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  #1081  
Old 07-15-2018, 08:22 PM
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Mary Pat Campbell
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INVESTMENT MANAGEMENT

https://finance.yahoo.com/news/wall-...134658282.html

Quote:
Pension fund investors cost taxpayers $624 billion in last 10 years

Spoiler:
Over the last decade, fund managers who oversee the pensions of the nation’s teachers, firefighters, police and other government workers have doubled down on an investment strategy that has cost U.S. taxpayers at least $600 billion, possibly more than $1 trillion, investment data and calculations by Yahoo Finance found.
Seeking higher gains, pension fund managers have upped their investment in so-called alternative strategies that are costly and weigh down returns, data shows.
“We find that some of the worst-performing plans are those that went into alternatives late in the last decade,” said*Jean-Pierre Aubry, a research director at the Center for Retirement Research at Boston College who studied the impact of investing in alternatives on public pension funds.

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Thanks to an unfortunate combination of high fees and poor performance, U.S. pension funds have lost $624 billion over the last 10 years.
Alternative funds invest in things like hedge funds, private equity, real estate or commodities, rather than traditional stocks and bonds.*Because pensions are guaranteed, the underperformance has hit taxpayers in the form of budget cuts for schools, hospitals and libraries and decreased spending on infrastructure, health care and other public projects.
Aubry’s studies show that across the board, public pension fund managers have thrown increasingly more money at these complex and pricey alternative funds, despite the fact that they consistently underperform simple index funds available for a fraction of the fee cost.
Fund managers have moved to alternative investments, in part, because when competing for the contracts to manage pensions, they sold pension boards on expected high returns that have not materialized. They are now trying to*provide a jolt to the plans, which are largely underfunded,*said*Scott Kubie, chief investment officer at financial management firm Carson Group.

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Since the financial crisis of 2007-2009 public pension fund managers have increasingly moved into so-called alternative investments, dragging down performance.
“Those high assumptions allowed [the employees] to make not as high contributions,” Kubie told Yahoo Finance. “They’re trying to find a way to catch up… because they haven’t covered the liabilities. I don’t know if that ends particularly well.”
State pension funds underperforming
Several studies have shown that pension fund managers are unable to consistently beat the market. And the growing popularity of alternative investments has only exacerbated the trend.
Data from the Center for Retirement Research at Boston College shows that*state and local pension plans steadily increased their holdings of alternative investments, rising from 9% in 2005 to 24% in 2015. A 2017 study from*Coller Capital found that a*net 23% of investors plan to increase their allocations to private equity over the next 12 months.
With the nation’s pension liabilities having risen to $6 trillion, Jeff Hooke, a lecturer at Johns Hopkins University, recently conducted a report for the Maryland Public Policy Institute*that found the state had lost billions in retiree income on account of the fees and lost revenue.
“The sales pitch of the alternatives community is ‘We’ve got some kind of secret sauce. Our returns are going to be higher than stocks and bonds,'” Hooke, who has authored numerous studies on the performance of public pension funds, told Yahoo Finance. “The only problem with the sales pitch is it doesn’t work.”
Hooke and co-author Carol Park found that of the 33 states for which data was available, the average state pension fund returned 5.46% over a 10-year period ended June 2017. A sample*index fund of 60% stocks and 40% bonds returned 6.4% on an annualized basis during that time, he found.
That difference may not sound like much, but it translates to $474 billion during the period, according to compound interest calculations by Yahoo Finance based on national pension account holdings of $3 trillion in 2007.

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This chart shows the growth of $3 trillion – the amount in pension accounts in 2007 – invested in a simple index fund against the performance of fund managers who managed the money.
The nation’s pension fund returns have also been hit by fees. Hooke’s study found that state pension funds paid, on average, fees totaling 0.56% of assets held to fund managers during the 10-year period. Had the nation’s collective pension fund managers invested in the 60/40 Vanguard Balanced Index Fund, for example, which carries a 0.07% fee, they would have saved $150 billion over 10 years.
In fact, the total amount pension funds could have saved by simply investing in index funds could be more than $1 trillion. In addition to the lower returns and higher fees that add up to $624 billion, data for 17 states were not disclosed, and the calculations don’t include funds contributed by workers and employers during the 10-year period.
The difference between the lowest fees paid by a state — 0.12% for Oklahoma — and the highest — 1.67% for Missouri — translates to nearly $500 billion. All that extra money paid for fees has translated into worse results. Oklahoma’s pension fund has generated a 5-year net return of 8.6% while Missouri has netted a 5.9% return during that time, according to Hooke and Park’s data.
Is now the time for alternatives?
Despite their unimpressive record, some argue that now is the right time to move into alternative investments. Investors like Kubie point out that alternatives like hedge funds perform better during times of economic stress. With a number of market analysts expecting a recession to hit soon and for it to be especially devastating, investing in alternatives could bode well for taxpayers in the future.
Aubry of the Center for Retirement Research says the data show investors who put funds into alternatives before the financial crisis had the best performance of public pension fund managers. Meanwhile, those who began putting money into alternative funds after the crisis — chasing strategies that worked in the past — fared the worst.
View photos
The move to cheaper funds has come as 401(k) plan managers feel pressured to disclose and therefore lower fees to meet investor demands.
“[Alternative funds] were helpful in the financial crisis, 2008-09, but basically after that they have done much, much worse than traditional equity,” he said. “That’s supposed to be their role — to do the opposite of equities. When markets are booming, they are going to be a drag, but they are helpful in downturns.”
Unfortunately, in the current nine-year bull market, that has meant a sizable drag.
U.S. pension funds have been investing in high-priced alternative funds*despite a general trend in the opposite direction. Data from Morningstar Direct obtained exclusively by Yahoo Finance shows the average cost of investment funds has declined and that far more 401(k) fund managers are choosing to go with the cheapest funds.
More than double the number of investors own funds that Morningstar categorized as its least expensive than did 25 years ago, and that number has increased by 4% since 2008 with 63% now invested in funds rated by Morningstar as the lowest-cost.
Patricia*Oey, a senior analyst at Morningstar, said the move to cheaper funds has come as 401(k) plan managers feel pressured to disclose and therefore lower fees to meet investor demands.*Morningstar reported earlier this year that it estimates investors saved more than*$4 billion*in fund fees*last year by continuing a move toward lower-cost funds.
“Broadly speaking, everyone is looking for lower cost,” Oey said. “Whether it’s on 401(k) platforms or individual investors or advisors, everyone is moving towards lower cost — that’s just an overall market trend. Who doesn’t want cheaper?”

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  #1082  
Old 07-15-2018, 08:24 PM
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Mary Pat Campbell
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INVESTMENT RETURNS

https://www.benefitspro.com/2018/07/...ary-crr-study/

Quote:
Why returns on public pensions vary: CRR study | BenefitsPRO

Spoiler:
Regarding the variation in returns from 2001–2016, from 6.3 percent for the top quartile to 4.6 percent for the bottom, CRR researchers investigated whether the variation could be due to differences in asset allocation and/or to the returns by asset class. (Photo: Shutterstock)
Returns on public pensions have varied pretty widely between 2001–2016, and the Center for Retirement Research at Boston College analyzed the data to find the reason.
According to the brief “What Explains Differences in Public Pension Returns Since 2001?” the funded status of public pensions depends on two major factors—the payment of plan sponsors’ annual required contribution and the investment return earned on pension fund assets.
Read: 10 states with the best pension funding: A tale of two discount rates
And while earlier CRR studies looked at how inadequate contributions can undermine funding progress, this one examined those plans’ ability to achieve adequate returns.
Considering the variation in returns from 2001–2016, from 6.3 percent for the top quartile to 4.6 percent for the bottom, the analysis evaluated whether the variation could be due to differences in asset allocation and/or to the returns by asset class.
The brief finds that on average, the annualized return for public plans during this period was 5.5 percent; that’s “well below the typical actuarially assumed return.” The variation between plans in the top and bottom quartiles, it adds, amounted to a difference “that could account for roughly a 20-percentage-point disparity in their funded ratios.”
Read: Public pensions gorge on private debt
The study found that asset allocations across quartiles are relatively similar, with allocations to the three broad asset classes differing by less than 10 percentage points.
But the asset classes themselves vary substantially more in returns, so that while the top and bottom quartiles hold a similar level of alternatives overall, “the bottom quartile holds slightly more in commodities and hedge funds and less in private equity and real estate.” And the second quartile holds more in real estate, hedge funds, and private equity than does the third quartile.
And since private equity and real estate had higher average returns than public equities over the period being evaluated, the lower-performing asset classes dragged down the lower-quartile plans.
While public plans at a high level have very similar asset allocations, and for the time period in question “all [public plans] shifted a portion of their assets out of equities and fixed income and into alternatives,” there was variation in “the magnitude and timing of this transition…” In the study’s evaluation of the performance of asset classes, it found that “the small differences in allocation among plans were secondary to the differences in asset class returns. That led to its conclusion that “returns accounted for almost the entire underperformance for the middle two quartiles.”

