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  #421  
Old 03-25-2017, 04:53 PM
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KANSAS

https://www.usnews.com/news/best-sta...-with-pensions

Quote:
Budget Woes Have Kansas Lawmakers Struggling With Pensions
Kansas legislators are trying to avoid the kind of moves with funding for public employee pensions that previously clouded the retirement system's long-term financial health.

| March 22, 2017, at 5:50 p.m.
MORE
Budget Woes Have Kansas Lawmakers Struggling With Pensions
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By JOHN HANNA, AP Political Writer

TOPEKA, Kan. (AP) — Kansas legislators worry about resorting to the kind of funding moves with public employees' pensions that previously clouded the retirement system's long-term financial health as they wrestle with the state's serious budget woes.

But lawmakers weren't sure Wednesday whether the state can afford the full, annual contributions to teachers' and government workers' benefits as spelled out in a 2012 state law designed to bolster the Kansas Public Employees Retirement System. House and Senate committees working on budget legislation have so far made conflicting decisions.

Republican Gov. Sam Brownback proposed freezing the state's pension annual contributions at the 2016 level to help erase projected budget shortfalls that totaling more than $1 billion for three years, through June 2019. The proposal is part of a larger budget-balancing package that would allow the state to preserve past personal income tax cuts that he has championed.

The Senate Ways and Means Committee this week voted to add a total of $330 million for increased pension contributions to its proposed budgets for the fiscal year beginning in July and the one beginning in July 2018. The House Appropriations Committee voted Wednesday to postpone a decision on larger contributions until later this spring.

Shawn Sullivan, Brownback's budget director, said that if legislators reject Brownback's plan to temporarily freezing pension contributions, they'll have to consider larger tax increases than they might otherwise pursue.

"It was a necessary evil within our budget," Sullivan said.

But critics of the Brownback's proposals contend that they move the state away from the pension-system reforms enacted five years ago. The governor has touted those reforms as a key accomplishment of his administration.

While state officials see no immediate danger to retirees' benefits, some lawmakers worry that continuing to short pension contributions would push the system — and the state's finances — toward a crisis.

"It's going to blow up on us," said veteran state Rep. Henry Helgerson, a Wichita Democrat.

Brownback's proposals would freeze the state's annual contributions to the pension system at roughly $300 million a year.

If the state does what the 2012 law requires, it would provide an additional $136 million in the fiscal year beginning July 1 and an additional $194 million for the following fiscal year. The state then would be spending close to what financial projections say is needed to keep up with promised benefits into the future. The law would demand additional increases in future years.

.....
The long-term pension funding gap stood at $8.5 billion at the end of 2015, the latest calculation available from the pension system. The 2012 law ramped up the state's contributions and increased paycheck deductions from teachers and government workers to close that gap by 2033.

The governor's proposals this year assume closing the pension funding shortfall would take 10 years longer, until 2043.

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  #422  
Old 03-25-2017, 04:55 PM
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CHICAGO, ILLINOIS

http://chicago.suntimes.com/politics...kers-pensions/

Quote:
Rauner vetoes bill to shore up Chicago municipal workers pensions

Gov. Bruce Rauner on Friday vetoed legislation designed to shore up the pension funds for city of Chicago laborers and other city workers.

“While I appreciate the effort to address the insolvency of certain pension funds for Chicago’s public employees, the legislation will create another pension-funding cliff that the city does not have the ability to pay,” Rauner said in a statement Friday. “This legislation will result in increased taxes on Chicago residents.”

Adam Collins, Mayor Rahm Emanuel’s chief spokesman, blasted the veto, saying “the people of Illinois deserve better.”

Senate Bill 2437 would have put more money into retirement systems covering some 88,000 city workers, excluding police officers and firefighters, who are covered by separate pension funds. The Illinois House passed the bill in December and it was unanimously approved by the Senate in January.

Rauner had previously said he wouldn’t support the bill without more systemic wide-reaching government pension reforms. He also questioned the use of revenue in the bill, which would resort to the city using property-tax money to fund pensions after it runs out of funds from a new tax on city water and sewer service.

