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  #1181  
Old 06-16-2019, 04:29 PM
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Mary Pat Campbell
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SWEDEN
ESG
DIVESTMENT

https://www.ai-cio.com/news/third-sw...cco-companies/

Quote:
Third Swedish Pension Plan Divests from Nukes and Tobacco Companies
AP2ís decision sees it keeping up with new laws, sister funds AP1 and AP4.


Spoiler:
Pension giant AP2 may have arrived late to the Swedish pension fund tobacco and nuclear divestment party, but itís working hard to catch up and is dumping those assets, too.

The $36.9 billion retirement fund cut 60 tobacco companies and businesses involved in the nuclear weapons industry from its asset mix. A new Swedish law, passed last year, requires the pension funds to invest with sustainability in mind.

AP2 removed tobacco stocks in hopes of encouraging smokers to quit. Nukes are out, in keeping with the UNís Non-Proliferation Treaty, which aims for the complete nuclear disarmament.

The Gothenburg-based pension organization is revaluating its portfolio in line with recent legislation and its own sustainability goals, it said Tuesday. These exclusionary decisions are similar to those of sister plans AP1 and AP4, which in January removed stocks not in accordance with environmental, social, and governance (ESG) principles.

The fundís asset mix as of December 31 was 42% equities, 34% fixed income securities, 11% real estate, 5% private equity, 3% alternative risk premiums, 2% alternative credits, 2% China A-shares, and 1% Chinese government bonds.

Of those assets, 83% are managed internally.

AP2 was unable to be reached for comment.

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  #1182  
Old 06-16-2019, 09:13 PM
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ILLINOIS

https://chicagocitywire.com/stories/...-in-retirement

Quote:
Former state university employee Dowell paid in $78K to pension fund, could collect $1.6M in retirement

Spoiler:
Former state university employee Belvie Dowell, who retired in April 2019, saved $77,947 toward a pension over 27 years working for state universities, State Universities Retirement System of Illinois records show.

Over 30 years of retirement, Dowell would collect as much as $1.6 million, according to a projection by Local Government Information Services (LGIS), which publishes Chicago City Wire.

The projection assumes Dowell received $33,540 in the first year of retirement, then 3 percent annual increases thereafter, compounded.

After 3 years of retirement, Dowell will have already received $103,668 in retirement benefits, or more than the sum total of the retiree's contributions to the state pension fund.


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  #1183  
Old 06-16-2019, 09:13 PM
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NEW YORK
DIVESTMENT
ESG

https://buffalonews.com/2019/06/09/a...e-to-politics/

Quote:
Another Voice: State pension funds shouldn't be captive to politics

Spoiler:
The politicization of pensions continues plaguing our state. In a misguided effort to fight climate change, State Sen. Liz Krueger introduced Senate bill 2126, the Fossil Fuel Divestment Act, earlier this year.

This prompted an open letter from New York Comptroller Thomas DiNapoli, urging Krueger to reconsider this legislation on the basis that it limits his fiduciary responsibility to manage the state pension funds for the sole interest of its beneficiaries. DiNapoli is right – and the Legislature shouldn’t limit his ability to do his job.

As a lifelong New Yorker and retired officer of the Fire Department of New York, I believe in empowering fiduciaries to make the best decisions for the funds without the influence of politics. By cutting investments that have generated more than $4 billion over the past decade, the Senate bill would force DiNapoli to abdicate his fiduciary responsibility, which stands independent of political and social opinions.

During an April 2019 hearing on the bill, New York State Common Retirement Fund’s interim chief investment officer, Anastasia Titarchuk, explained the benefits of the fund having a strong diversification strategy – which also includes $10 billion in its sustainable investment program. She called divestment a “blunt instrument that does not actually address the greatest [climate change] risks … ”

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New York job opportunities will also suffer if the state divests. In 2018, the fossil fuel sector grew by 4.9% and is projected to grow another 3% in 2019. New York could see economic gains between $2.6 and $5 billion from liquefied natural gas exports alone.