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  #1083  
Old 07-15-2018, 08:26 PM
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Mary Pat Campbell
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HOUSTON, TEXAS

http://www.pionline.com/article/2018...ond-referendum
Quote:
Judge dismisses lawsuit questioning Houston's pension bond referendum - Pensions & Investments

Spoiler:
A Texas district court judge has dismissed a lawsuit against the city of Houston's 2017 pension bond referendum, the city said in a news release Tuesday.
In December, James Noteware, a former city housing and community development director, sued the city alleging the ballot description for the Nov. 7 pension bond referendum was "materially misleading" and called for a temporary restraining order on the $1.01 billion bond issuance. On Dec. 21, Mr. Noteware's request for a temporary restraining order was denied and the bond issuance was completed.
Houston voters had overwhelmingly approved the bond issuance, which was intended to help reduce the city's $8.2 billion in unfunded pension liabilities.


https://www.houstonpublicmedia.org/a...ension-reform/
Quote:
Turner Welcomes Ruling Dismissing Case That Challenged The City’s Pension Reform – Houston Public Media

Spoiler:
Houston Mayor Sylvester Turner, who in this file photo appears at a media briefing held at City Hall, says the ruling is important because*the pension bonds are a “critical part” of the City’s pension reform plan.
The office of Houston Mayor Sylvester Turner informed Tuesday that*State District Judge Mark Morefield has dismissed a case that represented a challenge*to the 2017 election on the City’s pension bonds.
A news release from the Mayor’s office noted the City is “pleased” with the decision in its favor.
The litigation had been initiated by James Noteware in December 2017 with the goal of*setting aside the results of the November 7th 2017 election, in which Houstonians approved the pension bonds.
The news release underscored that the ruling “is important to the City’s pension reform plan” and Turner emphasized the pension bonds are a “critical part” of the City’s pension reform statute and plan.

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  #1084  
Old 07-15-2018, 08:27 PM
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RHODE ISLAND
https://www.ricentral.com/narraganse...1c435d22f.html
Quote:
Town gets Lighthouse Inn update, approves pension study | Narragansett Times | ricentral.com

Spoiler:
NARRAGANSETT - Despite unanimously tabling the evening’s most expensive agenda item to purchase the current Pier Liquors building in the Pier Marketplace, Monday was still a busy evening for the Narragansett Town Council, which provided an update on the proposed demolition of the Lighthouse Inn, formerly the Dutch Inn, in Galilee and voted to fund a study of the town’s pension plans.*
The meeting began with an update from council president pro-tem Matthew Mannix on the proposed demolition of the Lighthouse Inn. Last year, Procaccianti Group, the company leasing the property from the state on which the hotel stands, filed for a lease amendment to allow the demolition of the building in order to construct a 544-space parking lot at the site. Procaccianti Group already owns a parking lot adjacent to the hotel, which is regularly used by those taking Galilee’s ferry to Block Island. Since the lease amendment proposal, a local and grassroots opposition to the demolition and subsequent parking lot construction formed in Friends of Galilee, a non-profit organization seeking an alternate fate for the property*
“Thank you to [town council president Susan Cicilline Buonanno] for asking me to provide an update on this issue, it’s something several people had questions about,” said Mannix Monday. “Basically, there’s three lots in Galilee at the old Dutch Inn site, and there was a proposal by the tenant of one of those lots to amend the lease and make that a parking lot.”
“There was a meeting on this by the Galilee Lease Advisory Committee last summer,” Mannix continued. “The lease advisory committee only meets on an as-needed basis, and the members of the committee are two members from the Rhode Island Department of Environmental Management (DEM), including Dean Hoxsie, whom many of you are familiar with, and the attorney from DEM, and the town manager and one of the council members. I am the liaison to that group from the council. This committee, unlike most town committees, provides advice to the state properties committee regarding any property in Galilee that’s state-owned. About 90 percent of property in Galilee is state-owned by DEM and governed by these kind of leases.”
Mannix then spoke to the vision of the Galilee advisory committee.*
“The goal of many people, especially members of Galilee advisory committee, and many people who live in that area, is to preserve the nature of Galilee and keep it focus on its roots as a fishing port,” he said. “What happened was we went over the proposed amendment to the lease, expressed our concerns about it, and there’s been no final decision made on that item at this time. Since last summer, several boards and commissions in town have expressed their view of not amending the lease, and again, the lease advisory committee is not a decision-making body, but it is a place where the town has a voice on this issue.”
Mannix said the committee would continue to “do its best” to make sure the lease was not amended.*
In other council news, the body unanimously approved a $20,000 study of the town’s pensions plans to be carried out by Nyhart, an actuary firm who has handled analysis of the town’s pension and OPEB liabilities in the past. The study, said Manni, was not of the town’s liability, but rather, the individual ordinances dictating pension policy within specific town departments.*
“Speaking with finance director Laura Kenyon, this study has never been done for the town and knowledge is power,” said town manager James Manni. “This study here is not to determine liabilities, it’s to define what our pension plan is. It’s loosely defined right now by our ordinance and our union contracts. This study here - we would hire Nyhart to come up with a comprehensive review of our ordinances and union contracts and they would come up with one document that would clearly define what the pensions are for each pension plan that we offer. I think it’s money well spent.”*
Last month, councilor Jill Lawler revealed the town’s library board had included numerous employees in the town’s pension plan system, despite rulings from past town solicitors those employees would not be eligible for a town pension.*

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  #1085  
Old 07-15-2018, 08:50 PM
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KENTUCKY
https://www.bgdailynews.com/opinion/...ac6660c33.html
Quote:
We take exception to state's new sales tax | Our Opinion | bgdailynews.com

Spoiler:
This newspaper takes strong exception to House Bill 487, which became effective July 1 and imposed sales tax on a number of service providers, including nonprofits, in order to shore up Kentucky’s underfunded pension systems.
Our concerns and objections include the process and choice of targets chosen by the Republican majority in the legislature.
The legislation was passed at the near end of the legislative session without the required three readings. The lack of transparency was glaring.
The small businesses and nonprofits targeted for this tax had little time to become aware of what was happening to them. As a result, their voices went largely unheard. A partial list of those targeted included auto repair shops, lawn services, pet groomers, landscapers, janitorial services, small animal veterinarians, diet centers, as well as dry cleaners.
Nonprofits feel blindsided by the new tax on their events. “Nobody expected this to happen. Nobody put it in their budget,” said Scott Watkins, Orchestra Kentucky executive director, who we are certain expressed the concerns of nonprofits here as well as across the state.
In the interest of full disclosure, the sales tax on events will impact the recently announced Vette City Motorcycle and Music Fest being brought to Bowling Green in October by this newspaper and D93 WDNS-FM.
The Daily News, unlike the nonprofits, however, already pays sales tax on certain transactions. Nonprofits will have to deal with the increased cost of compliance as they scramble quickly to get up to speed administratively to comply.
If you look at the aforementioned list of small businesses targeted by the sales tax, it is apparent that they do not have the same legislative clout and influence as bigger, better financed entities with well-paid lobbyists.
The conclusion we draw from this is that a cynical political calculation was made to target these small businesses precisely because of the lack of political clout. This approach is totally wrong. Pensions and taxes are joined at the hip with public service employees, including teachers.
Because these pensions are an obligation of society, any taxes levied to shore up the system need to be as broad based as possible.

Senate Bill 151, the companion bill to HB487, was recently ruled illegal by Franklin Circuit Judge Phillip Shepherd. The fate of this legislation will likely be determined by the Kentucky Supreme Court.
If Shepherd’s ruling is upheld, pension reform is dead until the legislature decides to tackle it again. But the tax increase whose purpose was to raise revenue to support pension systems will remain.
Letting these taxes stand without the pension reform used to justify them is unconscionable.
The legislature should repeal these taxes at their earliest opportunity. At such time as they tackle pension reform in the future, any taxes enacted should be broader based to reflect our society’s responsibility to education and other public services all citizens benefit from.

http://www.lex18.com/story/38271184/...-to-ag-lawsuit
Quote:
Bevin's Legal Team Files Response To AG Lawsuit - LEX18.com | Continuous News and StormTracker Weather

Spoiler:
FRANKFORT, Ky. (LEX 18)*–*Gov. Matt Bevin’s legal team filed their official response to Attorney General Andy Beshear’s political lawsuit against Senate Bill 151, Kentucky’s recently enacted pension reform law.
In a statement, Governor Bevin called SB 151 "the Commonwealth’s most meaningful attempt to protect the pensions of Kentucky’s public workers and teachers." They called Attorney General Beshear "opportunistic" for filing the suit in the days after it was passed.
“The ultimate question for this Court is whether it wants to move the Commonwealth backward in the direction of fiscal irresponsibility and insolvent pension systems,” noted the Bevin Administration brief, “or whether it wants to join the recent [national] trend of marching toward prosperity and solvent pension systems….”
Gov. Bevin’s legal team implored the Court not to “turn its back” on Kentucky public employees and retirees, saying that a ruling against SB 151 “will only hasten the decline of the pension systems.”
SB 151 was originally a sewer bill, and Beshear has filed suit to stop the bill on the grounds that actuarial*analysis was not provided before the bill was quickly passed.
Oral argument in this case before the Franklin County Circuit Court is set for June 7.

