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Old 01-01-2018, 07:56 AM
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Default Public Pensions Watch 2018

It's that time of year!

Inside the spoiler, links to all the other public pensions threads:




And here are some other pension- and public finance-related threads, that may be of interest:



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Old 01-01-2018, 08:03 AM
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KENTUCKY
LAWSUIT
FUNDING

http://www.kentucky.com/news/politic...192373754.html

Quote:
Meet the teacher who keeps suing the state of Kentucky to get pensions fully funded
Spoiler:
Kentuckians will watch this winter as Gov. Matt Bevin and the General Assembly struggle with an estimated $41 billion public pension shortfall. Retirement benefits for public workers are likely to be cut. The rest of the state budget — education, social services, public safety — will get squeezed.

Randy Wieck wants to know why everyone is just now starting to take this mess seriously.

Wieck, 63, teaches American history at duPont Manual High School in Louisville. Over the last four years, he has filed three lawsuits related to Kentucky’s teacher pensions in state and federal courts. Sometimes he challenged the state’s massive under-funding of the Kentucky Teachers’ Retirement System. Other times he fought to get KTRS to fully disclose its investments in higher-risk, higher-fee private equities — or simply to get out of those funds altogether.

So far, all of Wieck’s litigation has been dismissed by judges, gaining him nothing but a reputation as a malcontent at the state Capitol, with KTRS and among his own teachers’ unions, which he sharply criticizes for not doing enough to protect the retirement security of their members.

“Mr. Wieck is disgruntled because we have not agreed to participate in any of his failed legal challenges to date, on the advice of our attorneys, who did not believe they had any chance of success,” said Brent McKim, president of the Jefferson County Teachers Association.

In October, the Kentucky Educational Professional Standards Board opened an inquiry into Wieck’s use of school email to communicate with other teachers about the pension shortfall. That put his teaching certificate at risk. This month, without explanation, the board dropped the matter for the moment.

Wieck said he can live with his unpopularity. He’s already preparing another state lawsuit to highlight the fact that the Kentucky legislature — for 10 of the last 11 years — paid many hundreds of millions of dollars less than the annual recommended contributions into KTRS. Largely as a result of this trend, KTRS now holds about $17 billion in assets, which is only 56 percent of what it’s expected to need for teachers’ future pension checks.

“It’s not a mystery how we got here,” Wieck said in a recent interview.

“You try paying three-quarters of your mortgage for a few years and then see how the bank responds to you,” he said. “You try paying three-quarters of your restaurant tab and then walk out the door after dinner and see what happens. But the state of Kentucky thought nothing of paying three-quarters of what was due the teachers’ pensions for year after year. And we’re surprised there’s a problem now?”

Wieck said his newest suit will demand that Kentucky raise enough revenue through tax increases to repay the teachers’ pension fund for what it was supposed to be getting all along.

Raising taxes needn’t be as difficult as it sounds, he said. During this fiscal year, the state expects to forfeit about $13 billion in “tax expenditures” — a vast collection of tax breaks and tax incentives — which is more money than it will collect for the General Fund. Lawmakers should go through that list with a fine-toothed comb and “close the loopholes” that don’t make sense anymore, he said.

Wieck originally filed his suits on his own. But the advocacy nonprofit that he launched with a GoFundMe campaign, the Teacher Retirement Legal Fund, has hired Ted Lavit, one of the lawyers who worked on the landmark litigation that convinced the Kentucky Supreme Court to require a systemic overhaul of school funding under the Kentucky Education Reform Act of 1990. He’s confident this case will make a similar impact.

“We’re not even asking for new laws to be written here,” Wieck said.

“We’re simply saying, ‘Honor the contract.’ Teachers did. We paid into the retirement system, as the contract required, with every paycheck since the day we started work. We started by contributing about nine percent of our salary, and as time went on and more money was needed, it slowly rose, and now it’s about 13 percent of our salary. So we did our part under our employment contract. The state needs to hold up its end.”

‘Suddenly my eyes opened’
Wieck is a Louisville native who spent years studying and teaching his way across Western Europe. He was in Finland when he felt compelled to come home briefly because his aging parents needed his assistance. That was two decades ago. Teaching in his hometown was a good fit, it turned out.

His epiphany on pensions came in September 2013 when Rolling Stone magazine published an article by Matt Taibbi called Looting the Pension Funds.

In the article, Taibbi warned that on a national scale, private equity firms were charging exorbitant fees to place public pension money in complex investment schemes, such as hedge funds, many of which yielded disappointing returns. Neither the fees nor the nature of the investments were ever fully explained to the public workers whose nest eggs were being mishandled, Taibbi wrote.

Aggravating this problem, Taibbi wrote, politicians for many years diverted much of the government money legally obligated for pensions to other spending. That diversion allowed them to balance state budgets without having to raise taxes. He accurately named Kentucky as one of the worst pension under-funding offenders. (This year, for example, the primary pension fund for Kentucky’s state workers has just 13 percent of the assets it’s expected to need to meet future obligations, putting it in far worse shape than KTRS.)

“Here’s what this game comes down to,” Taibbi wrote. “Politicians run for office, promising to deliver law and order, safe and clean streets, and good schools. Then they get elected, and instead of paying for the cops, garbage men, teachers and firefighters they only just 10 minutes ago promised voters, they intercept taxpayer money allocated for those workers and blow it on other stuff. It’s the governmental equivalent of stealing from your kids’ college fund to buy lap dances.”

As public pension funds predictably run low, the politicians who wrecked the system suddenly insist they have no choice but to slash benefits, Taibbi wrote. Traditional pensions guaranteed for life are replaced with 401(k)-style accounts that shift the burden to modestly paid workers to save enough money to carry them through 30 years of retirement. Other retiree benefits — cost-of-living adjustments, relatively cheap medical coverage — become unaffordable luxuries.

“Suddenly my eyes opened. What he was describing, it was exactly what we were seeing here in Kentucky!” Wieck said.

Appalled, he began making phone calls.

The Jefferson County Teachers Association and the Kentucky Education Association told Wieck not to worry, they had representatives at the state Capitol monitoring the pension situation, he said. Among other things, the unions were promoting the idea of a “pension bond” — several billion dollars in borrowed money, to be repaid over 30 years at 5 percent interest — to prop up KTRS. However, the legislature rejected that idea as too risky.

Various lawmakers assured him they had enacted rounds of “pension reform” at the state’s retirement systems. That very year, Senate Republican and House Democratic leaders congratulated themselves on passing Senate Bill 2, which enrolled future state workers in a less generous “hybrid cash-balance” plan rather than defined-benefits pensions. Also, future public employees will have to work longer and contribute more money for their benefits before they retire.

“This is a shining example of how government should tackle pressing problems facing the state,” Senate President Robert Stivers, R-Manchester, said in 2013. “Public pension reform was accomplished through a bipartisan, bicameral and collegial way.”

Yet for all of the confident talk, as time passed, the state’s public pension debt kept rising.

“What surprised me was, I felt like people were lying to me,” Wieck said. “They’d been telling all of us that this was a healthy retirement system, when even a cursory look at the numbers told you it was anything but healthy. All of the national ratings agencies, they just looked at our numbers and they knew right away that we didn’t have anywhere near the level of money we were going to need to meet our future obligations. That’s why they keep down-grading us. It’s simple math.”

Taking them to court
Although he knew little about the law — “not enough to get arrested,” he quipped — Wieck typed up and filed his first lawsuit in November 2014 in Jefferson Circuit Court against the KTRS Board of Trustees.

Wieck alleged that the retirement system’s trustees had failed in their fiduciary duty by not “aggressively and publicly demanding the full funding they need to stay solvent;” by not informing teachers of the “dire funding status;” and by not “aggressively exposing flawed and biased research in the legislature’s pension reform process.”

Officials at KTRS declined to discuss Wieck for this story, citing his history of litigation against the agency.

That first suit was dismissed for improper venue. Wieck lives and works in Jefferson County; KTRS is headquartered in Franklin County.