Beyond divestment posing a threat to New York’s workforce and retirees, it hasn’t been proved that it fights climate change. An issue brief from the Institute for Pension Fund Integrity (for which I am an advisory board member) explores this topic, showing that divestment doesn’t necessarily force a company to change its actions.

Pension funds have begun to realize that the costs of divestment are not worth the political statement. Recently, New York City police and fire pension funds opted against participating in Mayor Bill de Blasio and City Comptroller Scott Stringer’s divestment plans. And CalPERS voted to oppose legislation which would require divestment from private prison companies.

New York must recognize the futility of divestment and its ineffectiveness for urging change. It only hurts retirees and local economies. Fellow pensioners, retirees and taxpayers must demand separation between political opinions and public pension management. Politicians should not jeopardize our hard-earned retirement and a healthy economy because of a political agenda.


https://www.ai-cio.com/news/new-york...s-esg-funding/
Quote:
New York Comptroller Aims to Double Pension Plan’s ESG Funding
DiNapoli seeks to increase the state Common Retirement Fund’s sustainable investments to $20 billion.


Spoiler:
New York State Comptroller Thomas P. DiNapoli pledges to double the New York State Common Retirement Fund’s sustainable investments.

That will bring the pension program’s environmental, social, and governance (ESG)investments to $20 billion over the next decade.

To aid in that effort, he will next create a multi-asset climate solutions program, which will operate similarly to its emerging manager program. It will work with managers, consultants, and index providers on creating alignment with the fund’s sustainability goals.

The fund intends to better assess its exposure to climate-heavy risk sectors recommended by the Task Force on Climate-related Financial Disclosures. These include energy and utilities, transportation, materials and buildings, agriculture, food and forest products, and financials.

Also, the fund will also create new evaluation tools, hire ESG-centric staff, and help managers, data and index providers, and consultants in meeting asset class-specific metrics and its own standards for companies in each high-risk sector, starting with thermal coal.

“The Fund has taken many steps to assess and address climate risk already, but clearly more must be done and done quickly,” he said. “This is a proactive plan to mitigate climate risk, capitalize on opportunities in the growing low-carbon economy and protect the fund’s long-term value.”

His new initiative allows the fund to divest from companies that fail to meet minimum standards set by the $210.2 billion pension plan. The strategy, which piggyback the Decarbonization Advisory Panel’s April findings, will now also seek to eliminate thermal coal and other sectors with climate-related issues where it has invested.

The panel was created by DiNaopli and Gov. Andrew Cuomo.

In addition, DiNapoli will establish a “watch list” of managers not hip to the fund’s ESG policy. New York Common will also develop eco-friendly strategies for businesses it is vested in that do not incorporate the best sustainability practices.

“The Panel delivered its ambitious recommendations in early April 2019, and in response, I directed staff to build on the Fund’s existing work by formulating this bold Climate Action Plan to put the CRF on the path to achieving a sustainable portfolio,” wrote DiNapoli in the strategy’s outline, which he said is the Common Retirement Fund’s “next level of climate-related assessment, investment, engagement and advocacy work.”

https://www.timesunion.com/opinion/a...y-13966589.php
Quote:
Letter: Challenge validity of pension study

Spoiler:
In response to Daniel C. Levler's commentary "Divestment will hurt economic security of pensioners," May 17, on the risk in divesting pension funds from fossil fuels, the validity of the study sponsored by the Suffolk County Association of Municipal Employees must be challenged.


Presenting an assessment of fund risk by comparing the performance of a set of fossil fuel assets against comparable "green" assets assumes a "business as usual" foundation for data analysis that in no way represents the current situation.

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If the Intergovernmental Panel on Climate Change's deadlines for avoiding climate chaos are to be met, the demise of the one-product fossil fuel industry is certain and imminent. The industry's near-term value may vary, but the risk for pension funds is in the consistently growing awareness of the certainty of the end for carbon fuels (see coal).