https://www.ai-cio.com/news/hedge-fu...ion-take-hike/
Quote:
Hedge Fund Tells Kentucky Pension to Take a Hike | Chief Investment Officer

Spoiler:
Davidson Kempner Capital Management takes issue with state’s code of ethics.
Hedge fund Davidson Kempner Capital Management has told the $17 billion Kentucky Retirement Systems (KRS) it doesn’t want its money and asked it to withdraw its $68.7 million in protest over the state’s new code of ethics.
KRS Executive Director David Eager said he was notified by the New York-based hedge fund that it didn’t want to abide by the CFA Institute’s codes of ethics and professional conduct that was part of a pension transparency bill passed by the state last year.
According to the bill, all individuals associated with the investment and management of retirement system assets, whether contracted investment advisors, board members, or staff employees, must adhere to multiple codes of ethics created by the CFA Institute, a nonprofit association of investment professionals. This includes “The Code of Ethics and Standards of Professional Conduct,” the “Asset Manager Code of Professional Conduct,” and the “Code of Conduct for Members of a Pension Scheme Governing Body.”
“We wanted to place more money with them,” Eager said, according to Reuters. “They expressed concern about the requirements of Senate Bill 2 with regards to the CFA codes.”
Davidson Kempner is not affiliated with the CFA Institute.
Eager also said the hedge fund was upset over a lawsuit filed in December by current and former state employees against hedge funds KKR/Prisma, Blackstone and PAAMCO for recommending high-risk investments that led to losses for the retirement system. He said that although Davidson Kempner was not a party to the suit, it was worried about facing similar suits because the plaintiffs went after hedge funds.
“There could be a problem here, but we just don’t know yet how significant it’s going to be,” Eager said. “An increased desire for transparency and accountability is being written into a lot of legislation around the country, and that is going to create difficulty in some of our efforts to establish business relationships with the people we want to.”
According to a KRS financial report from February, the system’s investment in Davidson Kempner returned 7.35% over one year, 3.6% over three years, and 6.1% over the past five years.
Eager also said that KRS is in the act of lowering its allocation in hedge funds to 3% of its assets from 10%, in part because of the high fees that accompany the investments.
State*Sen. Joe Bowen (R-Owensboro), who sponsored the pension transparency bill, was unmoved by Davidson Kempner’s rejection of KRS’s investment.
“If they want to fire us because they can’t comply with the transparency and accountability standards that we’ve put in place, then that’s OK with me,” he said, according to a report from the Lexington Herald Leader.* “If these hedge funds are pushing back, that’s too bad.”

https://www.cincinnati.com/story/opi...gop/752765002/
Quote:
Opinion: Nullified pension bill should send message to Ky. GOP

Spoiler:
Protesters fill the Kentucky State Capitol in Frankfort, Ky., on Monday, April 2, 2018. A pension reform bill quickly passed the House and Senate last week.(Photo: Sam Greene/The Enquirer)Buy Photo
On the 57th day of Kentucky’s 60-day legislative session, the House of Representatives called for an unscheduled and unpublicized committee meeting where Senate Bill 151 was amended from an 11-page sewer bill to a 291-page pension bill that greatly jeopardizes the state’s ability to recruit and retain qualified teachers in the future.
Within a few short hours, SB151 was sent to the House and read once under its original “wastewater services” title. It was then voted on, approved, and sent to the Senate, which also gave its OK.
This did not happen without protest – all of this went down while hundreds of teachers and citizens, myself included, filled the Capitol protesting the bill and the process. Our chants and pleas could be heard in the House and Senate chambers, but they were brazenly ignored. The teachers who stood in the Capitol day after day were there to support their students and the future of education in our commonwealth. I spoke to many of them over many days of protest and not one mentioned their own retirement; they each said they were there for the children.
But, behind those closed doors Northern Kentucky state senators and legislators didn’t even question this bill, a bill no one had even had time to read in its entirety.*
Among those senators was my opponent, Wil Schroder. Schroder, in fact, not only loudly voted his support for SB151, but he also voted for its even more devastating predecessor SB1, which would have also have eliminated cost-of-living increases on current retirees, making him one of only a very few lawmakers to back both flawed pension bills.
SB151, otherwise known as the “Sewage Bill,” was signed into law by Gov. Matt Bevin on April 10, and would have changed the entire pension system for Kentucky teachers, who don’t receive Social Security benefits. It would have made some of our lowest-paid professional workers – those whom we entrust with the futures of our children – much less stable in their retirement, and making it much harder to recruit new teachers and state employees to Kentucky.*
Thanks to a lawsuit brought by Attorney General Andy Beshear and a Circuit Court decision on June 20, that declared the actions surrounding the passage of SB151 by our State Legislature illegal, Kentucky teachers and public employees now have another chance to fight for a better pension bill.
Just think about that. Most of Kentucky’s Republican representatives in the state House and Senate did something that a court says violated the state constitution. They did it behind closed doors, without public input, for a bill they had not even read and without actuarial data.
Not only was this the way this bill was passed reprehensible and illegal, but it’s questionable as to how much SB 151 would have actually saved, because no actuarial was done. So everyone’s just guessing on how it might change the pension’s unfunded liability of $40 billion which much be addressed.
The governor will likely appeal the circuit court’s decision to the Kentucky Supreme Court, and he continues to insight fear by suggesting the court’s decision could negate other bills passed this session. Whatever the outcome, we need a level of transparency that does not currently exist in Frankfort. Bills, especially a bill that has such a powerful impact on Kentucky’s education systems, need bipartisan support and a clear avenue for input from the public.
Bevin said that SB 151 shows that Republicans have stopped kicking the pension can down the road by offering a solution. This solution, however, doesn’t really solve the pension shortfall, and leaves our education system is at even greater risk. The Legislature has a lot more work to do. Thankfully, Kentucky voters have the power to make big changes this November.
Rachel Roberts is a small business owner from Newport and the candidate for Kentucky Senate*District 24, which includes Campbell, Pendleton and Bracken counties.

https://www.ai-cio.com/news/kentucky...uling-request/
Quote:
Kentucky Judge Rejects Gov.’s Pension Ruling Request | Chief Investment Officer

Spoiler:
Bevin has 30 days to file an appeal with state Supreme Court.
Kentucky Gov. Matt Bevin’s request for a judge to revisit his ruling on a controversial pension law has been denied.
Judge Phillip Shepherd of the Franklin Circuit Court struck down the pension law, which cut the benefits of Kentucky’s public pensioners, on June 20. *Attorney General Andy Beshear had previously sued Bevin to have the law thrown out as it was passed while tucked into a sewage bill at the end of the legislative session.
Shepherd also considered the bill to be an appropriations bill, which requires a majority vote in each chamber. Although the pension law had passed in a 49-46 vote in the 100-member House, an appropriations bill needs 51 votes for full recognition.
Following Shepherd’s June ruling, the governor’s administration filed a request to have the judge amend or vacate his decision, which was declined on Wednesday after Shepherd heard arguments on that motion.
The governor’s general counsel, Steve Pitt, pushed for the reversal based on whether the new pension reforms violate the state constitution’s rights of the public workers rather than procedural issues. Pitt said the law does not violate these rights and that Shepherd ruled on that issue to provide guidance to future legislatures. Pitt also argued that parts of the bill should not be considered appropriations and receive individual attention.
Shepherd rejected Pitt’s discrepancies. Bevin now has 30 days to appeal the motion, and should he choose to do so, he’ll have to file it with the Kentucky Supreme Court.
In addition, the attorney general, a Democrat, announced his bid to run for governor next year. Bevin, a Republican, has not yet said if he’ll campaign for re-election.