So he tried again nearly a year later, suing in U.S. District Court along with two other teachers and requesting class-action status to represent everyone enrolled in KTRS. This time, the defendants included KTRS and private equity firms KKR, Blackstone Group, Carlyle Group and Rockwood Capital. Wieck said the underfunded retirement system inappropriately risked nearly $600 million in pension assets with those firms during the previous eight months.

This suit also was dismissed. Senior U.S. District Judge Charles R. Simpson III cited several reasons, including sovereign immunity — the concept that, in general, governments are immune from civil liability — and what he described as Wieck’s failure to state a specific harm suffered at the hands of the private equity firms.

Not one to let matters drop, Wieck sued once more in November 2016. (By now, thanks to a GoFundMe campaign that he says has raised about $25,000 so far, his nonprofit Teacher Retirement Legal Fund was able to hire legal counsel and operate a website to promote his ongoing battles.) This time, Wieck and 29 other Louisville teachers sued Bevin, Stivers and Jeff Hoover, who at that time was incoming speaker of the Kentucky House of Representatives.

Stivers and Bevin
Senate President Robert Stivers talks through details as Kentucky Governor Matt Bevin and then-House Speaker Jeff Hoover unveil a proposal to overhaul Kentucky’s pension systems during a press conference at the Kentucky State Capital on Wednesday, October 18, 2017 in Frankfort, Ky.
Michael Reaves
The teachers accused the state’s leaders of short-changing KTRS, collectively cheating them of secure retirements in violation of state law and their rights under the state and federal constitutions to life, liberty and property.

The case started in Franklin Circuit Court, the state court in the capital city of Frankfort. But the defendants shrewdly had it removed to U.S. District Court, where a federal judge declared that he lacked the jurisdictional authority to tell state officials how to spend state money. Dismissed.

“The main thrust of the suit is monetary,” wrote U.S. District Judge Gregory F. Van Tatenhove in his dismissal order. “In fact, there is no other remedy available to plaintiffs except for this court to force the defendants to withdraw from the treasury to fully fund KTRS.”

‘Nobody wants to rock the boat’
One of Wieck’s staunchest allies, Betsey Bell, 66, just retired from teaching high school English in Louisville in the middle of the school year.

Bell said Bevin made the decision for her in August after a Facebook Live video he gave on the pension shortfall “felt like he was insulting every one of us. It was really the last straw. Teaching is already such a tough job, and here is the governor of the state talking about how teachers only care about themselves and they’re so greedy and they hoard sick days. I just said, ‘The heck with this.’”

Bell was one of the teachers who joined Wieck in his last two suits. She admires him for taking action to defend his pension, something she says few other educators seem willing to do.

“People will complain in private, but in public, nobody wants to rock the boat,” Bell said. “Honestly, I can’t figure out why we’re not more vocal. Teachers seem to live in fear for their jobs, so they almost never speak up. Principals live in fear of someone filing a grievance. Everyone in education is so afraid.”

Wieck said he’s working with his lawyer on their next pension funding lawsuit, which they will do their best to keep in the state courts. If the Kentucky Supreme Court had the authority to order the General Assembly to spend more on schools nearly 30 years ago, then it can tell lawmakers to better fund the pension systems today, he said.

He’s keeping one eye on the ongoing pension debate in Frankfort, but he doesn’t see much in Bevin’s proposals that impresses him. Wieck said shifting future teachers into newly established defined-contribution accounts simply cuts off badly needed funding for the existing pensions because, as time goes on, there will be fewer active teachers contributing into the current system with each paycheck as older teachers keep retiring and withdrawing money.

And freezing retired teachers’ annual cost-of-living adjustments on their only income — in Kentucky, teachers don’t collect Social Security — is a heartless way to save money, he said.

“This whole discussion has taken on a diabolical quality that I don’t think is accidental,” Wieck said. “It’s supposed to make all of us in the public sector look greedy. It’s supposed to turn people against us. ‘Look, you people hoard sick days! Why do you even still get pensions? At least the governor is trying to do something, why won’t you just shut up and support him?’ And meanwhile, our contract has been violated year after year.”
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Old 01-01-2018, 08:13 AM
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CENTER FOR STATE AND LOCAL GOVERNMENT EXCELLENCE

https://www.prnewswire.com/news-rele...300575869.html

(press release)

Quote:
State and Local Government Trends to Watch in 2018
Spoiler:

WASHINGTON, Dec. 28, 2017 /PRNewswire-USNewswire/ -- Staff at the Center for State and Local Government Excellence annually predict what they think will be the top issues facing state and local government in the year ahead. The following are the "trends to watch" in 2018:

Chipping away at the retirement savings gap. Local and state governments are making it easier for private sector workers and their own employees to save more for retirement. Listen to national speakers talk about automatically enrolling employees into a supplemental savings plan or setting up a statewide retirement savings plan for private sector workers here.

....
What elected officials need to know about public pensions. This guide uses graphics to explain key facts about public pension plans and the role of elected officials in making sure their pension plans are well designed and funded. Read more.

Borrowing costs are affected by the funded status of public pensions. Several governments have experienced downgrades from ratings agencies related to their level of unfunded pension liabilities. Read the issue brief here.

Timely and complete pension reporting is more important than ever. Communication lessons from major pension systems shed light on leading practices. Read more.

State and local government wages and salaries decline as a percentage of compensation. As pension and health care costs have risen over the past 10 years, wages and salaries have declined. From 2006-2016, wages and salaries declined from 67% to 63% as a share of total compensation. See the infographic.

Funded levels of state and local government pension plans vary widely. The average funded ratio of 170 state and local pension plans in publicplansdata.org was 72 percent in 2016, but there is a wide variation among plans, even within a single state. See the infographic.




infographic with fy 2016 numbers:
https://slge.org/wp-content/uploads/...nfographic.pdf
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Old 01-02-2018, 09:44 AM
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FUNDED RATIOS
RISK-FREE (or other) MEASUREMENT

https://www.ai-cio.com/news/report-o...nded-level-50/
Quote:
Report: Only One US State Pension has Funded Level Above 50%
American Legislative Exchange Council says funding gaps are larger than what is being reported.

Spoiler:
A recent report from the American Legislative Exchange Council said that, based on its calculations, every US state’s pension system has a funded level below 50%, except for that of Wisconsin, which has a funded level of 61.5%.

According to the report from the nonprofit organization of fiscally conservative state legislators, the highest-funded states after Wisconsin are South Dakota (48.1%), New York (46.3%), Tennessee (45.9%), and North Carolina (45.0%). Meanwhile, the five lowest-funded states are Connecticut (19.7%), Kentucky (20.9%), Illinois (23.3%), Mississippi (24.2%), and New Jersey (25.7%).

“Absent significant reforms, unfunded liabilities of state-administered pension plans will continue to grow and threaten the financial security of state retirees and taxpayers alike,” said the report. “The fiscal calamity could be far deeper and prolonged than the Great Recession.”

ALEC’s Center for State Fiscal Reform analyzed the official annual financial documents of more than 280 state-administered pension plans using what it deems “more realistic investment return assumptions” in order to gain a clearer picture of the pension problem.

The unfunded liabilities of each pension plan were revalued using a discount rate equal to a risk-free rate of return represented by debt instruments issued by the US government. It said that 2017’s study used a risk-free rate of 2.142%, derived from an average of the 10- and 20-year US Treasury bond yields from April 2016 to March 2017.

“Based on these revised investment return assumptions, we report on total unfunded pension liability, unfunded pension liabilities per capita, and the funding ratio of these plans,” said ALEC.

The report said that unfunded liabilities of public pension plans continue to loom over state governments, and that if pension assets were determined using “more realistic investment return assumptions,” pension funding gaps would be even larger than what is being reported in state financial documents.

ALEC said that unfunded liabilities, using a risk-free rate of return assumption of state-administered pension plans, now exceed $6 trillion—an increase of $433 billion from last year.

“The national average funding ratio is a mere 33.7%, amounting to $18,676 of unfunded liabilities for every resident of the United States,” said the report. “Much of this problem is due to state governments failing to make their annually required contributions.”

The report cited a 2017 Pew Charitable Trusts report that found that only 32 states in fiscal year 2015 made pension fund contributions sufficient enough to diminish accrued unfunded liabilities.