The pressure of this awareness may lead to a sudden collapse in asset prices. This prospect is not "business as usual" and its timing is unpredictable. Managing pension fund shifts to maximize value is a slow process, making a sudden change an unmanageable risk. Getting state funds away from this anomaly is what makes sense. They don't have to be moved into "green" assets, but green is growing fast and at least has a future, especially in New York.

John Ingram

New York City

350 NYC and Divest New York State coalition


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  #1184  
Old 06-16-2019, 09:17 PM
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Mary Pat Campbell
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NEW MEXICO

https://www.ai-cio.com/news/new-mexi...rity-strategy/

Quote:
New Mexico PERA Launches Passive Risk Parity Strategy
Plan seeks to change up multi-risk allocations, boost beta exposure.


Spoiler:
The New Mexico Public Employee Retirement System (PERA) has implemented a new risk parity strategy, taking the investment option in a more passive direction.

The index-based approach is part of the $15.4 billion fund’s plans, adopted by the board last July, to reconfigure its strategic asset allocation.

The plan specifically targets the multi-risk allocation strategy, which is new to it. This is comprised mostly of risk parity-type strategies, which aim to protect assets against financial threats such as inflation. It is also referred to as the “all weather” tactic, coined by Bridgewater Associates’ Ray Dalio.

“We were careful in our process,” said Kristin Varela, the fund’s deputy chief investment officer. She said the PERA wanted to create a plan that aligned with its goals to split alpha and beta exposure, as well as “prudently budget active risk.”

Varela told CIO the strategy has the potential to “normalize” the fund’s risk parity as the PERA can now passively implement its beta exposure into a low-cost and transparent vehicle. She also said the new index will help manage mitigate tracking errors associated with risk parity, as it doesn’t have a specified benchmark.

The reason: the decade-old strategy is fairly new to the investment world and has yet to achieve widespread adoption, according to Wilshire Analytics Managing Director Robert Waid. He told CIO previous benchmarking concepts saw pension funds using either equity-based indexes such as the S&P 500, traditional 60/40 portfolios, or a multi-asset peer group process. “None of those were really risk parity implementations that were investable,” said Waid.

New Mexico’s plans look to change that. “They didn’t want their active risk budget being consumed by a beta strategy,” Roberto Croce, Mellon’s managing director and senior portfolio manager, charged with running the passive risk parity operation, told CIO. “They really believe in the separation of active risk and alpha and that all active risk should be devoted to generating alpha and that all beta should live within its risk allocation with very little tracking error.”

“Identifying a viable index to integrate into policy was very important for us,” said Varela. “We recognized the inefficiencies in indexing such strategies and believed there could be a more robust solution available.”

How it Works

The initial allocations to the PERA’s new concept will be about 10% of the plan’s total portfolio. It will consider these assets as part of its beta exposure. Consultant Wilshire Associates assisted the New Mexico pension plan in finding the right index, which the PERA specified be low-cost.

Talks with Wilshire first began last summer, according to Jeff Foley, Wilshire Analytics’ head of business operations and managing director. The fund’s parity index splits risk equally into stocks, bonds, and commodities while targeting a 15% volatility. This allows each bucket to hedge against and perform with the others.

Foley told CIO that when New Mexico decided it would indeed invest in risk parity, the question was whether to go active or passive. He said when the fund looked at the available options for passive risk parity, they realized how limited the space really was. Once it hired Mellon Investment Corp. to implement the strategy, that got the ball rolling for Wilshire’s index construction.

“When we were contacted by New Mexico PERA and Mellon about the idea of creating an investable risk parity index, it was a great opportunity to take something we had interest in for quite some time and turn it into something we could put out in the market,” Foley said.

Wilshire didn’t just make one risk parity index, though. They made two more, each with different volatility targets: 10% and 12%, but the firm is open to making more down the road.

“A year from now or two years from now depending on the environment, the world may be clamoring for an 8% volatility target,” Foley said. “If that’s the case, we would do that.”

Croce runs all the risk parity strategies at Mellon, so when the firm asked him to handle the New Mexico plan’s passive idea, he jumped at the chance. “It basically asked…would we be willing to run a passive risk parity strategy,” he said. “Our response to that was: yes.”