.....
With Rauner’s veto applying to legislation from the 99th Illinois Legislative Session, lawmakers in Springfield — now in the 100th Legislative Session — can’t override the veto.

An identical bill, Senate Bill 14, was submitted by Senate President John Cullerton, D-Chicago, on Jan. 11 and advanced to the House on Jan. 25.

Under that plan, city taxpayers would contribute millions more a year to the municipal workers’ and laborers’ pension funds. To pay for the increased contributions, the City Council approved a new tax on city water and sewer service. Without acting, the Municipal Employees Pension Fund would be left with a gaping hole in 2023 — even after a utility tax is fully phased in — that would require tax increases to honor the city’s commitment to reach 90 percent funding over a 40-year period.

In mid-September, the City Council easily approved the mayor’s plan to slap a 29.5 percent tax on water and sewer bills to save the Municipal Employees pension fund. But the Illinois General Assembly still needed to sign off on employee concessions tied to the deal, as well as the funding schedule for the five-year ramp to actuarially required funding.

The same goes for the mayor’s plan to save the Laborers pension fund, bankrolled by a previously approved, 56 percent tax on monthly telephone bills.

The workers’ concessions call for employees hired after Jan. 1 to become eligible for retirement at age 65 in exchange for an 11.5 percent pension contribution. That’s 3 percentage points higher than employees pay now. Veteran employees hired after Jan. 1, 2011, get to choose between contributing 11.5 percent for the right to retire at 65 or continuing to pay 8.5 percent and waiting until 67 to retire.

The legislation also would require newly elected Chicago aldermen and citywide elected officials to serve longer to achieve the maximum 80 percent city pension.
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  #423  
Old 03-25-2017, 04:56 PM
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IOWA

http://www.desmoinesregister.com/sto...lion/99600866/

Quote:
IPERS cuts key target; unfunded pension liabilities up $1.3 billion

Iowa's largest public employees' pension fund decided Friday to lower a key investment target, which will increase unfunded liabilities by about $1.3 billion and could require larger contributions by state and local governments and workers.

The Iowa Public Employees' Retirement System, which has more than 350,000 members, cut its assumed annual rate of return on investments from 7.5 percent to 7 percent. The changes were made in response to concerns that returns will cover less of the cost of retirees' pensions than in the past.

A similar change was approved in December by the California Public Employees' Retirement System, the nation's largest, which is considered a bellwether for public pension funds.

IPERS' Chief Executive Officer Donna Mueller said in a statement that the IPERS' Investment Board approved a set of changes after receiving an economic assumption study from Cavanaugh Macdonald, an actuarial consultant from Bellevue, Neb. Other new assumptions anticipate that inflation will be reduced, interest on members' accounts will decline, and wage growth and payroll growth will decrease

Using the new assumptions with the 2016 data, IPERS’ funded ratio has dropped from 84 percent to 80 percent, Mueller said. IPERS has about $28 billion in assets and an actuarial report issued in December said the pension system had unfunded liabilities of nearly $5.6 billion.

"Even though these changes will have a negative impact on IPERS’ funded ratio, the Investment Board believes that these modifications will provide a more accurate valuation of future liabilities," Mueller said. "Each year an investment return is less than the assumed return adds to the liability and increases the needed return in future years which can lead to even higher contribution rates."
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  #424  
Old 03-25-2017, 05:02 PM
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ILLINOIS

http://www.bondbuyer.com/news/region...1128511-1.html

Quote:
Illinois Brinkmanship Over Public Pensions, CPS Funding

CHICAGO – Illinois Gov. Bruce Rauner pressed Democrats on Friday to get behind state pension legislation that would provide Chicago Public Schools with $215 million in aid it needs to avert an early end to the school year.

"Now we finally have a pension reform package that everyone can agree on so now we can move forward," Rauner said at a news conference. "We can get CPS the $215 million they've requested this year so they do not have to have a crisis. They do not have to close early and we can save taxpayers across the state of Illinois a billion dollars per year."

