control the risk we take, and we can control how much we pay to get those returns," he said of the recommended switch to index funds. "In the long run, that is the, by far, smarter choice that keeps more dollars in our pockets."

The funds are more than $70 billion dollars in debt. The commonwealth is currently devoting about ten percent of its annual budget to paying it down.


http://www.ncnewsonline.com/news/loc...d2a1f16ba.html
Quote:
Study calls for pensions to cut costs, improve transparency

Spoiler:
HARRISBURG — Pennsylvania’s public pension systems could cut costs by almost $10 billion over the next 30 years, under a plan announced yesterday by a state panel.

The Public Pension Management and Asset Review Commission, led by state Rep. Mike Tobash, R-Schuylkill County and co-chaired by state Treasurer Joe Torsella, calls for changes to reduce costs and to make the pension systems more transparent about how much they pay fund managers.

Torsella and others, including Auditor General Eugene DePasquale, have been vocal critics of how much the state’s pension systems — the Pennsylvania School Employees' Retirement System and the State Employees' Retirement System — have paid in fees to investment managers.

The two pensions remain under-funded by a combined $64 billion, Torsella said.

Steps to strengthen the system are important to ensure that the pensions remain viable to provide the benefits to government workers and retirees who are depending on them, he said.

The savings spelled out in this plan would generate “$10 billion that will benefit taxpayers instead of Wall Street bankers,” said Gov. Tom Wolf.

The commission suggested that the pensions lean more heavily on index funds instead of using fund managers. It also called on the two pensions to use a combined investment office to eliminate redundant expenses and leverage of the increased size to get deals with asset managers. The move to a single investment office would save $2 billion over the next three decades, according to the commission's study.

The bulk of the remainder of the potential savings, the study said, would come from renegotiating contracts of moving to index funds instead of using fund managers.

Tobash said that commission was focused on finding realistic solutions. Merging two pensions doesn’t seem likely something that could be accomplished in the near future, so moving to a combined investment office was an alternative to reduce the costs of having two separate pensions, he said.

The commission was created in 2017 as part of the pension reform legislation passed that year. The commission’s goals were to identify ways for the pensions to make improvements to transparency, examine the strategies, investment performance and fees paid by the pensions; and come up with recommendations for how the pensions can each generate $1.5 billion in cost savings over the next three decades.

In statements released Thursday, officials at both pensions said that they haven’t had a chance to review the report so they didn’t have immediate comment on it. But throughout the commission’s work, pension officials have said they’ve taken steps to make changes to improve transparency and reduce what they pay to fund managers.

“As we testified at the commission hearing in October, SERS strives to be as efficient and cost-conscious as possible,” said Terrill J. Sanchez, SERS executive director. “The fact that we have been able to reduce investment management fees by 45 percent over the past seven years attests to this commitment.”


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