Croce said it was essential the plan’s new strategy to keep the same value-added properties of risk parity: diversification, growth and inflation balance, and consistent delivery on targeted levels of risk.

“If you target 10% volatility, you realize something close to 10% volatility,” he said. “That’s something we’re adamant about because if we’re not generating the amount of risk that you’re targeting, you’re also not going to generate the amount of return that the investors have in terms of their expectations.”

Wilshire said it is in talks with other large pension plans that either currently have an active implementation and are considering shifting to passive risk-parity options, or, like the New Mexico PERA, have no risk parity allocations and want to get their feet wet.

“We’re excited about the opportunity set and really being able to bring a very robust option to a market that has a limited set of options,” said Foley.

Dominic Garcia, the New Mexico PERA’s chief investment officer, declined to comment.



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  #1185  
Old 06-16-2019, 09:18 PM
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CONNECTICUT
UNIVERSITY OF CONNECTICUT

https://ctmirror.org/2019/06/11/ucon...-in-state-aid/

Quote:
UConn balances books despite big gaps in state aid

Spoiler:
A key University of Connecticut panel Tuesday endorsed new main campus and health center budgets that preserve programs while managing significant shortfalls caused by state government’s huge, unfunded pension liabilities.

The Financial Affairs Committee unanimously recommended a $1.33 billion budget for the main campus in Storrs and for the satellite campuses, as well as a $1.13 billion budget for the Farmington-based health center.

Tuition and fee hikes under previously approved schedules would go forward under the budget plan, but no supplemental increases would be needed.

The full Board of Trustees tentatively is scheduled to vote on the plans on June 26.

“Our core business is so strong, so good,” said Trustee Andy Bessette, chairman of the Financial Affairs Committee, referring to the academic, research and other programs as well as operations at John Dempsey Hospital, which is part of the health center.

Bessette acknowledged that the ongoing shift of pension expenses from state government onto its flagship university is a growing challenge. “But are we affecting the quality of the product on campus?” he added. “The answer is no.”


University of Connecticut Board of Trustees Interim Chairman Tom Ritter (right) and Trustee Andy Bessette

Over the past decade, governors and state legislatures increasingly have struggled with surging costs tied to pension pledged to state employees and to municipal teachers.

Connecticut has more than $50 billion in unfunded liabilities associated with two main pension funds and its retirement health care program for state employees.

This problem reflects decades of inadequate savings ordered by governors and legislatures, chiefly between 1939 and 2010.

For every $1 in salary paid to state employees, Connecticut spends 64.3 cents on retirement benefits. And of those 64.3 cents, 9.7 cents goes toward saving for present-day workers’ retirement benefits and 54.6 cents covers the fiscal sins of the past.

These legacy costs aren’t extracted directly from most state agency budgets.

But public colleges and universities are handled differently. The state gives them a block grant for operating costs, and additional assistance to cover only some of their fringe benefit costs. And as the state’s pension costs have exploded, higher education’s funding has slowed.

That means UConn’s main and satellite campuses would run a $11.4 million surplus next year if the university’s fringe benefit assistance wasn’t discounted to help the state with its pension debt problem.

State government reduced fringe benefit funding to the university by $31 million. This turns an $11.4 million budget surplus into a $19.6 million potential shortfall.

Scott Jordan, UConn’s chief financial officer, said the 1.5 percent gap likely would be closed through reduced hirings and other efficiencies, and by drawing on the university’s fund balance not designated for special projects.

“UConn’s core functions … are fiscally sound and healthy,” he said.

Hartford HealthCare - Men - Week 16 - 728 x 250 Black
Several years ago the trustees approved a schedule of tuition and fee hikes for each fiscal year between 2017 and 2020. The last increase of those four would take effect, as planned, in the new budget.


JACQUELINE RABE THOMAS :: CTMIRROR.ORG

Scott Jordan, chief financial officer of UConn.

For a Connecticut resident living on campus, tuition and mandatory fees would rise from $28,604 to $30,484.