Rauner's push followed the announcement by House Minority Leader Jim Durkin that he has the support of 26 of the House's 51 Republicans for the bills that mirror Republican-sponsored pension legislation in the Senate.

House Speaker Michael Madigan, D-Chicago, would need to provide 34 votes. Democrats hold 67 seats. Madigan did not issue a comment Friday.

The Republican governor's pleas fell flat with at least Senate Democrats.

The Senate's bipartisan "Grand Bargain" package aimed at breaking a 21-month-old budget impasse includes the state pension changes, but includes permanent help for CPS to cover its teachers' pension payment, similar to what the state provides other districts.

With the "Grand Bargain" stalled over disagreements about a local government property tax freeze and worker's compensation changes, two GOP senators, Michael Connelly of Naperville and Jil Tracy of Quincy, earlier this month broke out the pension reforms into separate legislation.

Their bill offers CPS only one year of pension help. Officials from CPS and Chicago and legislative Democrats balked at the limited help.

Rauner sought to cast off those criticisms on Friday, focusing instead of how the proposal mirrors what Chicago and state leaders agreed to in June as part of a stopgap budget. Unable to bridge their differences on a long-term agreement, the parties signed off on a package that funded state government through 2016 and provided CPS with $215 million in fiscal 2017 on the condition that lawmakers pass the state pension changes.

.....
The junk-rated district relies heavily on cash flow borrowing to stay afloat and has warned that without additional state help or swift court action on its lawsuit charging the state with discriminatory funding practices it will have to close schools early.

The district owes its teachers' retirement fund $700 million in late June.

The pension legislation lays out a series of changes with the cornerstone being a choice offered to employees hired before 2011 to forgo compounded cost of living increases. In exchange, salary increases would continue to count toward their pensionable salary upon retirement. If they decline the offer, future pay raises won't count toward their pensionable income.

It would apply to four of the state's five pension funds, with the judges' fund left out, and also include the Chicago teachers' fund. It would also create a voluntary tier 3 hybrid defined benefit/defined contribution plan for new employees in three of the state' five funds.

Savings are estimated at more than $1 billion.


http://chicagotonight.wttw.com/2017/...re-cps-funding

Quote:
Rauner Pushing New Pension Alternative to Restore CPS Funding

Facing an ongoing lawsuit brought by Chicago Public Schools and increasing calls to restore vetoed funding to the cash-strapped school district, Gov. Bruce Rauner is urging “swift action” to enact statewide pension reform in a new Republican-led bill.

Rauner has called on state Democrats to back GOP legislation that would uncouple a pension reform bill from the so-called “grand bargain,” so that measure could be passed on its own. If that does happen, the governor has said he would sign the legislation and turn over the $215 million in state funds to CPS that he vetoed late last year.

On Friday, the governor announced he is also backing companion legislation sponsored by House Republican Leader Jim Durkin, R-Western Springs, that he says would save Illinois billions through structural pension reforms. Rauner says those savings could then be used to help fund CPS.

“If Chicago is asking for assistance from the state, we need to find a way to help the state save money and justify that assistance – otherwise it’s just a bailout,” Education Secretary Beth Purvis said in a statement. “These bills are good for taxpayers, reduce our pension liabilities and keep kids in school.”

Rauner has long claimed the CPS funding he vetoed was tied to yet-to-be-achieved statewide pension reforms. But he said this legislation would satisfy that deal by linking the same CPS funding to a statewide pension reform bill filed by Senate President John Cullerton earlier this month.

The governor's office claims this package would save the state $1 billion to $2 billion dollars per year.

But Dan Montgomery, president of the Illinois Federation of Teachers, said Rauner’s plan is based on “alternative facts.”

“The pension bill Rauner demands as a condition for funding education reflects legislation that has already been ruled unconstitutional by our Supreme Court several times,” Montgomery said in a statement.