“Taxpayers ultimately provide the wages for public sector employees and the financial resources to cover the promised benefits of traditional pension plans,” said the report. “And all residents are impacted when pension costs absorb limited government resources, rather than core government services such as education, public safety, and roads.”

Faulty accounting and reporting methods obscure the magnitude of unfunded liabilities, according to the report. It said that significant changes made by the Governmental Accounting Standards Board in 2012 to the methods used for measuring a pension plan’s financial health were intended to increase transparency, consistency, and comparability of pension information.

“Unfortunately,” said the report, “states have found ways to work around these requirements and paint an unrealistically rosy picture of their pension funding status.”
http://www.benefitspro.com/2017/12/2...der-a-risk-fre

Quote:
10 states with the worst pensions under a risk-free model

Spoiler:
How poorly funded are the nation’s public pensions at the state and local level?

The answer depends on whom you ask and is largely dependent on the discount rates states use to assess the cost of future liabilities.



Discount rates, or the assumed rate of return on investments, are set by plan trustees and vary by pension.

According to new analysis of more than 280 public pension plans by the American Legislative Exchange Council, the average assumed discount rate is 7.34 percent.

ALEC, and other economists and actuaries, claim that presumed rate of return is too optimistic, ultimately leading to the systemic under-reporting of liabilities, in turn lowering annual minimum contributions states make to pension plans.

“In effect, these state governments are relying on unlikely long-term investment gains to remedy decades of underfunding the pension funds,” ALEC’s report says. The non-profit advocacy’s membership is comprised of mostly conservative state lawmakers and corporations.

Instead of the average 7.34 discount rate, ALEC maintains a risk-free rate of 2.14 percent, drawn from an average of 10- and 20-year U.S. Treasury bond yields between April 2016 to March 2017, provides a more accurate measure of pensions’ funded ratios.

ALEC is not alone in advocating for a risk-free measurement of future liabilities. The Society of Actuaries recommends pensions use a risk-free rate to assume investment returns.

When applying the risk-free assumption on investment returns, the average funding ratio of the plans ALEC analyzed is a paltry 33.7 percent. All told the plans carry more than $6 trillion in unfunded liabilities, amounting to $18,676 of unfunded liabilities for every resident of the U.S.

Earlier this year, Pew Charitable Trusts released its study of state-sponsored pension plans, and it put the total unfunded pension liabilities at $1.1 trillion, based on the higher assumed rates of returns states use.

Using a risk-free assumption creates a seismic difference from reported funding ratios. For instance, California’s public pensions report an aggregate funding level of 70 percent. CalPERS, the nation’s largest public pension fund, uses a 7.5 percent assumed rate of return. However, in applying the risk-free rate of return, the funding ratio for California’s plans drops to 33 percent.

Wisconsin’s pension plan reports a 100-percent funding level, but under a risk-free rate assumption, it drops to 62 percent. The Badger State is the only state that can claim a funded-ratio above 50 percent using the risk-free model.

Here is a list of the 10 states with the lowest average funding ratios among the plans they sponsor when applying the risk-free model.

10. Pennsylvania


Funded ratio using risk-free model: 28.1 percent

Reported funding ratio: 58 percent

Assumed rate of return in 2015, according to Pew Survey: 7.5 percent

9. South Carolina


Funded ratio using risk-free model: 28 percent

Reported funding ratio: 60 percent

Assumed rate of return in 2015, according to Pew Survey: 7.5 percent

8. Massachusetts


Funded ratio using risk-free model: 27.2 percent

Reported funding ratio: 59 percent

Assumed rate of return in 2015, according to Pew Survey: 8 percent

7. Hawaii


Funded ratio using risk-free model: 27.2 percent

Reported funding ratio: 55 percent

Assumed rate of return in 2015, according to Pew Survey: 7.8 percent

6. Michigan


Funded ratio using risk-free model: 26.9 percent

Reported funding ratio: 62 percent

Assumed rate of return in 2015, according to Pew Survey: 8 percent

5. New Jersey


Funded ratio using risk-free model: 25.7 percent

Reported funding ratio: 57 percent

Assumed rate of return in 2015, according to Pew Survey: 5.2 percent



4. Mississippi


Funded ratio using risk-free model: 24.2 percent

Reported funding ratio: 54 percent

Assumed rate of return in 2015, according to Pew Survey: 8 percent

3. Illinois


Funded ratio using risk-free model: 23.3 percent

Reported funding ratio: 47 percent

Assumed rate of return in 2015, according to Pew Survey: 7.3 percent

2. Kentucky


Funded ratio using risk-free model: 20.9 percent

Reported funding ratio: 44 percent

Assumed rate of return in 2015, according to Pew Survey: 6 percent

1. Connecticut


Funded ratio using risk-free model: 19.7 percent

Reported funding ratio: 47 percent

Assumed rate of return in 2015, according to Pew Survey: 8.2 percent
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Old 01-02-2018, 09:44 AM
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CALIFORNIA
CUTS
https://www.mercurynews.com/2017/12/...ornia-workers/
Quote:
Cases could open door to pension cuts for California workers

Spoiler:
SACRAMENTO — For decades in California, a sacrosanct rule has governed public employees’ pensions: Benefits promised can never be taken away.

But cases before the state Supreme Court threaten to reverse that premise and open the door to benefit cuts for workers still on the job.

The lawsuits have enormous implications for California cities, counties, schools, fire districts and other local bodies facing a sharp rise in their pension costs.

The ballooning expenses are an issue that Gov. Jerry Brown will face in his final year in office despite his earlier efforts to reform the state’s pension systems and pay down massive unfunded liabilities.

His office has taken the unusual step of arguing one case itself, pushing aside Attorney General Xavier Becerra and making a forceful pitch for the Legislature’s right to limit benefits.

At issue is the “California Rule,” which dates to court rulings beginning in 1947. It says workers enter a contract with their employer on their first day of work, entitling them to retirement benefits that can never be diminished unless replaced with similar benefits.

It gives workers security that their retirement will be safe and predictable after a career in public service. But it also ties lawmakers’ hands in responding to exploding pension costs.

It’s widely accepted that retirement benefits linked to work already performed cannot be touched. But the California Rule is controversial because it prohibits even prospective changes for work the employee has not yet done.


“Lots of people in the pension community are paying attention to these cases and are really interested in what the California Supreme Court is going to do here,” said Amy Monahan, a University of Minnesota professor who studies pension law.

Pension systems around the country are facing unprecedented pressures from generous benefits, severe losses during the Great Recession, mostly anemic investment earnings since, and retirees living for longer.

California’s two major pension funds, which have more than $570 billion in assets between them, have enough money to pay for only about two-thirds of their anticipated costs.

As a result, both the California Public Employees Retirement System and the State Teachers Retirement System will collect billions of additional dollars from state and local governments, putting pressure on those budgets.

The pending cases stem from a Brown-backed 2012 pension reform law that sought to rein in costs and end practices viewed as abuses of the system. One of those eliminated benefits was a right to buy up to five years of credit when retirement benefits are calculated, so a person who worked 20 years would get a monthly check as if he’d worked 25 years.

Brown, in a brief filed in November, argued benefits have been handed out too generously.

“For years, self-interested parties, overly generous promises whose true costs were often shrouded by flawed actuarial analyses, and failures of public leadership had caused unsustainable public pension liabilities,” his office wrote. A ruling is expected before Brown leaves office in January 2019.

The 2012 law also limited the types of income that can be used to calculate pension benefits in an attempt to limit “pension spiking,” or driving up final salaries to increase payments in retirement.

A group of Marin County employees sued separately over the changes, arguing the benefits couldn’t be altered. The California Court of Appeal in San Francisco disagreed in a ruling that strikes at the heart of the California Rule.

“While a public employee does have a ‘vested right’ to a pension, that right is only to a ‘reasonable’ pension — not an immutable entitlement to the most optimal formula of calculating the pension,” Judge James A. Richman wrote. The case is now pending at the Supreme Court.