For out-of-state students living on campus, tuition and mandatory fees would rise from $50,972 to $53,152.

But Jordan also sounded two notes of caution.

The new budget, which grows spending 4 percent, does include a modest amount of new hiring. But the university has compensated for shortcomings in state fringe benefit funding by trimming departmental spending in each of the past three years.

And Jordan said he believes that while this has not harmed core programs to date, it is not a long-term solution.

“Remember, UConn’s resources are really students’ resources,” he said.

Jordan’s second note of caution is that the fringe benefit problem has the potential to worsen down the road.

A preliminary forecast of likely UConn costs and revenues shows the gap widening from $19.6 million in the upcoming fiscal year to $122.3 million by 2024.

Former state House Speaker Tom Ritter, who is interim chairman of the Board of Trustees, said UConn must remain vigilant, but added he’s pleased with the concern Gov. Ned Lamont and the current legislature have demonstrated on this issue.

“I think everybody understands,” he said. “They have been attentive. And we have terrific people in our government relations department.”

Bessette said he also is optimistic the new governor and legislature are prepared to work with UConn year after year to ensure this challenge doesn’t harm vital programs. “It’s a never-ending partnership,” he said.

The legislature formed a special working group this year to analyze the long-term impacts of the fringe benefit funding on public colleges and universities.

And the $1.13 billion budget recommended for the upcoming fiscal year for the health center would have faced a $55 million potential deficit had not Lamont and legislators agreed to a last-minute funding boost of $33.2 million.

UConn Health Center officials further whittled that deficit down to $7.1 million by scaling back spending on equipment and other capital purchases.

Dr. Andrew Agwunobi, the chief executive officer of the health center, said the remaining $7.1 million deficit would be closed with other efficiencies to be achieved throughout the upcoming fiscal year.

Similar to the budget for the main campus, the health center plan would incorporate a previously approved tuition and fee hike, but no supplemental increases are ordered to deal with the gap in state funding.

For the school of dental medicine, tuition and mandatory fees would rise as follows:

For a Connecticut resident, from $37,137 to $38,437.
For a resident of another New England state, from $63,086 to $65,294.
For other out-of-state residents, from $74,891 to $76,191.
For the school of medicine, tuition and mandatory fees would rise as follows:

For a Connecticut resident, from $40,092 to $41,495.
For a resident of another New England state, from $67,791 to $70,434.
For other out-of-state residents, from $74,172 to $75,575.

https://www.courant.com/opinion/lett...63a-story.html
Quote:
UConn’s pension predicament

Spoiler:
It hurt to read that “UConn faces a $19.6M hole driven by pension costs: School to close deficits by reducing hiring, finding efficiencies” [Page A1, June 12].

This wonderful university and its students should not be penalized by a state that took its employees’ pension contributions from the 1930s to the 1970s and rolled this money into the general fund and spent it.


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These contributions should have gone into a pension fund where investments would have grown and the state would have avoided the current financial crisis. This crisis can best be solved by raising state income taxes on those who can afford it. Some wealthy people have offered to pay more; now it is time for the middle class to step up and pay more, too. Please raise my taxes!

My UConn Ph.D. earned me the opportunity to do research in a Boston-area industrial laboratory. Years later I returned to UConn to teach and continue research. The state pension was an important factor in my accepting the UConn position.

Do I live well? Yes, but not nearly as well as my colleagues who remained in industry. I took a serious pay cut to come to UConn, and on retirement my final paycheck, corrected for 37 years of inflation, was less than I started with in industry.

I worked harder for UConn than I ever did in industry. While not the driving force for these efforts, knowing that my pension was there for me and my family helped to keep me at UConn.

Quentin Kessel, Storrs


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  #1186  
Old 06-16-2019, 09:22 PM
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LOYALTON, CALIFORNIA
CALPERS
BENEFIT CUTS

https://www.sacbee.com/news/politics...231408658.html

Quote:
California retirees’ pensions restored — at least partially — after CalPERS cuts

Spoiler:
The Sierra County town of Loyalton has reached a settlement agreement with three retired city workers who sued the town and CalPERS after CalPERS reduced the retirees’ pension checks.