“This new bill, which also steals from public workers’ life savings, is likely to face the same fate, and therefore, its savings amount to nothing. For Rauner to say this is ‘good policy’ suggests he doesn’t understand the law or doesn’t care.”

CPS has been at odds with the state for months over $215 million in pension funding. A 2016 agreement between the city, state lawmakers and Rauner would have sent that money from the state toward this year’s district budget.



CHICAGO

https://fixedincome.fidelity.com/ftg...01128520_110.1

Quote:
Rauner Vetoes Chicago Pension Bill

CHICAGO – Illinois Gov. Bruce Rauner vetoed legislation designed to save Chicago's municipal and laborers' funds from looming insolvency.
"This is another kick-the-can approach to pension funding that landed Chicago in fiscal crisis in the first place," Rauner said in announcing the veto late Friday. "This bill will create an unsustainable funding schedule that will lead to tax increases without solving the real problem."
Rauner highlighted the need for future city tax hikes and called on other state leaders and all of its communities to work together on a "more comprehensive approach to reform."
Reforms, however, are tricky to enact in Illinois. The Illinois Supreme Court shot down attempts by Chicago and the state government to change pensions, citing state constitutional protections against cuts that impair or diminish public pensions.
Chicago Mayor Rahm Emanuel quickly attacked Rauner Friday, citing the need to rescue the funds, and ratings recognition that followed even though analysts consider the fixes flawed.
"The governor continues to make one irresponsible and irrational decision after another, and his veto today is the latest example," Emanuel said in a statement. "Instead of helping secure the future of our taxpayers and middle-class retirees, the governor chose to hold them hostage - just as he has done to social service providers, schoolchildren and universities across the state."
Chicago posted a notice late Friday of an investor "update" call set for Monday morning at 9:00 a.m. Chief financial officer Carole Brown will provide an update and then take questions.
Senate Bill 2437 passed the House in December on a 91-16 vote on the final day of the legislature's annual fall veto session. After intense lobbying to generate bipartisan support, Democrats were joined by some Republicans. The Senate then signed off in a 41-0 vote in early January during the lame-duck session.
The deadline for action by Rauner was March 25. If he took no action, the bill would have become law. The bill is now dead because it was passed by a prior legislature, even though it was passed by veto-proof majorities. The new General Assembly elected in November was sworn in early this year.
The veto was expected given the political dispute between Rauner and the Democratic legislative majorities that has driven the almost 21-month-long state budget impasse.
The governor has also feuded with Emanuel. Rauner had offered to support the bill but only if Emanuel used his political muscle with legislative Democrats. Emanuel instead has attacked the governor for holding a budget solution hostage to Rauner's larger policy agenda.
In anticipation of a possible veto, the new Senate approved Senate Bill 14, identical to the bill Rauner vetoed, in a 38-to-11 vote Jan. 25. It is pending before the House.
......
After a five-year ramp of increasing city contributions, the city commits to making an actuarially based contribution. The current formula, which has allowed the funds' health to falter, is based on a multiplier tied to recent employee contributions.

http://www.chicagotribune.com/news/l...324-story.html

Quote:
Rauner touts support for pension plan that includes CPS aid, vetoes a city proposal

publican Gov. Bruce Rauner summoned reporters to his office Friday to announce more than two dozen House Republicans are willing to vote for pension legislation that would include money for Chicago Public Schools but faces an uncertain future in Springfield.

And the governor's announcement projecting progress came hours before he vetoed a different plan from Mayor Rahm Emanuel to save money by changing city workers' pension plans.

Rauner and Democrats have traded insults for months after the governor's veto late last year of a proposal that would have sent $215 million to CPS. The plan he touted Friday would both cut pension benefits for state workers and teachers while providing that aid to Chicago schools.
.....
Indeed, negotiations surrounding the state pension systems and the financial needs of Chicago Public Schools have been at the center of a prolonged blame game between Rauner and the Democrats. It began in December, when the governor abruptly vetoed the bill that would have provided CPS with a $215 million cash infusion.