Dave Low, chairman of Californians for Retirement Security, a union coalition, said the Supreme Court upholding the lower-court ruling would be a “major setback” for public employees.
“If they base their decision on precedent, I don’t think that there’s much for the public employees to worry about,” Low said. “The key will be if the Supreme Court decides to break away from decades of precedent and dozens of decisions.”
Twelve states observe a variation of the California Rule, said Greg Mennis, director of the Public Sector Retirement Systems project at Pew Charitable Trusts. One of them, Colorado, has walked it back a bit, he said, requiring “clear and unmistakable intent to form a contract before pensions will be contractually protected.”

A change to California’s interpretation of its rule would not automatically change legal precedents in other states, but it could provide a spark for lawmakers to test changes that they previously considered unfeasible, said Monahan, the Minnesota law professor.
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Old 01-02-2018, 09:44 AM
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CONNECTICUT

https://westfaironline.com/97532/97532/
Quote:
Bridgeport pension bond sale will save taxpayers $48M, says Mayor Ganim
Spoiler:
The city of Bridgeport has completed a pension bond sale that raised $96 million to pay down a $200 million long-term unfunded pension liability the city faced covering retirement costs for current and former police officers and firefighters.

The measure will save Bridgeport taxpayers approximately $2 million per year in net debt service payments fobridgeport bond saler the next 26 years over the life of the bonds, resulting in total savings to taxpayers of approximately $48 million.

The bond sale was made possible through special legislation sponsored by the Bridgeport delegation and adopted by the Connecticut General Assembly during the 2017 legislative session. That action gave Bridgeport the statutory authority to issue taxable bonds to pay off more than $200 million in unfunded pension liability into the Connecticut Municipal Employee Retirement System.

“This is the kind of outside-the-box thinking we need to tackle our short- and long-term fiscal challenges as a city and as a state,” remarked Mayor Joe Ganim. “We’re showing we can do this while operating more efficiently and lowering borrowing costs as we search for savings to absorb major state budget cuts.”

The bond sale was approved by the Bridgeport City Council in August and was coordinated by the Bridgeport Finance Department. It was underwritten by Morgan Stanley, coordinated with outside financial advisor Public Finance Management, and attorneys from the firm Pullman and Comley as bond counsel for the city.

The bonds were sold with an average interest rate of 4.53 percent, with all proceeds to be deposited into the Connecticut Municipal Employee Retirement System pension fund at the closing date in early January.

Prior to the legislation, Bridgeport was locked into paying $7.5 million in amortization payments for the next 26 years into the Connecticut Municipal Employee Retirement System to cover unfunded pension liability. Ganim said that liability was created because the city did not transfer enough assets into the fund when it moved the fire and police pensions to state management in 2013.

The fund at the time covered the Bridgeport deficiency but charged the city an 8 percent interest rate on the its annual payments.

The news came on the heels of reports that Ganim would officially enter the gubernatorial race on Jan. 3. However, Ganim apparently inadvertently announced his candidacy on Twitter last night by posting “I’m seeking your support for the office of Governor of Connecticut” under the handle “@GanimforCT.”

Under state campaign finance laws, he legally became a candidate by issuing such a post. The account has since been deleted, however, leaving some doubt as to whether Ganim is now officially a candidate. His office did not immediately return calls for comment.

http://www.theday.com/article/20171228/OP01/171229457

Quote:
One year left, Malloy still wrestling with pensions
Spoiler:
Faced with choosing among bad options, Gov. Dannel P. Malloy has done a decent job of working with the legislature and state labor unions to address Connecticut’s severely underfunded pension plans. Certainly far more than his predecessors have.

While Malloy has not fixed the pension fund for state workers, his policies have improved the situation.

Now Malloy, entering his last year in office, is turning his attention to the teacher pension fund, also underwritten by the state and cash-starved.

In raising the issue, Malloy is following a familiar pattern. He is suggesting refinancing the state’s obligation to assure teachers get the pensions they were promised. This would push large pension payments further out into the future, and end up costing the state more, but would avoid massive balloon payments requiring cuts in municipal aid, reductions in state services and sharply higher taxes.

A 2014 study by the Center for Retirement Research at Boston College concluded that without any adjustments Connecticut’s obligations to fund the teacher retirement plan would exceed $6 billion annually in the early 2030s, before sharply declining in later years. It is not reasonable to come up with $6 billion just for teacher pensions in a state budget that now stands at about $20 billion.

Last year the legislature approved a plan to avoid similar balloon payments for the state-worker pension fund that were also to hit in the 2030s. Under that revised plan, pension contributions will peak at around $2.3 billion — costly but manageable. However, spreading out payments will add $14 billion or more to the cost.

While getting the revised payment legislation through the Generally Assembly — without any Republican votes — Malloy also won concessions from state labor unions. Under that deal, new workers are enrolling in hybrid pension/401(k)-style plans. Along with higher employee contributions toward their pensions, it creates a plan largely funded by the employees, at least going forward. The legacy costs for the gold-standard retirement plans of the past will be a drag on the state for decades to come, however.


In seeking a legislative deal to assure the solvency of the teacher pensions, we would expect Malloy to likewise pursue some structural changes that will lower the state’s obligation going forward.

Last legislative session, Malloy proposed that municipalities share some portion of the cost of funding the pensions for teachers who, after all, are employed by the local communities. The legislature balked at imposing this burden on towns and cities at a time when municipal aid was being trimmed.

Giving municipal school boards some skin in the game — by way of having to help pay the pensions — would provide an incentive to tailor labor contracts to reduce future pension obligations. Legislation to strengthen their hand in those negotiations and provide incentives to seek creative approaches to pension benefits should also be part of the solution.

The state is in this situation through no fault of Malloy’s, but because for decades Connecticut governors and legislatures did not come close to adequately saving to meet retirement benefit obligations. They were happy instead to spend money on ever-expanding services and pet projects, and — with less success — avoid tax increases.

Contrast Malloy’s approach with that of his predecessor, Republican Gov. M. Jodi Rell, and the Democratic legislature she worked with. Faced with a funding shortfall, they dug the hole deeper, borrowing $2 billion in 2008 to keep the teacher fund solvent. That debt could present legal hurdles in trying to realign payments into the pension.

Success in tackling this problem would be good news for whoever follows Malloy as governor, giving them one last thorny policy matter to deal with.



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Old 01-02-2018, 09:44 AM
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ILLINOIS
http://www.bnd.com/opinion/editorial...9.html#new_tab
Quote:
You owe $52K for state employee pensions, and the bill is overdue
Spoiler:
It should be no surprise that in the land of 6,963 government units, there are 650 public pension systems.

Belleville, for example, participates in the Illinois Municipal Retirement System for many of its employees. But Belleville firefighters get their own pension system. Belleville police get their own, too.

Belleville’s future IMRF retirees are 88.6 percent covered. The police pension has 54 percent of what it needs, and the fire pension has 44.5 percent.

One city, three pension funds. Multiply that across Illinois and you quickly reach 660, each with its own board, investment fees and lawyers.


Someone worked hard to design a system so inherently inefficient and costly, and with such wide ranging standards for what should be in the pot to cover future obligations.

As a whole, the public pensions in Illinois are underfunded by $167 billion. That means they have 29 percent of what they need to meet the promises made to public employees.

It also means a liability of $34,776 for each household in Illinois.

For some more good news, Moody’s Investor Service thinks the state’s projections are too optimistic and the debt is more like $251 billion just for the state’s five pension systems. That is a liability of $52,269 for you and for every other Illinois household.

There is a better way. Ohio has a single public pension system that is 82 percent funded. Utah also has one system and eight other states have only two systems, regardless of whether you are a local, county or state employee.

They don’t see you as a special case just because you are a retired cop rather than a retired dog catcher or retired sewer billing clerk.

Simple. Efficient. Makes too much sense to ever work in Illinois.

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Old 01-02-2018, 09:45 AM
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KENTUCKY
LAWSUIT

https://www.huffingtonpost.com/entry...ushpmg00000004
Quote:
Hedge Fund Bets Bilked Kentuckians Out Of Their Pensions, Lawsuit Says
Three hedge funds allegedly benefited from decisions that helped impoverish Kentucky’s state pension system.
Spoiler:
Years of risky hedge fund investments helped plunge Kentucky’s public pension system billions of dollars into the red, making it one of the worst-funded state pension systems in the country.

