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  #1961  
Old 01-01-2020, 10:35 AM
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KENTUCKY

https://www.pbs.org/wgbh/frontline/a...beshear-bevin/
Quote:
As a New Governor Takes Office, Kentucky Pensions Still on the Brink

Spoiler:
In April 2018, thousands of Kentucky teachers descended on the state’s capital to protest looming changes to their pensions: changes championed by the state’s controversial Republican Gov. Matt Bevin. “We’ll remember in November,” they chanted.

In last month’s closely contested governor’s race, they kept their promise, helping to defeat Bevin by a narrow margin.

Taking the stage for his victory speech, Bevin’s opponent, Kentucky Attorney General Andy Beshear — who picked a teacher as his running-mate and won by more than 5,000 votes — thanked teachers directly.

“Your courage to stand up and fight against all the bullying and name-calling helped galvanize our entire state,” he said. “Let me be very clear, to our educators, this is your victory.”

But while Beshear may have won that fight, the battle to save Kentucky’s two largest state pension funds, Kentucky Retirement Systems and Teachers’ Retirement System, continues. The plans, which support tens of thousands of retirees, remain two of the country’s worst-funded. As FRONTLINE reported in The Pension Gamble, KRS hit rock bottom in 2018 after years of underfunding and losing money to bad investments, placement agent fees and a stock market collapse.

Bevin sought to address the problem with deep cuts in state services: healthcare, infrastructure — and education, which helped keep the funds intact, but also fueled the anger of teachers and other public employees. During his campaign, Beshear promised to protect the funds, but it’s not yet clear how exactly he will do so.

Meanwhile, a court case filed by eight public workers who allege out-of-state hedge funds cheated KRS out of $1.5 billion in investments has been dismissed by the state court of appeals, and is now pending before the state Supreme Court.


Today, both pension funds are recovering, but remain at “scary-low” levels, said John Cheves, a reporter for the Lexington Herald-Leader who has covered the funds for nearly two decades. “We’ve been shoveling in more than $1 billion a year into the state pension system out of an $11 billion general fund. That’s a lot of our state’s money. And it’s finally starting to pay off,” he said. “Perhaps, everyone thinks, it has finally hit bottom, and it’s starting a very slow bounce back up towards solvency.”

The same day Bevin conceded the race, KRS trustees announced that their fund had shown a slight uptick for the first time in 20 years, growing from 12.9 to 13.4 percent funded. Then, just a few days later, the state’s auditor announced that TRS — which is still only 58.1 percent funded — had grown by $600 million, from $21.3 to $21.9 billion, over the previous fiscal year.

“They stopped destroying the plan, so now they’re doing what they’re supposed to do,” said investment advisor and former KRS trustee Chris Tobe, author of Kentucky Fried Pensions: A Culture of Cover-Up and Corruption. “That is an improvement, but it’s not exactly anything that we should celebrate. It’s something we should’ve been doing all along.”

In 2018, as Bevin scrambled to come up with a plan for the pension funds, he came under fire for calling teachers “selfish” and “ignorant” on a local radio station. (He later walked those statements back.) “I’m the only governor in the lifetime of any of these teachers that has fully funded the plan and yet they seemingly hate what we’re doing,” he told FRONTLINE.

That same year, Beshear and Bevin squared off around a controversial TRS pension reform bill — which had been nestled within an unrelated sewer bill — that eventually ended up at the state’s Supreme Court. The bill was struck down in December 2018, which was widely regarded as a victory for Beshear.

On the campaign trail, Beshear announced that, if elected, he would move to legalize and tax casinos, sports betting and online poker and redirect those funds to pensions. Before Bevin, two previous governors, including Beshear’s father, two-time former governor Steve Beshear, hadn’t mandated the state to make full annual recommended contributions to the fund, even as it continued to fall behind.

Now, to keep the pensions afloat, the younger Beshear will have to maintain the same commitment to funding the pension plans as Bevin did, as even small cuts to the annual contributions could cause another backslide. “The next few budgets are going to be very painful,” said Cheves.

There’s also the political reality: The KRS board of trustees are four-year-term political appointments, so the new governor won’t have full control of that board until July 2022, which would allow Beshear more control over future investment decisions.

In the meantime, the uncertainty is worsening the crisis for educators, says Louisville teacher Randy Wieck. Even as the state is suffering from a teacher shortage, he said many of his colleagues are considering early retirement in an effort to reclaim more of their pensions in case their fund declares bankruptcy.

“So many teachers are suddenly saying, ‘I’m going to get out now,” said Wieck.