The terms of the agreement are confidential, including when it was reached, but the 706-person town will pay at least a portion of what it owes the retirees, their attorney said.

“Loyalton will pay certain retirement benefits to plaintiffs as part of the settlement,” Seth Wiener, the San Ramon-based attorney representing the retirees, said in a statement.

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The California Public Employees’ Retirement System reduced the retirees’ checks in November 2016 after Loyalton stopped making required payments to the fund.

Like hundreds of other local governments in the state, Loyalton paid CalPERS to administer its workers’ pensions. CalPERS invests the payments and disburses benefits.


After Loyalton stopped making periodic payments in 2013, CalPERS told the town it would have to pay about $1.7 million to ensure the fund could keep paying the retirees’ pensions in full.

Loyalton didn’t pay, so CalPERS reduced the retirees’ benefits. For a while, the town paid the difference — about $5,000 per month — but then stopped at the end of 2017. So John Cussins, Patsy Jardin and Donald Yegge sued.

They initially named CalPERS in the lawsuit but the $360 billion fund was quickly dropped from it.

“CalPERS was dismissed from the lawsuit and we are pleased that the parties were able to work out their differences,” the fund said in a statement Monday.

The decision to trim Loyalton pensions affected only a handful of retirees, but it startled CalPERS members around the state because it marked the first time that CalPERS cut a former government worker’s pension.

CalPERS again reduced pensions a few months later, in March 2017, for nearly 200 former employees of a defunct job training agency that had been backed by four cities in Los Angeles County. That organization also quit making payments to CalPERS.

CalPERS members expressed anxiety about the benefit cuts in the pension fund’s 2017 survey. It showed declining confidence in CalPERS, particularly among local government executives.


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Old 06-16-2019, 09:23 PM
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KENTUCKY

https://www.wlky.com/article/gov-mat...pport/27930537
Quote:
Gov. Matt Bevin emails lawmakers searching for pension bill plan support

Spoiler:
Gov. Matt Bevin is still looking for support from state lawmakers for his proposed pension bill.

In an email obtained by WLKY, Bevin's deputy chief of staff Bryan Sunderland directly asks members to reply so they can get an accurate count of who supports the bill.


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"On behalf of Governor Bevin, I am asking you to respond affirmatively to this communication if you are willing to support this bill with only the changes noted above in a special session before our universities and quasi-government groups face a significant pension increase on July 1, 2019," the email read.

"Please respond directly to this email as soon as possible that you will support or oppose the bill as drafted. A simple “yes, I support” or “no, I oppose” response is sufficient. If we do not hear from you, we will assume that you are a nay vote."

The governor wants to call a special legislative session before July 1, when regional universities and other partial governmental agencies will be on the hook for additional pension expenses.

The email leaves the option for open for further work on the issue during next year's regular session.

Top Republicans in the General Assembly have said there is not enough support for the governor's plan.

Follow this story to get instant e-mail alerts from WLKY on the latest developments and related topics.

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Old 06-16-2019, 09:24 PM
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https://www.governing.com/gov-instit...-virginia.html

Quote:
How Not to Reform Teacher Pensions
West Virginia's experience offers lessons in what states can do to provide retirement systems that benefit educators and taxpayers alike.

Spoiler:
Nationally, increases in teachers' pension and post-retirement health care costs are outpacing growth in overall spending for K-12 education. Pensions are driving most of the problem. Many state leaders know this, but they aren't always willing to do the difficult work of reforming their teacher retirement systems. And they've been unnecessarily scared by critics who insist that moving away from a traditional defined-benefit pension system is a disaster for teachers.

Those skeptical of pension reform often point to Alaska, Michigan and West Virginia as case studies in the failures of changing existing defined-benefit pensions. (When Kentucky and Missouri recently began talking about reform, for example, West Virginia's experience was immediately brought up as a cautionary tale.) But these three states offer concrete lessons about how to approach pension reform responsibly, and to the benefit of both teachers and taxpayers. Legislators and governors who want to make a real, long-term difference on teacher compensation should take heed, giving particular attention to what happened in West Virginia.