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  #1086  
Old 07-15-2018, 08:53 PM
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Mary Pat Campbell
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ILLINOIS

https://www.civicfed.org/iifs/blog/e...budget#new_tab
Quote:
Examining Pension Savings in Illinois’ FY2019 Budget | The Civic Federation

Spoiler:
Since Illinois passed its budget for the current fiscal year, many questions have been raised about the $445 million in savings expected from enacted pension changes. What is the basis for the savings estimate and how accurate is it likely to be?
The assumed reductions in State pension contributions are the result of three provisions in the FY2019 budget legislation. The most important is a voluntary buyout plan that offers certain employees who are about to retire upfront cash payments—in exchange for delayed and lower automatic annual increases in their benefits. The plan accounts for $382 million, or 86%, of the total budgeted State pension savings for the fiscal year that began on July 1, 2018.[1]
Public records show that the $382 million figure comes from actuarial reviews of a different pension buyout plan. As a result, it is not clear whether the savings estimate applies to the enacted measure. Even if the savings estimate is relevant, it remains to be seen whether the assumed participation rate of 25% is realistic.
The $382 million savings estimate is based on actuarial reviews of House Bill 5472. The measure has not come up for a vote in the General Assembly, but the actuarial studies were prepared by the pension funds at the legislature’s request in advance of a public hearing last February. There was no public hearing on the enacted pension measure.
Like the enacted buyout plan, House Bill 5472 affects the State’s three largest pension funds: the Teachers’ Retirement System (TRS), State Universities Retirement System (SURS) and State Employees’ Retirement System (SERS). The actuarial reviews were obtained through public records requests to the pension funds and can be accessed from the following links for TRS, SERS*and*SURS.*
The enacted buyout and House Bill 5472 have several similarities. Both apply to Tier 1 pension fund members: employees hired before January 2011 who receive the most generous pension benefits. Upon retirement with full benefits at age 60, Tier 1 members receive automatic compounded annual increases of 3%. More recently hired Tier 2 members, who retire with full benefits at age 67, receive annual increases of 3% or one half the rate of inflation, whichever is less, calculated on a simple-interest basis.
In both buyout plans, retiring members who opt to participate get a lump sum payment equal to 70% of the difference between the present value of their benefits with the current Tier 1 annual increase and with a lower simple interest annual increase starting at age 67. The annual increase in House Bill 5472 is the Tier 2 formula, while the enacted plan provides for a flat, simple 1.5% yearly increase. In both cases, the upfront payments must be deposited into another retirement account to avoid being taxed.
There are other differences. The enacted buyout plan lasts for three years, until June 30, 2021. House Bill 5472 has no set ending date.
Another difference relates to how the upfront payments are funded. The enacted buyout will be financed by selling up to $1 billion in bonds through FY2021.[2] House Bill 5472 does not specify how the payments would be funded; the actuarial analyses for TRS and SERS assumed that the cash for the buyout would come from pension assets, while the SURS study assumed that an unspecified funding source other than pension assets would be used. Bond financing is expected to reduce net State costs because the pension funds’ assumed rates of return on investment of 6.75% to 7% are higher than the expected interest rate paid on the bonds.*
In evaluating House Bill 5472, the funds’ actuaries were asked to consider participation rates of 25%, 50% and 75%. The budgeted savings of $382 million were based on a 25% participation rate.[3] The actuaries did not provide their own assessment of how many fund members would choose the buyout or consider the potential cost of adverse selection, in which individuals in poor health choose the buyout while healthy members keep their lifetime pension payments.*
The following table compares FY2019 General Funds pension contributions before and after the changes in the FY2019 budget. The table has contributions to all five State pension funds, including the smaller Judges’ and General Assembly Retirement Systems, which are not affected by the new measures. It should be noted that the savings shown in the table total $445 million rather than $382 million because they reflect all three measures in the FY2019 budget (see footnote 1 for more details).

For reasons that have not been explained by State budget officials, most of the pension savings are expected to come from SERS. Even through the assumed participation rate is the same for all the affected funds, budgeted contributions for SERS were reduced by 20.1%, compared to reductions of 2.1% for TRS and 4.9% for SURS. This mirrors the results of the actuarial reviews of House Bill 5472, which show savings of $279 million, $56.1 million and $46.8 million for SERS, TRS and SURS, respectively.
In all, General Funds pension contributions are estimated to decline by 6.0% from $7.48 billion to $7.03 billion in FY2019 after the budgeted changes. With the assumed savings, pension contributions will account for 18.3% of budgeted General Funds expenditures of $38.51 billion. Total pension costs, including $1.25 billion of debt service payments on previously issued pension bonds, is estimated at $8.28 billion, or 21.5% of General Funds spending.[4]
The*budget legislation*directs the pension funds to implement the buyout plan “as soon as practical,” so it is not clear when it will take effect. However, the retirement systems will not receive their last monthly payments from the State until their trustees officially recalculate required contribution amounts in light of the newly enacted pension measures.
If the savings fall short of the estimated amount, the State would have to make up the difference due to continuing appropriation requirements, which statutorily authorize spending without any specific action by the General Assembly. Although the assumed savings are small compared with the overall General Funds budget, the budget is already precariously balanced with an operating surplus of $11 million.
The Civic Federation believes that significant changes to pension benefits should not be enacted without detailed actuarial impact studies that are made available to the public. Such actuarial analyses could indicate whether the changes will have the intended budgetary effects and show the long-term effects on the pension funds. Given the uncertainties inherent in actuarial projections, budget officials who are relying on the savings to balance the budget should also outline contingency plans in the event that the assumed savings do not materialize.
*
[1] Another provision gives inactive employees who have left their State pension-eligible jobs the chance to receive 60% of the current value of their benefits as a lump sum payment. A third shifts additional pension costs due to salary increases above 3% per year—rather than 6% under current law—to school districts, universities and community colleges. These changes are expected to save $41 million and $22 million, respectively.
[2] A portion of the bonds will be used to finance the buyout plan for inactive pension fund members.
[3] The savings estimate of $41 million for the inactive buyout plan is based on a participation rate of 22%, which is reportedly the rate experienced for a similar plan in Missouri.
[4] These numbers do not include $227 million for certain pension costs of the Chicago Public Schools.

https://reason.org/commentary/harvey...ility/#new_tab
Quote:
City of Harvey’s Pension Liabilities Raise Questions on Municipal and State Responsibility | Reason Foundation

Spoiler:
The city of Harvey, Illinois, announced the layoffs of 40 police officers and firefighters last April. The cuts were a devastating blow to the city, as the departing employees represented nearly half of Harvey’s public safety workers. Unsurprisingly, unmanageable pension liabilities were the catalyst behind the layoffs. What makes Harvey’s crisis of particular interest, however, is that the current situation is connected to a statewide policy — passed in 2011 and enacted in 2016 — that set the stage for state intervention in extreme cases of municipal pension mismanagement.
Seven years ago, Illinois passed Public Act 96-1495, which allowed the state comptroller to act if there is evidence that a local government is not making its required pension contributions to police and firefighter plans. In such situations, the comptroller is supposed to hold tax money that would normally go from the state to the local government and to instead apply all of those funds directly to the city’s pension fund. The purpose of the law is to protect public safety employees from any irresponsible underfunding of their retirement fund.
Although the law passed in 2011, it did not take effect until 2016. This is the first example in which the state’s comptroller has deemed it necessary to intervene according to the law. After racking up an unfunded liability of $36.7 million and a funded ratio of 29 percent from years of underpayment to the pension, Harvey’s Police Pension Plan sued its own local government sponsor. This action set the 2011 law into effect, resulting in the state’s comptroller garnishing $1.5 million in state tax revenues that was scheduled to go to the town.
After a reactionary legal appeal, a judge ruled that the comptroller was acting within their rights according to the law. Unable to cover payroll expenses, Harvey officials announced the layoff of nearly half its public safety workers the day after the court ruling.
According to representatives of the police pension fund, a deal with the state was in the works to split the garnished funds to the town and the pension, but a new claim against the town from the Harvey Firefighters’ Pension Fund—which is $67.6 million underfunded with a shocking 12 percent funded ratio—derailed these arrangements, forcing the comptroller’s hand to carry out the garnishment. Finally, just last week the city reached an agreement with the comptroller, which granted them access to a portion of the garnished revenue. This provides some temporary relief to Harvey but future funds will continue to be held and redirected by the state’s comptroller.
The case of Harvey appears to be the canary in the coal mine, as more than 200 other municipalities in Illinois also face the real possibility of seeing revenue intercepted according to the 2011 law. North Chicago has already become the second city to join Harvey. After confirming the city’s inability to pay its required pension contribution, the Illinois comptroller has begun intercepting payments meant to go to North Chicago so they can be applied instead to the city’s pension fund. Judging by the poor health of many of the state’s local pension plans, it is likely that more are to follow.
In response to the growing pressure from the 2011 law, lawmakers are proposing legislation that would delay any garnishment of funds until 2020 and add exceptions to the law for municipalities that face fiscal hardship. Many, however, believe that this proposed bill is just another example of kicking the can down the road, as it allows local governments to continue underfunding their pension plans.
All of these recent local developments in Illinois illustrate a growing problem that more and more governments around the country are facing. How can states promote or enforce responsible funding of municipal pension plans? This question is becoming increasingly relevant, as policymakers are exploring ways to protect local government workers from pension insolvency and degraded retirement security, which comes as the result of irresponsible pension management in some localities. Reason’s Pension Integrity Project has promoted transparency standards for local governments in Michigan for this very purpose.
Another relevant question in need of an answer concerns the proper balance between protecting local workers and protecting local governments when dealing with municipalities that have become delinquent in their pension payments?
Harvey’s current woes illustrate the challenges of trying to achieve such a balance. The 2011 law was passed to protect the pensions of local workers, but in this case, it will be enforced at a great cost to the town’s ability to serve its citizens. But exploring the recent history of pension funding policy used by Harvey’s policymakers offers some relevant context regarding who should be bearing the burden of responsibility.
The Harvey pension plans are suffering significantly from what can only be described as extreme underpayments of annual contributions. The police pension fund has received contributions well below the required amount ever since the 2008 market downturn. The town’s firefighters’ fund has seen even worse underfunding, with severe underpayment going back to 2004 (thus, the poor funding policy predates the economic hardships of 2008). Both plans combined, the town has shorted its contributions by a total of $20 million since 2004, even going three years — 2011 through 2013 — without dedicating a single dollar to either fund.