Current electoral realities in the state are also working against the new governor. Republicans hold supermajorities in both houses of the state legislature, which allows them to override Beshear’s veto power.

As the prospect of an economic downturn looms over the country, this existential crisis continues to loom over the funds. “Economists tell us there’s a good chance we’re going to have a recession by the year 2021,” said Cheves. “I don’t want to see what happens with a 13-percent-funded pension fund if the stock market craters.”


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  #1962  
Old 01-01-2020, 10:36 AM
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PITTSBURGH, PENNSYLVANIA

https://www.post-gazette.com/local/c...s/201912100107
Quote:
Measure to improve city pensions draws mayor's office warning

Spoiler:
A bid to boost the pension of one departing Pittsburgh councilwoman had other city employees thinking about improving their pensions Tuesday, but the concept drew a firm warning from the administration of Mayor Bill Peduto.

A bill that would, in the near term, affect only the pension of Councilwoman Darlene Harris was formally introduced Tuesday and is slated for discussion and an initial vote Wednesday. It has raised awareness in the city ranks of a 15-year-old financial recovery measure set to slash the retirement payments to hundreds of future city retirees.

The bill had some employees thinking: If council can fix Ms. Harris’ pension, why can’t it fix them all?

Slow down, urged Dan Gilman, the mayor’s chief of staff.


Council to consider sweeter pension benefit for Harris, other officials
Pittsburgh Post-Gazette
Council to consider sweeter pension benefit for Harris, other officials
The mayor’s office, council members and the city controller carefully crafted the city’s financial recovery, he said. “You can’t start to pull out one block at a time. … We need to fulfill the promises that have already been made, which is having a pension fund that is secure" and can pay what's already owed.

A decade ago, the city’s pension fund held roughly 30% of the money it needed to cover foreseeable future payments. Now — thanks in part to the annual transfer of around $26.8 million in annual parking revenue to the pension fund — those obligations are 60% funded. That puts the fund squarely in the “moderate distress” category, according to state pension funding standards.

The improvement was enabled in part by a plank in the 2004 recovery plan under which employees hired after June 30 of that year would, upon retirement, see their pensions reduced by half of the amount of Social Security they received.

A few post-2004 hires have applied for partial pensions, and have been shocked at the paltry benefit that remains after the Social Security offset, said John Sibbet, president of the city's Municipal Pension Fund Board.

The offset is “just mean-spirited,” he said. Affected employees think they are “going to get a $2,000 pension, and going out the gate they lose it. As soon as the Social Security offset takes effect, you end up with $1,000.”

The offset, he said, “does save money, but it saves money on the backs of the hard-working men and women who spend their careers working for the city of Pittsburgh."

"The employees and taxpayers have all taken a hit because of the Act 47 [distressed] status,” under which the city endured 14 years of austerity, ending last year, said Controller Michael Lamb. “So city employees are going to try go get their benefits back.”


Brandi Fisher, president of the Alliance for Police Accountability, speaks during a press conference outside City Council chambers before a budget hearing on Monday.
Pittsburgh Post-Gazette
Activists seek to sway city budget process
But any change in pension benefits should be comprehensive — not “elected officials only” — and it shouldn’t erode the retirement fund, he said.

Police and firefighters don't pay into Social Security, don't receive that federal benefit, and thus have never been subject to an offset. The offset applies, though, to nonunion employees hired after June 30, 2004. It also applies to some unionized employees — for instance, public works laborers and drivers hired after Jan. 1, 2007.

The legislation introduced this week by Councilman Ricky Burgess would eliminate the offset only for the nine council posts, the controller and the mayor — and only for those who were in the city’s employ after Jan. 1, 2020, and reached required ages and years of service. Ms. Harris, who lost her bid for a fourth full term this year, is set to end her city service Jan. 6.

Giving her and some future retiring elected officials full pensions wouldn’t cost much. But it would be illegal under state law without a full actuarial study of the long-term costs, according to the mayor’s administration. It would also run afoul of a city code provision passed in 2017 that bans pension enhancements, except those granted through collective bargaining.

Eliminating the offset for all nonunion employees — a concept not yet proposed, but bandied about council this week — would eventually boost the city’s annual payout for pensions by around $7 million.

“What are the cost savings they plan to implement to pay for that?” asked Mr. Gilman. Asked about the arguments by some employees that the offset is unjust, he said, “It’s not a question of just or unjust. It goes to the ability to pay for it.”

He said the administration would conceivably consider a budget-neutral pension fix proposal, if one was presented.