In the early 1990s, faced with mounting cost pressures, West Virginia's legislature closed its traditional defined-benefit teacher pension plan to new members. In its place, the state enrolled new teachers in a 401(k)-style defined-contribution (DC) plan. But the larger debt issues never went away, and in 2005 the state reopened its defined-benefit pension plan.

RELATED
The Drastic, Risky, Measures to Fix America's Brokest Pension Systems As Protests Spread, Lawmakers Seek Punishment (and Protection) for Teachers Despite Teachers' Strike Success, Their Schools Are Still Funded Less Than a Decade Ago The Key to Predicting the Next Teacher Strike
But a closer look at West Virginia's teacher pensions reveals that the limited success of the state's DC plan wasn't the result of an innate shortcoming of DC plans in general. Rather, the state's design choices undermined the ability of the plan to provide a sufficient benefit to most teachers. Indeed, both plans were designed in such a way that at least 40 percent of teachers never qualified for any retirement benefits from the state at all.

But where West Virginia really went wrong was switching to a DC plan without also implementing an actionable and accountable plan to pay down the state's existing pension obligations to current and retired teachers. As a result, while the DC plan was in place, the state's teacher-pension debt grew from $3.5 billion to $5 billion. To try to cover those costs, the state currently spends fully 25 percent of its overall K-12 education budget on benefits. That's among the highest rates in the country.

The real lesson for policymakers? To effectively reform teacher pension systems, states should require the fewest years of service possible before a teacher vests into the system and becomes eligible for state benefits. Moreover, to produce a sufficient benefit, teachers and the state combined should contribute between 10 and 15 percent of salary annually. Finally, it is critical that states have a plan to pay down existing pension debt.

Many states are in worse shape than West Virginia. Across the country, states carry roughly $500 billion in unfunded teacher pension liabilities. To try to get those debts under control, states have cut benefits, increased how much teachers must pay into the system, and increased their own contributions, often by shifting other education funds into pensions. In some states, the situation is so dire that those states have pursued all three efforts at the same time.

Despite the popular narrative that West Virginia's teacher pension reform was an abject failure, it is critical that reformers not fall prey to misunderstandings of West Virginia's story. The state's story should be leveraged to encourage, rather than stymie, important policy change and construct sustainable teacher retirement systems that serve both educators and taxpayers. Otherwise, teachers' retirement benefits will eat up more and more of K-12 education spending and further squeeze state budgets.


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Old 06-16-2019, 09:27 PM
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Mary Pat Campbell
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https://www.forbes.com/sites/christo.../#124fcfafffdb

Quote:
It's Proxy Season And Here's Why That Matters For Public Pensions

Spoiler:
This is the time of year when publicly traded companies host their annual shareholder meetings. During these meetings the shareholders vote their shares on various issues impacting the company. The company’s proxy statement will include shareholder resolutions on everything from executive pay to proposals that impact how the company operates. This is a critical part of keeping management focused on increasing shareholder value (i.e., growing the company).

This can be a complicated cycle for public pension plans that typically have thousands of issues to vote on for hundreds of companies. Most pension plans hire outside consultants to advise on how to vote the various issues confronting shareholders, and in some cases, public plans assign their vote directly to the proxy advisory firms.

I disagree with this for two reasons: first, proxy voting firms are not fiduciaries and are not required to be registered with the Financial Industry Regulatory Authority (FINRA); second, they are not managing the money—typically pension funds hire money managers to do that.


As Connecticut State Treasurer in 1995, I made sure that all our asset managers only collected fees when they out-performed their benchmark. That is the quintessential “alignment of interest”. The problem with proxy advisory firms is that they have no alignment of interest. They may make a recommendation of how to vote based on issues that have a political impact but not a shareholder value impact. No matter what—they still get paid their fee. A far better way would be to do what we did in Connecticut—let the money managers whom you have chosen based on a myriad of factors, including their performance, vote the proxy shares—and pay them their fees only when they outperform the benchmark. Now that is an incentive for money managers to force corporate managers to stay focused on strengthening and growing the company.