One way to look at these underpayments is to assume those amounts were instead used towards the payrolls of the town’s public safety workers, especially in the context of the recent layoffs of these workers. Using payroll and active member numbers from their financial documents, the amounts presumably diverted to employees was enough to pay about 5 police officers and 17 firefighters from 2004 to 2016, which is about 9 percent and 36 percent of the current staffs respectively. In other words, the town was in a situation where it needed to cut back on services in order to keep its pension promises to current and past workers. Instead, it consistently shorted the required annual contributions.
Viewed in this light, the mass layoffs this year are perhaps unsurprising, as the town needed to cut services and/or increase revenue to address this challenge years ago. What is striking is that Harvey likely would have continued to short its payments to the pension fund at the expense of its employees’ retirement security, save the recent interventions from the state comptroller.
The situation in Harvey demonstrates the complexity of balancing responsibility between state and local governments. Illinois’ 2011 legislation may appear to be a heavy-handed response to municipalities who are struggling to keep up with the rising costs of pensions, but—at least in the case of Harvey—it does maintain a system in which the consequences for poor funding policies falls onto the responsible party. That is little consolation, however, to the citizens of Harvey who will see large cuts in crucial services from no direct fault of their own.





http://www.wirepoints.com/where-illi...ints-original/
Quote:
Where Illinois’ skyrocketing pension promises came from – Wirepoints Original | Wirepoints

Spoiler:
Wirepoints’ recent commentary on Illinois’ skyrocketing pension benefits – “Janus v AFSCME and the truth about Illinois pensions” – left many readers questioning where that massive growth in pension promises came from.
In our report “Illinois state pensions: Overpromised, not underfunded,”*we showed how the growth in total pension promises to state workers and retirees has overwhelmed Illinois’ economy and residents’ ability to pay.*Illinois’ total pension promises since 1987 are up 1,061 percent, 4.5 times more than the growth in the state economy.
The answer to where that growth came from is simple.*The growth is due to overly generous benefits. In addition, reality occasionally forces more honest disclosure of the true cost of pension promises made. In other words, more accurate reporting also pushes the numbers up.

Illinois politicians have doled out all kinds of expensive benefits over the past few decades, from compounding cost-of-living increases to service credit for unused sick leave to early retirement ages.
That’s caused a host of problems, because the Supreme Court has declared that the pension benefits of current workers untouchable. The state’s constitution says pension benefits can’t be “diminished or impaired.”
It’s a hypocrisy. Pension perks can be increased ad infinitum, but it’s impossible to scale back benefits that existing workers haven’t even earned yet.
Take teachers and their benefits, for example. Their pension fund makes up more than half of Illinois’ promised pension obligations.
The Teachers Retirement System publishes the entire list of changes to the pension plan since 1915. Teacher pensions were generous to begin with, yet lawmakers continued to add new sweeteners and bigger benefits over time.
Below is a list of some of the biggest changes:
Cost of living increases
Overly generous cost-of-living benefits – compounded and granted automatically regardless of inflation – are what arguably cause the most fiscal stress to pensions’ solvency. What started as simple COLAs at levels approximating inflation have now become compounded yearly increases that double a retiree’s annual pension after 25 years.
• 1969 COLA increased to 1.5 percent simple
• 1971 COLA increased to 2 percent simple.
• 1978 COLA increased to 3 percent simple.
• 1990 The 3 percent annual COLA increases begin compounding annually.
Pension formula
Pension benefits for every year worked were originally calculated as 1.5 percent of each worker’s “average final salary.” The max starting pension was restricted to 60 percent of a teacher’s final salary. By 1998, that amount was increased to 2.2 percent of salary and max starting pension became 75 percent of final average salary.
Under the original rules, a teacher had to work 40 years to get the 60 percent maximum. Today, a Tier 1 teacher only needs to work 34 years to get to a much higher 75 percent maximum.
• 1947 Pension formula: 1.5 percent of average final salary per year of creditable service. Average final salary calculated based on the last 10 years of service. Maximum starting pension as a percentage of final salary became 60 percent.
• 1971 Pension formula upgraded to 1.67 percent for first 10 years; 1.9 percent for next 10; 2.1 percent for next 10; and 2.3 percent for years over 30. Average final salary calculated based on the highest four consecutive years within the last 10 years of service. Maximum starting pension as a percentage of salary became 75 percent.
• 1998 Pension formula upgraded to 2.2 percent a year. TRS member contributions increased by 1 percent.
Sick leave benefits
Unused sick leave days in the private sector are typically use it or lose it, with some limited ability to roll over unused days to the next year. But teachers in Illinois, and many public sector workers, get much more. They can accumulate unused sick leave days over the course of an entire career –*and then cash them in as years of pensionable service – an extremely generous benefit unheard of in the private sector.
• 1972 Credit for one-half year or 85 days of sick leave granted.
• 1984 Maximum of one year of service for 170 or more days sick leave credit granted
• 1998 Sick leave could be used for credit, if not compensated in any way.
• 2003 Members with up to two years of unused sick leave credits could exchange that sick leave for up to two years of service credit.
Retirement ages
Teachers can begin drawing pensions with full benefits while still in their 50’s. And a majority of teachers took advantage of this rule. Sixty percent of teachers currently collecting a pension retired in their 50’s.
• 1947 Retirement permitted at age 55 with 20 years service and at age 60 with 15 or more years of service
• 1969 Retirement permitted at age 55 with 20 years of service, 60 with 10 years service; age 62 with 5 years
Some of these increases were paid for with increased employee contributions, as outlined in the TRS document outlining the benefit increases. But many were not.
And that’s left Illinois residents holding the bag.
Telling the truth
A second reason the reported cost of Illinois pension promises have grown is because Illinois politicians are being forced periodically to measure that cost more honestly.
They are often forced to change outdated assumptions that understate those benefits. For example, retirees are living far longer than originally assumed. And assumed stock market returns are overly optimistic.
As those faulty assumptions are corrected, the amount owed to pensioners only goes up.
In 2016 alone, assumption changes contributed $10 billion of a $17 billion jump in promised pension benefits.
The combination of benefit increases and assumption changes have been going on for years, as reflected in the leading graphic of this piece.
As a consequence, the cost to taxpayers has increases year after year. The employer’s (taxpayers’) annual “normal costs” for teacher pensions has grown 5 times since 1987, far in excess of the economy. And as a percentage of payroll, employer normal costs have grown to 10.1 percent from 7.3 percent, a 38 percent increase.
Incompetence or Malice?
Lawmakers actions have driven the state into to virtual insolvency. Illinois’ near-junk credit rating, years of unbalanced budgets and steady outmigration are clear evidence of that.
A financial mess like the one Illinois politicians have created would normally be investigated.
If this state were a corporation, think Enron or Worldcom, an official inquiry would be asking all sorts of questions. How did lawmakers get pensions so wrong? Was the extreme growth in benefits due to incompetence or was it purposeful?
Either way, lawmakers hid a massive liability from Illinois residents for decades. That’s damning proof they should never have been in change of government worker retirements in the first place.