The city’s top firefighters union official declined to comment on the offset issue Tuesday, but urged council to take steps to protect the pension fund.

Ralph Sicuro, president of the International Association of Fire Fighters Local 1, said the city is nine years into the 30-year arrangement under which parking revenue is pledged to the pension fund, and should “add additional years, possibly 10 years, maybe even more” to the pact.

Mr. Peduto, who was in Madrid Tuesday for a climate change conference, has been employed with the city since 1996, and so is not subject to the offset.


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  #1963  
Old 01-01-2020, 10:39 AM
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ALABAMA

https://www.wsj.com/articles/alabama...rs-11577269802
Quote:
Alabama Pensions’ Troubled Bet: Lobster Rolls and Star Wars
Retirement Systems of Alabama has sunk hundreds of millions into iPic, a boutique theater chain that recently filed for bankruptcy

Spoiler:
Alabama's retired teachers and other pensioners could use a huge box-office haul for the latest installment of Star Wars, which hit big screens last week. Their pension fund is betting on it.

The Retirement Systems of Alabama has sunk upward of $221 million into a 16-location boutique theater-and-restaurant chain, recently wresting control of the company in bankruptcy court.

Alabama pensioners are now the owners and operators of iPic Entertainment Inc., an unprofitable chain that helped usher in the era of dine-in theaters, serving moviegoers lobster rolls, steak skewers and cocktails in buttery leather recliners.

"We have new management in place," the pension's chief investment officer, Marc Green, said of iPic." It's in stabilization mode."

The Retirement Systems of Alabama, which manages more than $40 billion on behalf of about 360,000 public workers and retirees, has long invested beyond the realm of stocks and bonds. Under the leadership of David Bronner, who has served as CEO for nearly a half-century, the pension has pursued a range of so-called alternative investments including golf courses, a chain of small newspapers, hotels throughout Alabama and a Manhattan skyscraper.

It isn't unusual for public pensions to allocate big chunks of their assets to private funds that buy entire companies or lend to businesses. Debt funds in particular have gained popularity among yield-starved pensions since last decade's financial crisis and the limitations on bank lending that followed. Pensions these days typically have 2% of their assets committed to private lending, according to data provider Preqin.

Public pension allocations to alternative assets such as private debt, real estate and private equity have grown over the past decade as the funds try to earn market returns of 7% or more to help cover shortfalls. State and local pension plans have about $4.3 trillion in assets, according to the Federal Reserve, $4.2 trillion less than the value of future benefits promised to firefighters, police officers, teachers and other public workers.

Lending directly to companies, as Alabama has done with iPic, rather than through a specialty fund saves fees paid to investment managers. But doing so can put pension fund managers in unfamiliar territory, trying to operate businesses beyond their expertise.

Alabama's dinner-theater gambit dates back more than a decade. Around 2007, the pension teamed with an Australian cinema company and an American movie executive to develop theaters that served fine wine and a seasonal menu to moviegoers. The pension had high hopes for its Gold Class Cinemas, but they mostly lost money.

By 2011, the six cinemas that had opened were merged with iPic Theaters, a rival chain with two theaters and more on the drawing board. The venture was run by iPic founder and Florida theater developer Hamid Hashemi. He harbored plans for a chain that paired fine dining with Hollywood hits and reclining seating pods of his own design.

Mr. Hashemi mapped out an ambitious expansion. The company told investors that it could build as many as 200 U.S. locations and applied for an operating license in Saudi Arabia, where it said it might develop as many as 30 locations.

In February 2018, iPic sold shares in an initial public stock offering to bolster its deteriorating balance sheet. It raised just $17 million before expenses were subtracted.

Meanwhile, the Retirement Systems of Alabama, which owned about one-quarter of iPic's shares, enlarged its line of credit to the company to about $226 million, up from $120 million that the pension had lent its theater business in 2007, filings show.

The company burned through the credit and its IPO cash as it built fancy theaters in high-rent districts around the country. By 2019, iPic shares had plunged from their debut of $17 to less than $3.

Early in the year, iPic struggled with bad winter weather that kept moviegoers at home. Hollywood served up a slate of movies better suited to the tastes of children than people willing to spend upward of $30 a ticket and order steak at a screening. First-quarter revenue plunged 22%.

Building permits were delayed for a new California theater. The Saudi expansion hadn't gotten off the ground. Minimum-wage increases boosted payroll and interest expenses rose as iPic drew down its credit line to stay afloat.