Chicago Public Schools chief fires back at Gov. Rauner
Chicago Public Schools chief fires back at Gov. Rauner
The legislation was one piece of a two-part deal between Rauner and the Democrats, hatched as the two sides were finalizing a stopgap spending plan to keep state government afloat through last year's election season. Under that deal, Rauner would approve a one-time payment to CPS in exchange for lawmakers passing legislation to help cut state pension expenses by offering workers less costly options.

The idea re-emerged earlier this year when Cullerton and Senate Republican Leader Christine Radogno of Lemont decided to attempt their own far-reaching compromise effort to break the budget stalemate that's dominated state government for nearly two years. They started working on a package of interdependent bills, with the CPS aid and pension changes as part of the package.

.....
Emanuel wanted the state changes for two reasons: to increase pension fund contributions from new employees to 11.5 percent of their wages from 8.5 percent and to set in law the city's contribution schedule. Without the changes, the funds are at risk of going broke in about a decade. The two funds are a combined $21 billion short of what's needed to pay out future benefits.

Although the City Council has already approved taxes on city water and telephone bills to cover the bulk of additional yearly contributions to the two pension funds, Emanuel's plan still requires changes to state law.

At least for now, he won't get those changes.

"Instead of helping secure the future of our taxpayers and middle-class retirees, the governor chose to hold them hostage — just as he has done to social service providers, schoolchildren and universities across the state," Emanuel spokesman Adam Collins said in a statement. "The governor's actions are harming the most vulnerable in our state, and the people of Illinois deserve better."

Because Emanuel's pension plan was approved by state lawmakers from a previous term, they can't even try to override the governor. But lawmakers could send him a new bill this year.
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Old 03-25-2017, 05:11 PM
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TAIWAN

http://www.taipeitimes.com/News/taiw.../25/2003667437

Quote:
Legislators blast ‘garbage’ reform proposal

CRITIC:The Examination Yuan’s pension reform plan shows that the government body itself is in need of reform, New Power Party Executive Chairman Huang Kuo-chang said

It is not possible for the legislature to accept the Examination Yuan’s version of pension reform, Democratic Progressive Party (DPP) caucus whip Ker Chien-ming (柯建銘) said yesterday, after the proposal was criticized as being lax.
The Examination Yuan on Thursday proposed to gradually lower the income replacement ratio for public servants who have worked for 35 years from 80 to 70 percent, which was deemed lenient when compared with the plan proposed by the Presidential Office’s Pension Reform Committee in January, when it announced its plan to lower the ratio by 1 percentage point each year from 75 percent until it reaches 60 percent.
.....

The Examination Yuan’s proposal also aims to “do away with” the 18 percent preferential interest rate for some retirees — by cutting it to 6 percent within six years for those who received their pension as a lump sum and to zero within six years for those who have part of their pension deposited in a bank account that offers preferential interest rates and also receive monthly pension payments.
It seeks to raise the maximum premium rate from 12 percent to 18 percent for individual contributions to the pension fund by public servants.
The proposal also seeks to raise the age at which retirees would begin receiving monthly pension payments to 65.
The proposal is to be voted on at an Examination Yuan meeting on Thursday next week before being sent to the Legislative Yuan for approval.
The proposal, which is likely to become the government’s formal proposal to the legislature, was also criticized by National Civil Servants Association chairman Lee Lai-hsi (李來希).
He accused the Examination Yuan of betraying its role as an independent institution with a constitutional duty to manage public services.
“The Examination Yuan has succumbed to pressure from the ruling party,” Lee Lai-hsi said, adding that a “war will soon be waged” between the nation’s retired public servants and President Tsai Ing-wen’s (蔡英文) government.
http://www.taiwannews.com.tw/en/news/3125467

Quote:
If not unfair, why does the pension system need reforming?