Now, eight current and former state employees are suing a trio of hedge fund operators and current and former members of Kentucky’s pension board, alleging that they breached their financial duties to the state and its taxpayers by sinking millions of dollars into “exotic” hedge fund bets.

The lawsuit, filed in Kentucky circuit court on Wednesday, takes aim at three hedge fund firms ― KKR/Prisma, Blackstone and Pacific Alternative Asset Management Company ― and their executives, as well as seven current and former members of the Kentucky pension board, the pension system’s former chief investment officer, and a consulting firm that advised the board.

Together, the defendants “chose to cover up the true extent” of the pension plans’ financial shortfalls and to “take longshot imprudent risks” in an effort to make up for the funding problems, the suit contends.

“They misled, misrepresented and obfuscated the true state of affairs ... from at least 2009 forward,” the suit alleges.

Kentucky’s pension plans, collectively known as Kentucky Retirement Systems, hold savings for more than 350,000 current and former state workers. At the turn of the 21st century, the suit states, the system held enough money to cover all its obligations with $2 billion in surplus.

But over the ensuing decade, it lost more than $6 billion in assets. Today, it holds enough cash to cover just 37 percent of its obligations. The largest of the state’s plans, the Kentucky Employee Retirement System, has enough in assets to pay only 17 percent of its future obligations. The system as a whole is facing a nearly $27 billion shortfall, according to official figures. The lawsuit estimates the actual funding gap could be as large as $50 billion.

A major cause of those problems, the suit asserts, is the pension system’s investments in so-called hedge “funds of funds” ― that is, hedge funds composed of other hedge funds. As HuffPost laid out in a deep dive into Kentucky’s pension mess in June, such funds of funds feature little to no transparency when it comes to fees paid to investment managers and firms or their performance. They tend to offer higher costs and lower returns than traditional investments, all while potentially greasing the wheels for corruption inside public pension plans.

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The three hedge fund operators named as defendants created special funds for the state of Kentucky ― the suit refers to such funds as “black boxes,” for their notable lack of transparency. The operators allegedly promoted the funds to Kentucky Retirement Systems as safe and virtually guaranteed investments. Instead, they helped “generate excessive fees” for the hedge fund managers while producing “poor returns and ultimately losses” for the pension plans, “damaging [Kentucky Retirement Systems] and Kentucky taxpayers” in the process.

Most of the assertions in the lawsuit involve decisions made during the administration of then-Gov. Steve Beshear (D), who held office from 2008 to 2016. The suit also references at least one decision the Kentucky Retirement Systems board made after Gov. Matt Bevin (R) took office in January 2016. In May 2016, after Bevin had drastically reshaped the board, the system’s investment committee plunged $300 million into the hedge fund of funds created by KKR/Prisma.

At the time, the state was supposedly making some effort to reduce the pensions’ overall involvement in hedge funds. The KKR/Prisma fund was the “worst performing” of the “black box” funds: It had a negative 8 percent return in 2016, even as the stock market rose 15 percent.

Bevin had previously appointed William Cook, a former KKR/Prisma employee, to the pension board as part of the reshuffling. Cook said upon his appointment that he would recuse himself from any decisions involving his former company. But the lawsuit alleges that he was among the investment committee members who “permitted” Kentucky Retirement Systems to enter into the deal, in which KKR/Prisma was also able to place one of its current employees inside the pension system on a part-time basis.

That deal, the suit claims, “was not done ‘solely’ in the interest of the members and the beneficiaries” ― as required by Kentucky law ― “but to help KKR/Prisma” and Pacific Alternative Asset Management Company.

Investments in hedge funds of funds have created legal scandals for state pensions across the country, including in California and New York. Amid more scrutiny, California, New York and other states have pledged to rid their pension systems of hedge fund investments. Although Kentucky has attempted to reduce its reliance as well, Kentucky Retirement Systems still held 8.4 percent of its assets in hedge funds as of March 2017.

The lawsuit does not allege any federal crimes. It seeks an undisclosed sum in damages on behalf of the state, the taxpayers and Kentucky Retirement Systems. Any damages the eight plaintiffs themselves received would go to Kentucky Retirement Systems, the suit says, to help shore up the pensions.

Blackstone and KKR/Prisma both denied the allegations in statements to the Louisville Courier-Journal.

Kentucky’s state legislature returns to work next week, and pension reform is expected to be near the top of its 2018 agenda. Last year Bevin released a proposal to transition from a traditional, defined contribution-style pension program to one featuring plans that resemble 401(k)s. That idea has met with widespread opposition from public employees, who, along with economic analysts, say it would reduce benefits for future retirees and could even exacerbate some of Kentucky’s current pension woes.

CORRECTION: A previous version of this story said the lawsuit both names and doesn’t name current members of the pension board. The lawsuit, in fact, names current and former board members.

http://www.benefitspro.com/2017/12/2...ntucky-pension
Quote:
Workers sue investment firms over Kentucky pension shortfall
Spoiler:
State retirement system officials and three asset management firms are being sued by a group of Kentucky state workers as a result of the state having one of the country’s most underfunded pension funds.

U.S. News reports that the workers’ lawsuit says the firms and officials breached fiduciary duties by using high-risk, high-fee investments that yielded lackluster returns.


Kentucky’s public pension fund has nearly $16 billion in assets but a shortfall estimated by the lawsuit to be at least $27 billion.

The dreadful irony is that in 2001, it was fully funded with a $2 billion surplus, according to the suit.

However, it is now in danger of failing, with the largest of the plans having only 13.6 percent of the money it needs. The retirement and health benefits of 360,000 state workers, from police officers to janitors, depend on Kentucky’s pension fund.

The lawsuit in Franklin Circuit Court seeks damages from KKR Prisma, Blackstone Group and PAAMCO for losses on investments they recommended; Blackstone and KKR say in the report that the claim is baseless.

The suit also names several former or current Kentucky Retirement Systems officials as defendants.

Blackstone issued a statement saying, “The Blackstone fund referenced in the complaint delivered to the Kentucky Employees Retirement System positive returns outperforming relevant benchmarks,” while in a separate statement KKR said, “We take our fiduciary duty very seriously and believe that the allegations about our firm are meritless, misplaced and misleading.”

Attorney Ann Oldfather, one of the workers’ attorneys, is cited in the report saying that the system suffered major losses in the 2000s.

In desperation to make up shortfalls, Oldfather says in the report, retirement officials then invested $1.2 billion in 2011 in complex, high-fee, high-risk hedge funds that were also difficult to monitor.

She adds that lower-risk, simpler index fund investments would have been more suited for a pension fund.

In addition, the assumptions used by retirement officials on returns were faulty, and the officials failed to adequately communicate just how big the shortfalls were. That contributed, according to the lawsuit, to the state legislature then failing to provide sufficient funding.

http://www.wkyt.com/content/news/Ken...466898103.html

Quote:
Kentucky workers suing hedge funds to recover pension losses
Spoiler:
FRANKFORT, Ky. (AP) - A group of former and current public workers is suing three hedge funds for selling risky investments and overstating returns to the agency that manages Kentucky's struggling pension fund.

The lawsuit filed Wednesday seeks damages from hedge funds KKR Prisma, Blackstone and PAAMCO. The workers allege the funds sold "unsuitable 'black box' investments" in 2011 with massive fees to the Kentucky Retirement Systems, according to a summary of the 124-page lawsuit filed Wednesday in Franklin County Circuit Court.

Last year, the pension debt was a combined $21.7 billion across the five systems in the Kentucky Employee Retirement System.

The lawsuit says the KRS was fully funded in 2001 but after years of bad losses, the pension board trustees and their consultants decided to "take longshot gambles (in 2011) to try to catch up."

REFORM
http://www.richmondregister.com/news...ef362917c.html

Quote:
LOOK BACK 2017: The pension promise
Year's end sees employees looking at drastic changes; no special session on reform
Spoiler:
In the last few months, the Register has run myriad stories dealing with the state's pension woes. Stories about Gov. Matt Bevin's draft bill for pension reform, education groups rallying to push an alternative plan they say is better for teachers, studies on the pension plans, county and city employees retiring before any changes occur and local governments being told they will have to contribute more to the pension system all were featured in the Register's pages.