The company reported $3.5 million in cash at the end of March. Its liabilities had ballooned to $291 million.

Mr. Hashemi remained upbeat. "We have the benefit of the last Star Wars in December," he said on an earnings call in May. "It's a movie that plays to everyone."

Investors on the call were less optimistic. "With only $3.5 million in cash, in a sense, you're kind of one bad movie or one polar vortex or something away," said Andrew Shapiro, president of Lawndale Capital Management LLC. Mr. Shapiro shorted the stock.

Mr. Hashemi said iPic had engaged bankers to find additional capital. None turned up. The company failed to make a $10 million interest payment to Alabama in July, and iPic filed for bankruptcy protection in August. Its shares were delisted from Nasdaq soon after. The shares have continued to trade over the counter, recently for 20 cents.

The pension lent iPic $16 million anew to ensure its claims remained senior to those of other creditors. In October, the pension won an auction for iPic. Alabama offered $56 million credit against the $221 million it was owed.

"We probably understand the company better than outsiders coming in and looking at it," Alabama's Mr. Green said.

Alabama's pension emerged with control of the 16 theaters last month and promptly dismissed iPic executives, including Mr. Hashemi, who declined to comment. Through a spokeswoman, iPic executives declined to comment.


https://finance.yahoo.com/news/alaba...151109897.html
Quote:
Alabama pension fund betting on boutique movie theater investment

Spoiler:
Alabama's pension system has directly invested $221 million into a boutique movie theater-restaurant chain with 16 locations nationwide, The Wall Street Journal reported Wednesday.

The Retirement Systems of Alabama and the 360,000 federal workers and retirees who depend on it are now the sole owners and operators of iPic Entertainment Inc., which filed for bankruptcy in August, WSJ reported.

Pensioners are depending on big sales from the latest "Star Wars" film and big movies like it to create a dent in their investment of the luxury theater. iPic told investors it could build up to 200 locations in the coming years, according to WSJ.

"We have new management in place," Retirement Systems of Alabama Chief Investment Officer Marc Green told WSJ of iPic. "It’s in stabilization mode."

CORPORATE PENSION PLANS COULD BECOME A THING OF THE PAST

The pension plan manages more than $40 billion on behalf of the several hundred thousand federal workers and retirees in the state, and it has been increasing its efforts to pursue "alternative investments" in an attempt to earn market returns of 7 percent or more, WSJ reported.

But that hasn't been the outcome for most government pension funds across the country that make such investments, according to a May 2019 study by credit rating agency Fitch Ratings.

The study found that between 2001 and 2017, state and local pension funds' "shift away from lower-risk allocations has not necessarily produced stronger returns. For state and local systems in this survey, median average returns were ... 6.4% for the 17-year horizon between 2001 and 2017."

RETIREMENT REFORM: KEY SECURE ACT PROVISIONS THAT WILL AFFECT YOU

While state and local pension plans have about $4.3 trillion in assets, that's $4.2 trillion less than the amount needed to cover the future benefits promised to firefighters, teachers and other public workers, WSJ reported, citing the Federal Reserve.

CLICK HERE TO GET THE FOX BUSINESS APP

"For many pension systems, assets set aside to prefund pensions remain well below the accrued benefits that have been promised to current and future retirees," the Fitch Ratings study explains.

"The ability of plan managers to accumulate and effectively manage assets to cover promised benefits has become a key source of pension risk for governments, particularly as funding challenges continue, plan demographics continue weakening and constrained state and local budgets persist," the study reads.


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  #1964  
Old 01-01-2020, 10:41 AM
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KENTUCKY

https://wfpl.org/kentucky-lawmaker-p...e-up-pensions/
Quote:
Kentucky Lawmaker Proposes Legalizing Marijuana To Shore Up Pensions

Spoiler:
An eastern Kentucky lawmaker has proposed a bill to legalize the recreational use of marijuana and dedicate tax revenues from the industry to the state’s cash-strapped pension systems.

The proposal is a long-shot in the Republican-dominated Kentucky legislature, but Democratic Rep. Cluster Howard of Jackson says that citizens are more receptive to marijuana than they have been in the past.

“I think that a lot of people make this a moral issue. To me, we know as a society that times have changed. People are more apt to accept legalization of the product,” Howard said.

The bill would allow the state to regulate marijuana growers, processors, testers and retailers. It would also decriminalize possession of less than an ounce of marijuana and expunge the criminal records of those with marijuana-related misdemeanors.

Howard predicted the bill could bring in more than $200 million per year in tax revenue. The bill would dedicate revenues to the state’s struggling pension systems, which are short about $37 billion.