Politicians may argue that good politics makes for good shareholder value, but unfortunately, this is a violation of fiduciary responsibility. Make politics in the legislatures, but please leave our precious retirement funds free from your personal political opinion.

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The two largest proxy advisory firms, ISS headquartered in Rockville, MD, and Glass Lewis, headquartered in San Francisco, CA, control 97% of the advisory market. Among other services, they develop proxy proposals, analyze proxy proposals, and provide clients with recommendations on how to vote all other proposals. These two companies recommend proxy proposals, provide suggestions to clients about how to vote on those proposals, and in some cases, vote their clients proxy. In other words, they have the ability to control the entire proxy process which has led them to have a duopoly on how institutional investors vote.

This concentrated power has prompted the SEC to take action and begin reviewing the current rules governing proxy firms. This started with a panel discussion in November, 2018 to hear from the various stakeholders that would be affected. Since then, and since the official comment period opened, the SEC has shared more than 250 unique comments on the issue of proxy advisory firms, with a majority in favor of reform.

But how should the SEC deal with this monopolistic concentration? First and foremost, those in charge of our public pension plans (which is not the SEC) should let money managers do their job—and managing money in my mind also means managing the proxy votes. Let those who manage your money also vote your shares in the best interest of all shareholders.

However, if plan sponsors want to continue to use third party firms, then these firms should be held to the same fiduciary standard to which money managers are held—and as a first step they should have to register with FINRA, and the SEC should assign fiduciary responsibility to them for their fiduciary advice.

Our public pensions funds are facing an almost unfathomable unfunded liability burden that will impact the retirement security of our teachers, firefighters, and public servants, including me, very shortly. Proxy advisory firms are making recommendations on decisions that impact company performance. They should be making those decisions in the best interest of improving returns and not based on the political whims of the day or upcoming elections. Applying fiduciary responsibility to proxy advisory firms would be an important first step.


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Old 06-16-2019, 09:32 PM
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https://www.sacbee.com/news/politics...230902804.html

Quote:
California moves to divest from Turkey over Armenian Genocide despite pension fund objections


Spoiler:
California’s two major public pension funds could be prohibited from investing in Turkey under a proposal the state Assembly passed despite opposition from the funds.

The legislation would require the funds to halt new investments and unload existing ones if the federal government imposes sanctions on the country over the systematic killing of about 1.5 million Armenians starting in 1915, known as the Armenian Genocide.

The $360 billion California Public Employees’ Retirement System opposes the bill on grounds that divesting from Turkey could diminish investment returns.

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“Every dollar in investment returns that is forgone, or expended on transaction costs and fees, must be offset by employer and employee contributions,” fund staff wrote in a memo. “If CalPERS were to divest from Turkish investment vehicles and the companies performed well, employers and employees would bear the investment loss and transaction costs to maintain divestment through increased contribution rates.”

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The fund typically opposes divestment bills, preferring to consult its own policy on sustainable investments rather than outside restraints.

CalPERS has divested from Sudan, Iran, manufacturers of guns that are illegal in California, thermal coal and certain companies that don’t meet its environment, social and governance standards.

Since 2001, the divestments have cost the fund about $2.5 billion, primarily driven by tobacco, although some divestments have saved the fund money, an analyst told the board in March.

The $234 billion California State Teachers Retirement System also opposes the measure, in accordance with its policy against supporting legislation “that infringes on the investment authority of the board.”

The bill passed the Assembly unanimously in a May 23 vote, with 17 members not voting, and proceeded to the Senate. Similar legislation passed both chambers last year but was vetoed by former Gov. Jerry Brown.

Adrin Nazarian, D-Los Angeles, authored the bill. In a statement, Nazarian said its passage in the Assembly sends a “clear message to Turkey to stop their deceitful campaign of genocide denial.”


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