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Old 07-15-2018, 08:56 PM
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https://www.ocregister.com/2018/07/0...cash-strapped/
Quote:
California’s economy may be booming but pension payments have governments cash-strapped – Orange County Register

Spoiler:
CalPERS headquarters at Lincoln Plaza in Sacramento.
California’s economy may be booming, but throughout the state, local governments — including school districts — are feeling the financial pinch and asking their voters to approve new taxes of one kind or another.
There were 111 local tax measures on the June primary election ballot, the vast majority of which passed, according to municipal finance guru Michael Coleman of*CaliforniaCityFinance.com.
Dozens more — sales taxes, parcel taxes, marijuana taxes, utility taxes and hotel taxes — are being planned for the Nov. 6 general election.
So why are so many local entities feeling strapped?
Local officials will tell you, if you don’t quote them by name, that it’s mostly because their mandatory payments into the state’s two big pension funds are soaring.
The California Public Employees Retirement System and the California State Teachers Retirement System lost tens of billions of dollars during the recession a decade ago and have never fully recovered.
CalPERS has steadily and sharply increased financial demands from cities, counties and school districts for their civil service workers while the Legislature and Gov. Jerry Brown cranked up contributions to CalSTRS from school systems to cover teacher pensions.
However, while seeking more money from their voters to cover their ever-increasing retirement costs, local officials have been very reluctant to say it’s for pensions, fearing backlash at the polls. Rather, on the advice of high-priced “consultants,” they promise the new taxes will enhance such popular services as police and fire protection and parks.
We can expect more such propaganda this fall, leading up to the election.
One example is in Sacramento, whose mayor, Darrell Steinberg, wants his voters to reauthorize a half-cent sales tax that will soon expire and to add another half-cent.
In a recent speech, he called his proposal “a real game changer” that would finance affordable housing, shelters and services for the homeless, job training in low-income communities and small-business incentives.
However, simple arithmetic tells us otherwise. The additional half-cent of sales tax would generate less than $40 million a year, city budget documents say, while by the city’s own estimate, its mandatory payments to CalPERS are expected to increase from $81.6 million a year to $129 million by 2023.
To its credit, the*Sacramento Bee*pointed out the looming effect of the city’s rising pension costs. The state’s other news media should follow suit as their local officials tout the benefits of increasing taxes. Reporters can easily calculate projected pension cost increases from*CalPERS data*and the potential revenues from*sales tax data.
Meanwhile, one city just a half-hour’s drive from Sacramento is doing it the right way, telling voters why it needs more money.
Lodi also will place a half-cent sales tax increase on the November ballot and its officials are*not shy about the reason.
Lodi City Manager Steve Schwabauer has been a leading figure in efforts to persuade CalPERS to moderate its demands, arguing that cities such as his will face insolvency unless they get relief or persuade voters to raise taxes.
Schwabauer told the city council, before it voted unanimously to ask voters for the tax hike, that without it the city will see operating deficits beginning next year.
“The cause of this, point-blank, is CalPERS and our pension fund, and I have spent at least two years of my life fighting with CalPERS,” Councilwoman JoAnne Mounce said.
Such candor may not make it easier to persuade voters, but it’s the right thing to do.


https://santamariatimes.com/opinion/...e9922e1a5.html
Quote:
Our View: Governments' big beast gets bigger | Editorial | santamariatimes.com

Spoiler:
The Santa Barbara County Ciivil Grand Jury is in full gallop, recently releasing a report on the deep hole city and county governments are in with regard to unfunded pension liabilities.
Newcomers might think that to be a shocking revelation. It’s not. Every elected and appointed government official throughout the region is aware of the problem, and grand juries have been delving into the issue for decades.
The root of the pension issue is not exactly a Rubik’s cube-sort of problem. County and city government policy makers essentially have written checks to retirees they can’t cash. The bank would call it “insufficient funds.”
This particular grand jury report singled out Santa Barbara County government as carrying the biggest deficit load, but the report also targets pension plan deficiencies in Santa Maria, Lompoc and the city of Santa Barbara. Basically, the larger the government, the bigger the problem.
State rules on pension funds launched in 2013 have had a modestly positive effect on the huge deficits, with government chipping away at the costs. The grand jury report, however, correctly points out that any gains achieved via the newer rules could be wiped out instantly by what the report refers to as “additional fiscal shocks.” That means if something goes wrong, such as a giant wildfire, 6.7 earthquake, stock market crash or a recession.
In other words, any hiccup in a government’s revenue stream could throw the pension situation back a decade or more. In which case, elected officials will be faced with very limited choices, none of them very pleasant — and some decidedly unpleasant, especially for government workers. Here’s how the grand jury report puts it:
“Such measures could be to reduce salaries and other non-pension benefits, to raise employee and employer contributions or to cut benefits, apply fiscal measures to fund higher employer contributions, as well as start new negotiations with labor unions to raise contributions from employees, or to otherwise modify benefits not covered by the new … law …”
It may seem simplistic, but the grand jury report also makes a sound recommendation — that governments of the county and Buellton, Carpinteria, Goleta, Guadalupe, Lompoc, Santa Barbara, Santa Maria and Solvang hold public meetings to discuss possible “revenue-gain and cost-saving measures that may be necessary to ensure continued adequate funding of their pension plans.”
The local governments’ pension situation is not unlike a long drought, during which our leaders talk about the problem but can’t seem to come up with a good strategy to fix it. Instead, too often it comes down to hoping for a miracle. Miracle rains have ended some nasty local drought situations, but we just don’t see that happening with the unfunded pension liability mess.
A 2011 grand jury report on this issue was titled, “Local Government Post Employment Benefits in Santa Barbara County: Complicated and Costly.” To be brutally honest about this, nothing has changed in the past seven years, nor is it likely to change without local governments taking fairly draconian steps.
Over the years we have referred to the pension mess as the 800-pound gorilla standing just off-stage at government meetings. Since we used the gorilla phrase, the creature has more than doubled in size.
Government officials are loathe to discuss it in any great detail, because they have no viable solutions, and the solutions they choose could be political suicide.
So, once again, the grand jury has stated the obvious — and it probably should continue to state the obvious until our elected leaders buckle down and do what needs to be done.


https://www.dailyrepublic.com/all-dr...pension-costs/
Quote:
CALmatters Commentary: Coy about taxes and pension costs

Spoiler:
California’s economy may be booming, but throughout the state, local governments – including school districts – are feeling the financial pinch and asking their voters to approve new taxes of one kind or another.
There were 111 local tax measures on the June primary election ballot, the vast majority of which passed, according to municipal finance guru Michael Coleman of CaliforniaCityFinance.com.
Dozens more – sales taxes, parcel taxes, marijuana taxes, utility taxes and hotel taxes – are being planned for the Nov. 6 general election.
So why are so many local entities feeling strapped?
Local officials will tell you, if you don’t quote them by name, that it’s mostly because their mandatory payments into the state’s two big pension funds are soaring.
The California Public Employees Retirement System (CalPERS) and the California State Teachers Retirement System (CalSTRS) lost tens of billions of dollars during the recession a decade ago and have never fully recovered.
CalPERS has steadily and sharply increased financial demands from cities, counties and school districts for their civil service workers while the Legislature and Gov. Jerry Brown cranked up contributions to CalSTRS from school systems to cover teacher pensions.
However, while seeking more money from their voters to cover their ever-increasing retirement costs, local officials have been very reluctant to say it’s for pensions, fearing backlash at the polls. Rather, on the advice of high-priced “consultants,” they promise the new taxes will enhance such popular services as police and fire protection and parks.
We can expect more such propaganda this fall, leading up to the election.
One example is in Sacramento, whose mayor, Darrell Steinberg, wants his voters to reauthorize a half-cent sales tax that will soon expire and to add another half-cent.
In a recent speech, he called his proposal “a real game changer” that would finance affordable housing, shelters and services for the homeless, job training in low-income communities and small-business incentives.
However, simple arithmetic tells us otherwise. The additional half-cent of sales tax would generate less than $40 million a year, city budget documents say, while by the city’s own estimate, its mandatory payments to CalPERS are expected to increase from $81.6 million a year to $129 million by 2023.
To its credit, the Sacramento Bee pointed out the looming effect of the city’s rising pension costs. The state’s other news media should follow suit as their local officials tout the benefits of increasing taxes. Reporters can easily calculate projected pension cost increases from CalPERS data and the potential revenues from sales tax data.
Meanwhile, one city just a half-hour’s drive from Sacramento is doing it the right way, telling voters why it needs more money.
Lodi also will place a half-cent sales tax increase on the November ballot and its officials are not shy about the reason.
Lodi City Manager Steve Schwabauer has been a leading figure in efforts to persuade CalPERS to moderate its demands, arguing that cities such as his will face insolvency unless they get relief or persuade voters to raise taxes.
Schwabauer told the city council, before it voted unanimously to ask voters for the tax hike, that without it the city will see operating deficits beginning next year.
“The cause of this, point-blank, is CalPERS and our pension fund, and I have spent at least two years of my life fighting with CalPERS,” Councilwoman JoAnne Mounce said.
Such candor may not make it easier to persuade voters, but it’s the right thing to do.


https://www.lodinews.com/news/articl...33458f88b.html
Quote:
Herald Fire borrows $460,000 to end CalPERS contract - Lodinews.com: News