The pension issue has been voted by The Richmond Register staff as the second biggest story of 2017.

In his 2015 campaign to become Kentucky's governor, Matt Bevin held out pension reform as one of his top priorities, stating that without reform, the systems will fail.

Together, the eight pensions in the three major systems under the umbrella of the Kentucky Retirement Systems (KRS) have unfunded liabilities of between $34 billion and $60 billion, depending on which actuarial assumptions are used (the actuarial assumptions include estimates of much interest investments will earn).

In 2016, Bevin persuaded the legislature to appropriate $1.2 billion to the pension funds, the largest contribution ever and an amount larger than the annually required amount at that time.

This year, Bevin's push for reform of KRS, which oversees the pensions of more than 350,000 Kentuckians, escalated. The governor said he would call a special session of the Kentucky Legislature, which would cost $65,505 per day and require a minimum of five days to pass a bill, before the end of the year to enact reform of the pensions.

Turns out one outcome of the reforms could be that local governments will have to foot more of the contributions — a lot more.

As early as September, local governments across the state received a letter from Kentucky budget director John Chilton informing them they will have to pony up more — as much as 50 to 60 percent more — to go into the retirement systems.

At the same time local governments were facing the possibility of significant jumps in their retirement contributions, many faced the loss of employees.

News of pension reform on the horizon prompted many employees under the pensions eligible to retire to do so.

In August, two Richmond Police officers announced their retirements, citing pension concerns as the reason. That same month, two Richmond firefighters also announced their intent to retire, though Richmond Fire Chief Robert Carmichael said the firefighters did not cite pension concerns as their reasons for retiring.

In September, Madison County's county attorney of 19 years, Marc Robbins, announced his decision to retire at the end of the month, before the expiration of his current term and just over a year before he had planned to step down. Shortly after, circuit clerk Darlene Snyder, who had been in the circuit clerk's office in one role or another for almost 30 years, announced she would retire. Both said worry over changes to the pensions prompted the move.

In October, Bevin, House Speaker Jeff Hoover (who has since resigned as Speaker following accusations of sexual harassment), R-Jamestown, and Senate President Robert Stivers, R-Manchester, released a draft bill for pension reform that would eliminate pensions for future teachers and government employees and instead move them into a 401a, which is a mandatory defined contribution plan.

It would keep the current defined benefit plan for current employees and teachers but cap those benefits at 27 years, after which employees would be moved into the 401a plans. (Teachers who currently have 27 or more years of employment will be given a three-year window before being transferred into the new system.)

The plan will also freeze cost-of-living-adjustments for five years for retirees and require teachers to chip in an additional 3 percent of salary to help pay for their health insurance.

Later that month, Democratic Minority Leader Rep. Rocky Adkins, D-Sandy Hook, said he and his Democratic colleagues were hearing from many teachers who were unhappy with Bevin's draft bill, and said he had warned the governor to prepare for a mass exodus of teachers if the bill passes. As of late October, there were 11,400 teachers in Kentucky who were eligible to retire, Adkins said. Adkins added that shoring up the pensions could be done by closing some of the state's tax breaks and credits, called expenditures.

Worried about the effects of Bevin's proposal, Kentucky education groups devised their own plan they said is better for teachers. The groups held a press conference Nov. 6 to lay out their "shared responsibility" plan, which would maintain defined benefits plans for teachers. The groups' alternative plan leaves much of current and retired educators' benefits untouched, while creating a new tier of benefits for new employees who will be hired next summer and beyond.

Then, in early December came a report by PEW Charitable Trust, which advised legislators on steps to take to reform the state pensions in 2012 and 2013. The report stated the trust found the 2013 reforms will get the pensions on track within 20 years, provided the state continues to stay on the course charted in 2013. That year, Senate Bill 2 placed new hires into a hybrid cash balance plan, utilizing both 401(k) style savings as well as traditional defined contributions from the state, called for full annual funding of the system by the legislature, and limited future cost-of-living adjustments for beneficiaries. The report contradicts Bevin's assertion that the system will fail if additional changes aren’t enacted.

All the while, increased retirements of local government employees continued, including in Madison County.

In 2017, a total of 10 Madison County employees retired, though only Robbins specifically stated pension reform as the reason. That number is higher than the number of county employees who retired in the prior three years combined (a total of nine retired in the years 2014-2016). The 2017 retirees included six from the Madison County Fire Department.

In 2017, a total of 11 employees of the City of Richmond retired, including four firefighters and four police officers.

Now, 2017 is ending without a special session having been called, and the fate of the state's retirement systems in limbo. Whatever plans have been discussed and whatever deals have been made since Bevin's October draft bill have been kept from the public.

The Public Pension Oversight Board met Dec. 18 to receive an actuarial update from legislative staff on the current unfunded liabilities of the retirement systems.

During that meeting, no one on the board, which includes members of the Republican majority House and Senate, answered a question asking for information on the status of a proposal the House and Senate leaders have been working on. According to the presentation given by legislative staff at that meeting, the pensions will need an influx of around $1 billion more in the next two-year budget, on top of a similar appropriation in the current budget.

But the year didn't come to an end without the pensions' trouble making it to a Kentucky court. On Wednesday, eight former or current public employees filed a lawsuit in Franklin Circuit Court against three hedge funds, also naming as defendants several former or current Kentucky Retirement Systems board members, a former KRS chief investment officer and consulting firms that advised KRS.

The suit claims the hedge funds, KKR/Prisma, Blackstone and PAAMCO, violated their fiduciary duty by promising high rates of returns and charging high fees.

Lawmakers will have the chance to take up reform in general session, which convenes Jan. 2.

http://www.kentucky.com/opinion/op-e...192296359.html

Quote:
Finding common ground on Ky. pension reform

Spoiler:
It appears that any solution to the state pension crisis will be unacceptable to public employees and taxpayers with perhaps no winners.

Under the letter and spirit of the law, public workers are entitled to generous pension benefits that shouldn’t be renegotiated. It may appear that teachers and other public servants would have nothing to gain and a lot to lose in any pension reform.

However there are a few lurking dangers for anyone with a public pension. The legislature cannot easily dispense with promised pensions but can counter the pension’s realized benefits by halting cost of living increases (COLAs), taxing pensions like ordinary income and switching new employees to defined contribution plans.

Even without the legislature taking counter measures to lower the net costs of pension benefits, these pensions are at significant risk from inflationary spikes. Although the United States has experienced low, single-digit inflation since the early 1980’s, this trend may be bucked in the coming years.


If the U.S. were to experience double-digit inflation for even a few years this could effectively destroy a third of a pension’s lifetime value. The legislature is currently under no obligation to go above the 1.5 percent COLA.

A challenge to funding our public pensions is that the promised benefits are based on relatively high investment expectations that can only be achieved with a significant investment in volatile assets.

Furthermore pension benefits are based on the highest years’ earnings, which can be out of line with career earnings. Each of these pension designs invites trouble both at the micro level with benefit “spiking” and at the macro level with under-performing markets.

How can we move forward with uncertain investment performance and inflation risks? A guiding principle is that both the state and state workers should honor the letter and the spirit of the law. Kentucky should maintain a defined benefit retirement system for its workers with concessions made on both sides.

Workers should not be allowed to include any supplemental pay in their benefit calculations. An ideal system is that workers are immediately vested in the plan with contributions and benefits tied to each year’s salary, not a few high years. There are over 50,000 former teachers retirement system employees who didn’t work long enough to gain any retirement benefits.

Pension funds should invest in the Kentucky economy through Kentucky-based businesses and municipal projects. Fund performance could be tied to an index of growth in the state’s output. This hovers around 3 to 4 percent but is steady and, importantly, is part of what our state workers are impacting with their public work. Pension benefits could be tied to the Consumer Price Index to float with any high inflation episodes. State workers should have the opportunity for their pensions to grow if they do not take them at the earliest eligible age. This would allow teachers to stay in their current positions rather than having to find new jobs or retire early.

The combined impact of these policies would be that workers receive guaranteed pensions that are robust despite investment and inflation swings. This reworked system would require longer careers and likely some pension reductions.