These recent days, the issue of pension reform again led to quarreling, with first of all, the Examination Yuan overturning the conclusions of the pension reform meetings chaired for about half a year by Vice President Chen Chien-jen. The original conclusion was that the income replacement ratio would drop from 75 percent to 60 percent over the space of 15 years, but the Examination Yuan’s conclusion saw the ratio fall from 80 percent to 70 percent over 10 years, or a full 10 percent more than what the National Pension Reform Conference came up with. Yet, even this result has led to loud protests from the retired civil servants, military and teachers who are the chief beneficiaries of high pensions with high income replacement ratios. “The great war needs to begin, the use of the retroactive reduction of retirement payments for people who are already retired, the Examination Yuan should still abolish that,” said Lee Lai-hsi, the head of the national association of civil servants. “The Democratic Progressive Party government puts the title of reform on what is just fighting,” said Hau Lung-bin, candidate for chairman of the Kuomintang. In the past, I already commented on Hau’s insatiable greed.

Still, I think that even the 60 percent income replacement ratio to be reached after the reforms is too high. I asked many foreign friends overseas and found out that a researcher who worked in the Navy for more than 25 years benefits from an income replacement ratio of 25 percent. A retiree who spent more than 30 years working at Westinghouse in the United States will have an income replacement ratio of 30 percent. The ratio of 60 percent proposed by Taiwan’s reforms is obviously still too high, so that is why when I retired from National Taiwan University more than two years ago, I abandoned the 18 percent preferential interest rate. With just that interest rate alone, I would have been able to receive NT$22,000 (US$725) a month, the wage of a fresh university graduate. Now that I have foregone that interest rate, my income replacement ratio is still 50 percent, which I think is rather reasonable.

In the other news, the Executive Yuan distributed a letter under the heading “Unfair pensions have to be reformed,” but according to media reports, all the letter had was just this heading without any content. The opponents of pension reform criticized the letter for creating hatred and class war. Does this phrase really foment hatred? My Mandarin Chinese might not be that good, so I can’t really tell. If we say that “bad habits should be changed,” what is wrong with that? If we say that “a wrong position has to be corrected,” what is wrong with that? Do we have to say that a right position has to be corrected? If we have to change the pension system right now, of course it is because there is something wrong with it. If those who benefit from retirement pensions now receive an income many times higher than someone who just started work after graduating from university, then the name “unfair pensions” is only just right.
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Old 03-25-2017, 05:12 PM
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ILLINOIS
SPIKING

http://ilnews.org/news/schools/pensi...f59aefa43.html

Quote:
Pension spiking continues despite $130 billion deficit

With an unfunded Teacher Retirement System liability estimated at $71.4 billion, taxpayers might think school boards across Illinois are reining in contributing salary costs.

Such taxpayers would be wrong.

A whopping 10-year teacher contract recently approved in Palatine Community Consolidated District 15 provides back-to-back 6 percent salary increases for the four years leading to retirement for eligible teachers. A teacher entering the retirement track with an annual salary of $80,000 would be making $100,998 a year four years later.

In Crystal Lake Elementary District 47, school board members approved a similar, albeit shorter-termed contract earlier this year. District 47’s four-year deal provides eligible, retirement-track teachers with 6 percent increases over three consecutive years, or raises of 6 percent, 6 percent and 5 percent, depending on age and years of service at retirement. Other teachers in the district not on the retirement track were guaranteed 3 percent salary increases each year.

While neither District 47’s nor District 15’s pension-padding contract exceeds statutory limits, both push limits to the maximum. And, despite the state’s ever-growing chasm between pension obligations and ability to pay, each is an example of a commonplace practice in Illinois public education.

Pensions are calculated on a percentage (up to 75 percent) of the average of a teacher’s highest four consecutive years of salary within the final 10 years of service, according to the state Teachers Retirement System website. So larger raises at the end of a teacher’s career mean larger annual pension benefits, and greater costs to taxpayers.

It’s a practice commonly referred to as pension spiking.