Spoiler:
Unable to keep up with their payments, the Herald Fire Protection District Board of Directors voted unanimously on June 21 to terminate their contract with the California Public Employees’ Retirement System, which manages public employee pensions.
Lindsey Liebig, president of Herald Fire’s board of directors, said the final decision came after more than a year of negotiations with CalPERS failed to result in a payment plan that the fire district could afford.
“We had been working with CalPERS on an actual payment plan since we received the final evaluation in December 2017. However we had been asking for a payment plan since our initial vote to terminate in January 2016,” Liebig said.
CalPERS spokeswoman Amy Morgan said in an email that fewer than 100 agencies have ended their CalPERS contracts in the 80 years that CalPERS has existed, many of them small local agencies or districts such as Herald Fire.
“CalPERS contracts with nearly 3,000 public agency, school and state employers that represent more than 1.8 million members,” Morgan said. “CalPERS fully works with our contracted employers on many levels to provide them support and education about their pension costs ... Additionally, we also notify and communicate with the employers’ employees when an agency may possibly terminate their contract with us, so they have information about what may impact their retirement payments.”
When an agency terminates a contract with CalPERS, Morgan said, they must still make all payments required by said contract to fund pension benefits that were accrued before being released.
In order to pay the $437,966 in termination costs, known as “determination fees,” Herald Fire borrowed $460,000 from Five Star Bank, Liebig said, that includes a 15-year payment plan.
“We are very fortunate Five Star Bank was willing to invest in our district and community because now we have the ability to accurately plan for the future of our district and the needs of our community,” Liebig said.
The loan will be re-evaluated every five years, Liebig said, and Herald Fire can pay more than the minimum amount if they choose.
“We see no effects to taxpayers. By obtaining a loan at this repayment rate we can keep services to the district intact,” Liebig said. “Had we taken the payment plan offered by CalPERS our annual payment would have doubled and we would have been forced to make staffing cuts to our stations, which would have had a direct impact on our taxpayers. We have carefully budgeted to absorb this payment so that it maintains our current staffing model, training programs and operational needs.”
Susan Shelley, vice president of communications for the Howard Jarvis Taxpayers Association, said that the costs of pensions and other post-employment benefits have been rising in California because CalPERS promised more benefits than they can deliver, which has caused government agencies such as Herald Fire to end their contracts with CalPERS rather than raise taxes.
“Budgets are being squeezed. There’s a crowd-out effect that’s causing these agencies to either cut services or raise taxes,” Shelley said. “So, without knowing too much about this particular case, it would appear that (Herald Fire) decided it would be better for taxpayers to pay the determination fee.”
Taxpayers should contact their local elected officials to ask about CalPERS costs, Shelley said, and whether it would cost them more money to stay with CalPERS or end their contracts like Herald Fire did.

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Old 07-15-2018, 08:58 PM
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http://www.pionline.com/article/2018...ension-capital
Quote:
San Diego County doubles commitment to Public Pension Capital - Pensions & Investments

Spoiler:
San Diego County Employees Retirement Association increased its commitment to Public Pension Capital by $50 million to $100 million total, according to a report to the board of the $12.4 billion pension plan on investments made by staff on delegation of authority.
SDCERA had committed the initial $50 million to the middle-market private equity evergreen fund managed by Public Pension Capital in 2016. It was the pension fund's first investment with Public Pension Capital, a private equity firm formed by two former KKR & Co. executives.
Separately, the pension fund board changed its asset allocation for fiscal year 2019, which started July 1, in which it increased the U.S. equity target allocation to 20% from 18% and decreased emerging markets equities to 7% from 9%.
General investment consultant Aon Hewitt Investment Consulting and staff recommended the change for SDCERA to take advantage of the gains made in emerging markets equities' performance, said Michael Comstock, associate partner at Aon Hewitt, at the board's June 22 meeting.


http://www.sandiegouniontribune.com/...713-story.html
Quote:
If state Supreme Court rules against San Diego on pensions, it could could cost city millions - The San Diego Union-Tribune

Spoiler:
The state Supreme Court strongly indicated in May that it will rule San Diego’s six-year-old pension cutbacks are illegal, but crucial questions remain about how the court might order the problem fixed and how much it could cost the city’s taxpayers.
When the court rules in the next few weeks, it has a variety of options that would have very different effects on the city’s finances and how the city compensates its employees moving forward.
Estimates of a potential city payout have been as high as $100 million, but the people making such guesses have always acknowledged uncertainty given a host of variables.
During oral arguments in the case on May 29, the justices nearly universally agreed with claims by city labor unions that it was illegal for then-Mayor Jerry Sanders to push the Proposition B pension measure onto the ballot in 2012 without labor negotiations.
The justices, however, made no comments about what remedy they might order if they follow through with a ruling that finds the pension cutbacks illegal.
The measure, which was approved by more than 65 percent of city voters, replaced guaranteed pensions with 401(k)-style retirement plans for all newly-hired city employees except police officers.
The justices could force the city to spend many millions retroactively creating pensions for 4,000 employees hired since 2012, or order the city and its unions to negotiate an alternative solution.
While unusual, the court could also fashion its own comprehensive solution that may impose obligations on the city that have never previously been discussed.
The uncertainty partly stems from San Diego being the only city in California to discontinue pensions for new hires, meaning there is no model to follow.
The ruling could have an impact across the state as other city and county governments consider pension cuts and how they can be legally enacted.
Since oral arguments, city and union officials have been tight-lipped about what solutions they prefer in an effort to avoid perceptions they are telling the justices what to do.
"Until they issue their order, that's speculation we're just not going to engage in," Michael Zucchet, general manager of the Municipal Employees Association, said by phone this week. "When they do issue their order, we're going to roll up our sleeves and work with whatever lies ahead. This is where the buck stops — the final ruling — and all of the parties including us are going to do whatever the court says."
Mayor Kevin Faulconer also declined to comment through a spokesman.
A starting point for a solution could be the state labor board’s recommendation in 2015 that San Diego make employees hired since 2012 whole by creating pensions for them and paying them interest and penalties of 7 percent.
Based on the labor board proposal, the actuary for the city’s pension system estimated in late 2015 that it would cost the city $20.1 million to retroactively create pensions for 1,600 employees hired without pensions at that point.
But the number of employees hired without pensions has increased to more than 4,000 since then, more than doubling the city’s potential cost.
In addition, new demographic studies showing the city had been underestimating life expectancies for its retirees prompted city pension officials to significantly increase the projected cost of pensions in 2016.
The labor board recommendation, however, said the city could count against its costs the many millions it has contributed to 401(k)-style retirement plans for those workers.
Because of the particularly strong performance of the stock market since 2012, those retirement plans are worth more than expected. That could make the city’s costs to create retroactive pensions relatively minimal if the Supreme Court follows the labor board recommendation and allows the city to count its contributions to the 401(k)-style plans.
The mayor’s spokesman, Craig Gustafson, said city officials have not calculated any updated estimates of the city’s potential liability if the pension cuts are overturned.
Another option for the court might be leaving the pension cuts in place, forcing the city to pay court costs and other penalties but not creating retroactive pensions.
The reasoning would be that the court wouldn’t be ruling that the pension cuts themselves are illegal, just that they were illegally placed on the ballot by Sanders without conducting labor negotiations beforehand.
The justices could decide it’s not appropriate to punish the citizens for a technical misstep by their elected leaders.
Another option for the court could be ordering the city and its unions to negotiate an alternative solution that makes more sense to both sides than the state labor board ruling.
Possibilities could include the city offering hefty pay raises in exchange for the unions agreeing that new employees will continue to receive the 401(k)-style plans instead of pensions.
Instead of pay raises, the city could offer to restore retiree health care benefits that were slashed in 2010, or some combination of those two.
Some of the 4,000 employee without pensions may prefer those options to having pensions retroactively created for them, especially if they don’t plan to work for the city long enough to be eligible for a pension.
Looming as a factor in all of those compromise options is the possibility, if the court rules Proposition B is illegal, that supporters of the initiative would place a similar measure on a future ballot.
While the 401(k)-style plans require roughly the same size annual contributions from the city as pensions, supporters of eliminating pensions say they are seeking to reduce the city’s long-term risk.
They say pension plans put cities in financial jeopardy because employees receive a “defined benefit,” leaving the city on the hook to come up with money to pay that benefit even if the stock market crashes or retirees live much longer than expected..
The 401(k)-style plans, called “defined contribution” plans, don’t guarantee a particular benefit, meaning the city simply makes its contributions and faces essentially no risk.
The city, which has 11,000 employees, is facing a shortfall in its available funds to pay pension obligations of more than $2.7 billion.
The city’s pension system, formally known as the San Diego City Employees Retirement System, said Friday that it has formed a special committee to analyze the court’s ruling when it’s issued and help its members understand how the ruling affects them.

DIVESTMENT
https://www.ocweekly.com/calpers-ceo...ion-investing/
Quote:
CALPERS CEO and Sen. John Moorlach to Talk Socially Conscious Pension Investing

Spoiler:
CALPERS headquarters in Sacramento. Photo by Coolcaesar
John Moorlach and Marcie Frost are not running against one another for office, but they are poised to take different sides on a public policy issue they will discuss Thursday in Huntington Beach.
Moorlach (R-Costa Mesa) is the state senator for the 37th district that stretches from Huntington Beach south to Three Arch Bay and inland to East Anaheim. Frost is the CEO of the California Public Employees Retirement System (CALPERS), which is the largest public pension fund in the U.S., with a $326.4 billion total fund market value for the current fiscal year.
She has defended CALPERS’s socially responsible investment policy, which favors stock purchases, mutual fund choices and private equity investments that are grounded in social and environmental sustainability. The theory is that by steering the massive financial pool in those directions, other investors will follow and the world will become a better place.
For instance, in June 2017, Frost issued an official statement in defiance of President Donald Trump’s declaration that the U.S. would abandon the Paris Agreement that had 149 countries pledging to take steps to combat climate change. “As a global investor and as fiduciaries focused on the long-term sustainability of our investments, we will continue to support the Paris Agreement on climate change,” Frost stated. “The Paris Agreement enables us to manage material risk and build opportunity in our investment portfolio. Supporting its goals ultimately benefits our members and their long-term retirement security.”