The state would have a defined benefit plan that was synced with the state economy, eliminating investment risk and solvency issues. For those public employees who think the status quo is better, they could be grandfathered and take their chances that inflation doesn’t thrash their pension benefit.

Paul V. Hamilton is an associate professor of economics at Asbury University.

Kason Williams, 2, of Mount Vernon, Ky., held a sign reading "what about my future?" during a rally against the Republican proposal to reform the state's pension system at the state capitol in November.
http://kentuckytoday.com/stories/pen...awmakers,10938

Quote:
Pension, budget highlight busy session for lawmakers
Spoiler:
FRANKFORT, Ky. (KT) - Kentucky lawmakers have a full plate of issues to address when they return to Frankfort to convene the 2018 regular session on Tuesday.



At the top of the list is reforming the state’s eight public pension systems, which have a total unfunded liability of between $33 billion and $84 billion, depending on whose figures you use. Gov. Matt Bevin, accompanied by legislative leaders, rolled out a plan in October, ahead of a planned special session, which never materialized.


Those affected most by changes to the pension plans, particularly teachers and state employees, plan to hold rallies on the opening day of the session.


The Kentucky Association of State Employees sent out an advisory on their event, scheduled for the steps of the Capitol at 6 p.m. Tuesday, describing it as a “Torches and pitchforks ‘We are angry and we have had enough’ protest.” State, city and county workers, along with retirees, are expected to attend.


“We cannot afford to wait any longer,” said David Smith, executive director of KASE. “The legislators and the governor have a moral obligation to come out of the darkness with viable funding source solutions that will benefit workers and not Wall Street.”


He says KASE will be presenting, “radical solutions proposed by workers never heard before.”


Another daunting task facing lawmakers will be enacting a state budget for the next two fiscal years, starting on July 1, 2018. The State Budget Office issued a spending reduction plan late last week to resolve an anticipated $156 million shortfall during the current fiscal year. It includes a 1.3% cut by all state agencies in the Executive, Legislative and Judicial branches of government and the outlook does not get rosier in the near term.


“It won’t be pretty,” Bevin told reporters during a year-end press conference at the Capitol on Dec. 21. “Things that have been exempt are not necessarily going to remain exempt, because we can’t afford it. There are going to be cuts spread across things people think are sacrosanct.”


Potential new revenue sources could include expanded gaming or marijuana legalization, but the governor and legislative leaders have repeatedly said both are non-starters.


Kentucky’s adoption and foster care programs are also expected to get some attention from lawmakers in the 2018 session.


Bevin named Dan Dumas as the state’s adoption czar and he began his work in June, trying to reform the state’s process for adoptions and foster care.


The House also created a special task force on the issue, which made over a dozen recommendations in December. Rep. David Meade, R-Stanford, co-chair of the panel said, “These recommendations will be presented to Speaker Pro Tem David Osborne, and out of that we will begin to draft a bill.”


The state’s financial situation could affect how much goes up for consideration. “We’ve got some budget constraints,” said Osborne, R-Prospect. “So, I’m not sure what we’re going to be able to do. We’ll look into it and see what we can do.”


Sen. Dennis Parrett, D-Elizabethtown, has proposed legislation to permanently establish and fund a kinship care program in Kentucky.


A proposed constitutional amendment on crime victims’ rights may also be addressed during the session. Marsy’s Law, as it is known, is named after a California murder victim, whose mother saw her daughter’s accused killer in the grocery store a week after her death.


In addition to California, the measure has also been approved by voters in Ohio, Illinois, Montana, North Dakota and South Dakota, and efforts have been launched in at least nine more states.


Sen. Whitney Westerfield, R-Hopkinsville, was primary sponsor of Marsy’s Law legislation in 2017, but SB 15 did not reach the Senate floor. Still, he plans to sponsor it again in 2018, although nothing has been proposed at this point.


“This is necessary, commonsense legislation with widespread support from all across Kentucky,” Westerfield said. “Just as the accused have important, protected rights, victims also deserve to be given consideration and dignity in the judicial process. Our northern neighbors in Ohio overwhelmingly supported and passed Marsy’s Law this year, and it’s time we do the same.”


The messengers at the Kentucky Baptist Convention gave an endorsement to Marsy’s Law at its annual meeting in November.


Westerfield says concerns expressed in other states, including fears of becoming an unfunded mandate for local governments, “Have been addressed in our own draft during a couple years of stakeholder review and scrutiny.”


The 2018 session also has one big unknown, at least in the early days: the effect of a sexual harassment scandal in the House where this fall four members settled allegations by a former staffer. It led to the resignation of Rep. Jeff Hoover, R-Jamestown, as Speaker, and the ascension of Osborne to the top position in the chamber.


Leadership of the House Republican caucus said earlier this month there will not be an election to replace Hoover as Speaker when lawmakers convene.


A statement was issued by Osborne; Majority Leader Jonathan Shell, R-Lancaster; Majority Whip Kevin Bratcher, R-Louisville; and Majority Caucus Chair David Meade, R-Stanford: "After meeting as a Republican caucus and consulting with attorneys regarding the Kentucky Constitution and the Rules of the Kentucky House of Representatives, we have determined as a caucus that the House will operate as is when the General Assembly next gavels into session," the statement read.


"As such, David Osborne will remain acting speaker of the House, and the rest of the Republican leadership team will remain in their positions. We believe this is what the Constitution and Rules of the House provide as a remedy for the situation in which we find ourselves.”


The 2018 General Assembly will meet for 60 legislative days, not counting holidays and weekends, and is scheduled to adjourn on April 13.

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Old 01-02-2018, 09:45 AM
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NEBRASKA
STATE TROOPERS
http://www.omaha.com/news/nebraska/a...3a2b9ac74.html

Quote:
As legal battle drags into 7th year, troopers say they overpaid $12 million
Spoiler:
LINCOLN — A six-year legal battle between the state and 400 current and former Nebraska state troopers now has another big number attached to it: $12 million.

That’s roughly how much the troopers say they were overcharged for pension contributions between 2008 and 2016. The troopers have been pursuing a series of lawsuits since 2011 to recoup those funds and end what they consider an unconstitutional breach of contract by the state.

“We want an equitable resolution,” said Trooper Kurt Frazey, legislative liaison for the State Troopers Association of Nebraska. “We’d rather not go to trial. At the end of the day, we’re all taxpayers.”

At stake is the Nebraska Legislature’s ability to adjust pension contribution rates by troopers, which is allowed under state law, said Mark Laughlin, the Omaha attorney hired to defend the state.

“Their attempts years later to keep all their benefits without paying what was clearly required under Nebraska statutes is both unfair and contrary to Nebraska law,” he said.

The legal team for the troopers has twice fought off attempts by the state to have the lawsuits tossed out. But with several important legal questions yet to be decided, no end is in sight as the litigation heads for a seventh year.

The issue also has commanded the attention of State Sen. Mark Kolterman of Seward, the chairman of the Legislature’s Retirement Systems Committee, which provides oversight of the patrol’s nearly $400 million retirement plan.

“We’re watching it closely because the outcome could have a significant impact on the plan,” Kolterman said.

It’s far from the first legal dispute over the retirement pension plan for state troopers. Prior lawsuits, however, have centered on the benefits paid to troopers. This one involves contributions made by them.

Lawmakers established the plan in 1947 because “the Highway Patrol has performed good service to the state and ... salaries were not large enough to hold men for a long enough period of time,” according to the legislative history cited by Lancaster County District Judge Susan Strong in her 2016 order allowing the lawsuits to continue.

The law requires troopers to contribute a set percentage of their salaries to the plan, which also is funded by contributions from the state and returns on investment.

Lawmakers initially required the state to withhold 5 percent of each trooper’s paycheck, not to exceed $15 per month. But the law also stated that a trooper’s contributions “may be increased from time to time to ensure the actuarial soundness of the retirement fund,” the judge said.

By 1969, the pensions were underfunded because the state had failed to keep up with contributions. So lawmakers increased the troopers’ contribution to 7 percent. While the Legislature dropped the language that reserved the state’s right to increase trooper rates, the state has continued to do so. The senators also added a clause requiring the state to cover the plan’s unfunded liabilities going forward.