So far, 11 states have legalized marijuana use for adults over age 21 and 33 states have legalized it for medical use.

Howard said he doubts the bill will get a hearing in the Republican-dominated legislature, but encouraged citizens to call their lawmakers about the issue.

“I think it depends on how much people actually call their reps and their senators and insist that it be heard. I do think that the chance of the bill being heard is much greater this session than it was last session,” Howard said.

Newly-inaugurated Gov. Andy Beshear has signaled support for medical marijuana but says he doesn’t favor recreational use.

A medical marijuana bill passed out of a Kentucky legislative committee earlier this year, but never received a vote in the house. The bill would have not allowed patients to smoke marijuana.

Adult marijuana use will be legal in Kentucky’s northwestern neighbor Illinois starting on Jan 1, 2020. Officials there predict it will bring in about $375 million a year in tax revenue and create a path to clear 700,000 low-level marijuana convictions.


https://forwardky.com/bevin-hid-fina...r-released-it/
Quote:
Bevin hid the financial analysis of his pension proposal. Beshear just released it.

Spoiler:
Gov. Andy Beshear has released a financial analysis of a 2017 pension proposal that former Gov. Matt Bevin fought to keep out of the public eye.

The 65-page analysis shows that Bevin’s controversial pension overhaul plan — which sparked mass teacher protests in 2017 and contributed to Bevin’s ouster as governor — would have saved the state money in the short term but would have slowed the financial rebound of Kentucky’s most troubled pension system and cost the state more in the long run.

“It was absurd that it was suppressed all these years,” said Jim Carroll, the president of Kentucky Government Retirees. “We’re certainly grateful that Gov. Beshear released it.”

The actuarial analysis only applied to the Kentucky Retirement Systems, which oversees pension plans for most state and local government employees, but not teachers.

The proposal would have made sweeping cuts to retirement benefits, including a provision that would have stopped employees from accruing more pension benefits after working 27 years, moving them to a 401(k)-style plan instead. Bevin had hoped to call the legislature into special session to consider his plan, but it never happened and the legislature ended up crafting its own bill, which was later tossed by the Kentucky Supreme Court.

Additional insight: Jason Bailey’s analysis of the actuarial analysis and the pension proposal at Kentucky Center for Economic Policy:
https://kypolicy.org/what-the-finall...ension-reform/



The actuaries who wrote the analysis said Bevin’s plan would have created an incentive for people to retire and start collecting pension benefits after 27 years, which would have put a burden on the system.

The bill would have lowered the unfunded liability in the state’s most troubled pension plan (Kentucky Employees Retirement System Non-Hazardous) by $377 million in its first three years, but the unfunded liability would have grown in later years and taken an additional four years to pay off.

The state’s payments into that pension plan would have been about $1.6 billion less over the first 24 years of Bevin’s plan, but after 30 years, the total cost to the state would be $2.1 billion more than the current plan, the analysis found.

The Bevin administration fought in court for years to prevent the analysis from being released. After losing in Franklin Circuit Court, the Bevin administration took their case to the Kentucky Court of Appeals, where the lawsuit remains.

Judge Philip Shepherd had previously revealed that Bevin’s plan would have delayed the system from reaching full funding by four additional years when he ruled against Bevin in Franklin Circuit Court.

“While the actuarial study of the governor’s proposal may be embarrassing to the administration in that it reveals substantial fiscal and economic problems with the governor’s proposal, the Open Records Act requires disclosure even if it causes ‘embarrassment to public officials or others,’” Shepherd wrote in his 2019 decision.

Republicans have super majorities in the House and Senate, but there has been little appetite to tackle pension reform the way Bevin had hoped. Now, with Beshear’s election, there is even less pressure to overhaul the pension system for state employees.

Beshear campaigned heavily against Bevin’s efforts to reform the pension system — particularly the teachers’ pension system — and hailed the release of the analysis as an opportunity for the public to “know the truth” about Bevin’s attempted reform.

“Today, less than two weeks into my administration, I turned over the documents and let employees and taxpayers know the truth – the proposed 2017 reforms would have cost the state more and forced out many more career employees,” Beshear said. “If we are truly going to solve the problems we face as a commonwealth, we must work together in an honest and open way.”

–30–


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  #1965  
Old 01-01-2020, 12:35 PM
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alas, I didn't make it to 2000 posts.

Here is the 2020 thread:
http://www.actuarialoutpost.com/actu...d.php?t=345749
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