State Sen. John Moorlach (R-Costa Mesa). Official California Senate photo
Moorlach first rose to prominence as a private accountant running for Orange County Treasurer-Tax Collector in 1994, when he predicted the county would go bankrupt because of the risky investments of incumbent Robert Citron. The GOP-controlled Orange County Board of Supervisors circled the wagons around Democrat Citron, saying conservative Republican Moorlach did not know what he was talking about.*Citron won the race, but after the county did indeed suffer what was then the largest municipal bond portfolio loss and bankruptcy in U.S. history, he resigned in disgrace. He was later convicted of felony financial crimes and died in 2013.*
Meanwhile, the county board eventually appointed Moorlach to fill the Treasurer-Tax Collector vacancy, and he springboarded from that seat to county supervisor and state senator. Along the way, he has warned about a looming public pension crisis and has questioned the CALPER’s socially responsible investment policy.
Last summer, when speaking about the Public Divestiture of Thermal Coal Companies Act authored by his Senate colleague Kevin de Leon (D-Los Angeles), who is now seeking to unseat U.S. Senator Dianne Feinstein (D-California) in November, Moorlach told CalWatchdog.com’s Steven Greenhut that chief investment officers “invest for value and don’t appreciate being hamstrung by legislators who don’t know how to manage a diversified portfolio. I think I’m the only legislator who managed a $7 billion portfolio. And the studies I’ve seen have shown that social investing has produced lower returns.”
Ironically, some public employee union members, who want the biggest bang for their invested pension bucks, find agreement on this point with Moorlach, who recently danced on the grave of the California labor movement in light of the Supreme Court’s Janus ruling.

Marcie Frost. Courtesy of CALPERS
Huntington Beach Mayor Mike Posey, who also held a town hall in February that tackled local housing issues, brings Frost and Moorlach to the*Council Chambers from 4:30 to 6:30 p.m. Thursday to discusses the topic, “Point of No Returns – Environmental Social Governance Investment Strategies and CALPERS.”
City Hall is at 2000 Main St., Huntington Beach.


Matt Coker
Matt Coker has been engaging, enraging and entertaining readers of newspapers, magazines and websites for decades. He spent the first 13 years of his career in journalism at daily newspapers before “graduating” to OC Weekly in 1995 as the paper’s first calendar editor. He went on to be managing editor, executive editor and is now senior staff writer.

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Old 07-15-2018, 09:02 PM
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NEW YORK
DIVESTMENT



http://www.nydailynews.com/news/poli...713-story.html
Quote:
EXCLUSIVE: DiNapoli divests N.Y. pension funds from private prison companies - NY Daily News

Spoiler:
ALBANY — State Controller Thomas DiNapoli this week took the rare step of divesting all direct state pension fund holdings in private prison companies.
The move comes amid concerns about President Trump’s stepped up immigration detainment policies.
“For nearly two decades, the fund has recognized private prisons is a controversial industry and restricted investments,” said DiNapoli spokeswoman Jennifer Freeman. “The current immigration situation is creating even more risks in their business model, which has consequences for their long term value.”
The state controller’s office since 1999 has restricted state pension fund investments in private prisons, which are barred in New York. DiNapoli updated the list of companies subjected to the restrictions in 2016.
But as of June, the $206.9 billion state pension fund — the third largest public fund in the country — continued to have a modest $9.6 million in holdings in two private prison companies, The Geo Group and CoreCivic.
DiNapoli on Thursday ordered the divestment of the pension fund’s direct holdings in those two companies.
“Because of the limited size of these holdings, imposing these restrictions will not negatively impact the (pension) fund,” Freeman said.
The move drew immediate praise from pro-immigrant groups.

This US Customs and Border Protection photo dated June 17, 2018, shows intake of illegal border crossers by US Border Patrol agents at the Central Processing Center in McAllen, Texas. (HANDOUT / AFP/Getty Images)
“As Trump ruthlessly seeks to criminalize immigrants and people of color and put us in cages, his administration relies on the morally bankrupt private prison industry to hold our communities captive,” said Javier Valdes, co-executive director of Make the Road New York. “With the Comptroller's bold action…he is ensuring that New York stands up to this grotesque industry.”
Make the Road New York recently issued a report that found full implementation of the President’s “zero tolerance” policy at the border would expand the number of people held in private immigration detention up to 580% within two years.
DiNapoli over the years has been urged by activists to divest pension funds from a host of companies, including the fossil fuel industry. He almost always declines, saying his fiduciary responsibility as the sole trustee of the pension fund its value and the pensioners it serves. He also has suggested he could do more as a shareholder to pressure companies to implement reforms.
Deciding whether to divest “requires a high level of due diligence” and input from the office’s counsel and investment and risk staff, Freeman said.
In deciding to divest from The Geo Group and CoreCivic, Freeman cited concerns about a number of different factors related to private prisons, including immigration detention, and the fact it will not significantly harm the overall pension fund.
Melissa Nunez, a trans woman who said she suffered physical and mental pain as well as being sexually assaulted during a six-month detainment at a CoreCivic facility, urged other states and corporations to follow DiNapoli’s lead by divesting from private prisons.
“New York is sending the message that no one should invest in companies that torture, separate and criminalize our community,” Nunez said.
The Florida-based GEO Group in a statement called it “unfortunate that the state is gambling with public employee retirement benefits by inserting politics in their decision-making rather than basing their decisions on facts.”
“These political efforts are misguided and based on a mischaracterization of our role as a long-standing service provider to the government, and totally ignore the fact that we have absolutely no role in setting criminal justice or immigration policies nor have we ever advocated for or against criminal justice or immigration enforcement and detention policies,” the company said.
CoreCivic spokeswoman Amanda Gilchrist didn’t comment directly on the pension fund divestment, but defended the company’s “valued but limited role in America’s immigration system, which we have done for every administration — Democrat and Republican—for more than 30 years.”
Gilchrist said the Tennessee-based CoreCivic does not provide housing for children who aren’t under the supervision of a parent, advocate for policies, or enforce immigration laws.


https://nypost.com/2018/07/12/conser...nypd-retirees/
Quote:
Conservative group sues pension fund for not releasing info on NYPD retirees

Spoiler:
A fiscally conservative government watchdog is suing the city’s police pension fund for failing to release info on NYPD retirees.
The Empire Center has filed a petition in state Supreme Court that claims the city acted “unlawfully” in failing to provide an accounting of pensions of former NYPD cops.
“The Empire Center seeks to give New Yorkers a clearer view of how their state and local taxes are spent, including by providing information regarding pension benefits paid to retired government employees,” said the lawsuit filed on Thursday.
The organization has won previous battles to gain pension records of government agency retirees, which it posts on its SeeThroughNY.net database.

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Old 07-16-2018, 06:51 AM
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NEW JERSEY

https://www.nj.com/opinion/index.ssf...n_cartoon.html

Quote:
Of black holes and Jersey's pension costs | Sheneman cartoon

Spoiler:
A black hole is region of space time that contains such extreme gravitational pull that nothing, not even light, can escape it.

There is a theory that if you were to cross the event horizon and be sucked into a black hole that you would be discharged out the other size in a thin string of atoms, like human zucchini noodles. You don't need Neil DeGrasse Tyson to tell you that being sucked into, and subsequently extruded out of, a black hole is highly preferable to dealing with the state's underfunded and ever expanding pension system.

Phil Murphy probably thought this would be easier | Sheneman cartoon
Phil Murphy probably thought this would be easier | Sheneman cartoon

The same group of Democrats who so eagerly welcomed Murphy have unceremoniously thrown a bucket of cold water on his grand plans.


New Jersey's underfunded pension costs are currently expanding at the rate of $650 million annually. For layman, that is what we refer to as a buttload of money.

An unsustainable buttload of money. Lost, or perhaps purposefully ignored, in the annual budget showdown is any substantive discussion of how to deal with the boa constrictor currently unhinging its jaw and swallowing us all slowly.

Gov. Phil Murphy paid the pension crisis lip service by pledging to up the state's annual payment, but his close union ties will likely keep him from pursuing the types of benefits reforms required to diffuse the time bomb.

It's not a can that can be kicked down the road in perpetuity, either. Public workers inevitably age, retire and access the pension system they've been paying into their entire careers.

Sports betting and pot taxes aren't going to cover the bill coming due. If the level of benefits they've been promised is unsustainable someone in charge needs to summon the political courage to act sooner rather than later.


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