Over time, the pension system grew until it had $12.5 million more in assets than in liabilities. Then, in 1993, the Legislature reduced the minimum retirement age for troopers to 50, as long as the officers had at least 25 years of service. It was a change the trooper’s union lobbied to obtain.

An increase in early retirements in 1994 was one of several factors that led to a projected long-term shortfall in the pension plan, the judge said. That same year, the Legislature increased the contribution rate, which was at 8 percent, to 10 percent.

Between 1994 and 2011, the rates were increased six more times until they peaked at 19 percent. In 2013, they were reduced to their current level of 16 percent.

Despite hikes in trooper contributions, the plan currently has an unfunded liability of nearly $70 million, according to a recent report on the state’s pension plans. That puts the plan at 85 percent of full funding.

The judge said the legislative history shows a lobbyist for the trooper’s union testified that union members would support contribution rate increases. Their support was tied to the early retirement benefit approved by the Legislature two years earlier, the lobbyist said. No similar testimony by a union leader appears in the official record, the judge noted.
One of the fundamental arguments made by the troopers in their lawsuit is that they have a contractual right to their pensions, which includes paying the same contribution rate as when they were hired. They argue that any increase in their contribution must be accompanied by an increase in benefits, which they contend has not been done through the years.

In arguing for dismissal of the lawsuits, the state’s lawyers said that lawmakers did not “unmistakably” say that the troopers’ contribution rates could never be changed.

Lawyers with Fraser Stryker in Omaha — hired because of a conflict of interest with the Attorney General’s Office — cited a 1995 ruling by the Nebraska Supreme Court that said a state law is a policy that can change or even be repealed, making it unlike a binding contract. Only unmistakable language in the law can bind the state contractually, the court ruled.

The troopers’ legal team with Keating O’Gara Law in Lincoln cited a different Supreme Court decision, from 1982, that involved a member of the patrol suing over the pension plan. The court ruled in that case that pensions are a type of deferred compensation that constitute contracts between public employers and their employees.

The Supreme Court also said it must be determined whether changes to a pension plan “impair the employee” and whether such impairment violates the Constitution. To comply with the Constitution, the state must show that any changes are “reasonable and necessary to serve an important public purpose.”

Judge Strong ruled that the troopers have established a contractual right to the pension contribution rate in effect on their hiring date. As a result, she rejected the state’s motion for summary judgment. What now needs to be decided through further litigation is whether the Legislature’s increases in the contribution rates have “impaired” the troopers’ vested pension rights.

“And if so, whether those modifications were reasonable and necessary or accompanied by comparable benefits,” the judge added.

The case currently is in the discovery phase, during which lawyers exchange information. No trial date has been scheduled.

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Old 01-02-2018, 09:46 AM
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NEW MEXICO
http://www.santafenewmexican.com/new...e99aca8eb.html
Quote:
State holds trove in pensions, investments

Spoiler:
Thanks to the steady climb in world stock markets, New Mexico pension fund and investment managers are now sitting on an asset trove larger than many developing countries.

As of Sept. 30, the public pension and endowments funds in New Mexico reached almost $50 billion, and that number is surely higher today as the stock market climbed another 6 percent in the last quarter of 2017.

Taken together, the assets are larger than many reserve funds in the countries of New Zealand, Chile, Ireland, Peru, Malaysia and Brunei, according to the Sovereign Wealth Fund Institute, which keeps track of such things.

With that growth comes more scrutiny and more demand for transparency than ever before. Perhaps for the first time, lawmakers and others are asking questions about where the money is going and how much is paid in fees.

In the last fiscal year, for instance, the funds paid out a combined $475 million in management and performance fees to investment firms and consultants, most of whom are outside New Mexico. Whether all of this money was well spent remains open to debate. Fund managers are being asked to justify these costs, which is a very good thing.

To say there is $50 billion sitting in one pot is not accurate. In reality, there are several pension and investment funds in the state each with independent boards, investment strategies and fiduciary obligations.

The two large state pension funds, for instance, do not necessarily have a mandate to build assets, but to ensure solvency so future generations of teachers, judges, law enforcement officers and state employees will receive the retirement distributions promised. Making money in stocks, bonds and mutual funds is one of the paths to achieve that goal.

The appointed State Investment Council is charged with managing the two so-called permanent funds, the Land Grant Permanent Fund and the Severance Tax Permanent Fund. The total assets of both funds now stands at $23 billion, up from $15 billion in 2008.

The value of the four largest funds in the state — the two permanent funds and the two pension funds — has grown by $12.6 billion, a 34 percent gain over the past five years, according to the Legislative Finance Committee.

In the last half of 2017, for instance, the SIC managers as well as board members and managers from the Education Retirement Board and the Public Employees Retirement Association went on informational visits around the state and have been answering more questions about their funds from the public and the media.

There also are fund reports and web dashboards. The Legislative Finance Committee also publishes a one-stop summary of all the state investments and how they fared, as well as what they spent on fees and how those fees compare to industry norms.

Here is a primer on the four largest state investment funds:

u The Land Grant Permanent Fund, with assets over $17 billion, was created as a way to preserve the gift of land granted to New Mexico when it became a state. The money generated from these lands and associated minerals were designated to benefit specific schools and universities as well as the general state government operations.

u The Severance Tax Permanent Fund, with assets over $5 billion, was originally used to repay bonds for capital projects from taxes on natural resources, largely oil and gas. But when there was excess money above and beyond the repayments starting in 1973, the Legislature created the fund to invest the balance of the dollars.

Distributions from both pots of money have certain restrictions and are set by law with a portion going to pay for day-to-day government operations, but the bulk reserved for future generations when there are no more natural resources to tax. In the most recent year, some 14.7 percent of the $6 billion general fund came from these endowments.

u The Public Employee Retirement Association of New Mexico is actually an umbrella association that manages 31 retirement plans for state city and county employees, including police, firefighters, judges, legislators and as well as special districts and housing authorities. The fund now has assets of over $15 billion, and has grown more than 9 percent over the year as well as paying out a $1 billion a year in benefits to 39,000 retirees.

u The Educational Retire-ment Board has assets of almost $13 billion and is paying benefits to 46,000 retirees, teachers, administrators, college faculty and staff.

By objective measures, the funds have done relatively well in the short term, but have lagged similar public funds from other states over a 10-year period.

According to the LFC report, only the ERB is near the average of its peers over the past 10 years while PERA and the Severance Tax Fund are at the bottom 10 percent in terms of performance.

PERA managers say they have a lower return because they are less invested in equities, a policy its board has adopted to sooth volatility and it doesn’t anticipate changes.

As far as fees go, there is also a wide range of formulas for reimbursements and the numbers are now more accessible to the public.

In fiscal year 2017, for instance, the LFC reports:

u The SIC paid $135 million in management fees for both funds (56 basis points) and $76.7 million in performance fees.

u ERB paid $99 million in management fees (65 basis points) and $63 million in performance fees.

u PERA paid $68 million in management fees (41 basis points) and $34 million in performance fees.

The ERB has paid special attention to the fees it pays and has switched to a more passive investment style, even taking the management of some domestic bond and equity portfolios in house to manage with its own employees instead of paying Wall Street firms.

PERA has also moved to more passive equity funds in some cases and worked to reduce what it pays for management as well as holding its advisers more accountable for returns.

Many argue there is still more to be done, and that some of the funds are being just too smart, holding specialty investments like land , timber, currencies that are expensive to manage and not easy to trade. The SIC also places money in startup businesses in exchange for equity in those firms, which is paid back when a firm goes public or gets sold.

Can a fund that holds $10 billion or $20 billion just lock in passive index funds or set an allocation of 70 percent stocks and 30 percent bonds? Those are the questions raised and answered at recent legislative hearings

The real question it seems after 2017 is not how best to pile into the winners, but how to take money off the table and reduce exposure to volatile equities. Those who look at long-term returns say avoiding bad years with big losses is more important for performance than getting in on the gains.

The more you have invested, the more you lose — and it can be a long way back if the $50 billion now held by state pension and endowment funds were to drop 20 percent to 30 percent.

And faster than you can say, “Hey, can you tell me again how Bitcoin works,” that drop will come.

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