.....
Meanwhile, a new Illinois Policy Institute report states that, on average, career teachers retire at age 59, receive $73,300 in annual pension benefits and can expect to receive more than $2.2 million in benefits during retirement. Almost half of all state appropriations to education (excluding Chicago) are consumed by pensions. Between 2010 and 2014, 89 percent of new dollars spent on education went to retirement costs, according to the report.

In an email, Crystal Lake District 47 Board President Jeff Mason said journalists and taxpayers should focus on “the continuing budget crisis and the handling of pension funds/investments by the state government.

“When locally elected officials receive direction on the resolution of the budget and pension crises, these will provide guidance and a possible impetus for change,” he added.
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Old 03-25-2017, 05:13 PM
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MILWAUKEE COUNTY, WISCONSIN
http://www.jsonline.com/story/news/l...tate/99538418/

Quote:
Milwaukee County Board approves study of switching troubled pension plan to state

Milwaukee County will study transferring all or part of its pension plan to the Wisconsin Retirement System, under a resolution adopted Thursday by the County Board.

On a 12-5 vote, the board approved a resolution by Supervisor Sheldon Wasserman that would create a special work group — made up of representatives of the county retirement office, the comptroller and corporation counsel — to identify steps needed in making such a transition. The panel is asked to provide a report to the board in May.

Supervisors Peggy West and David Sartori said the state would never accept responsibility for the county's problem-prone and complicated pension system. Joining West and Sartori in voting against the study were Michael Mayo Sr., Willie Johnson Jr. and Supreme Moore Omokunde.

Mayo and Johnson said the county should fix the known problems with its system before considering a transition to the state.

Supervisor James Schmitt, a supporter of the study, suggested that the county could move future new hires to the state as a first step in any transition.

Even a full merger of the county system within the state plan would not cause "a loss in pension benefit" for current retirees and employees, said Supervisor Deanna Alexander.

Wasserman introduced the resolution after a series of pension office mistakes and costly corrections were revealed in the last six months.


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Old 03-25-2017, 05:16 PM
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HOUSTON, TEXAS

http://www.houstonchronicle.com/opin...m-11024148.php

Quote:
Turner: Pension plan is gaining forward momentum

With our pension challenges, Houston has reached a fork in the road, and each day we delay in choosing direction costs us another $1 million.

One path allows us to solve our pension problems once and for all; the other path has us repeating the mistakes of the past. It's a choice between eliminating $8.1 billion in unfunded pension obligations and capping future costs or laying off hundreds of city employees and cutting services.

The choice is clear, and that is why we are moving forward to obtain legislative approval of the Houston Pension Solution - a plan that is fair, financially sound, budget-neutral and sustainable for the long term. On Monday, this plan won committee approval and was sent to the full Texas Senate for consideration. Next Monday, we go before the Texas House Pensions Committee, and I expect a similar outcome.

The progress we are seeing is historic. Never before have so many different entities been united in the direction forward. Since February of last year, the city has worked with all three employee pension groups to draft a plan that would be fair to our employees and financially sustainable for them and all Houstonians.

In October 2016, all employee pension groups signed off on an agreed set of terms that would reduce the unfunded liability by $2.5 billion through changes in future retirement benefits and cap the city's future financial exposure. The pension reforms were subject to all three employee groups providing to the city the necessary actuarial data needed to verify the costs - data only the employee groups possess and only they control.
.....
In the absence of the data from the fire pension system, we had no choice but to move forward with our own projections about what it will cost to provide future benefits for fire retirees. We have taken a conservative approach with these projections because we have learned from past mistakes. For instance, in 2001, the city agreed to richer benefit plans for all three employee groups, which the city later learned were based on erroneous representations of the cost of these benefits.

To ensure we are using real numbers to analyze and reflect the true costs, I am, once again, asking the fire pension system to give us their information, like the police and municipal pensions have done. If this information shows we are reducing benefits more than is necessary, we can adjust the proposed benefits cuts. You have my commitment to not take more than what is needed to solve this issue.

For the 27 years I served in the Texas Legislature, I was a staunch supporter of our police, fire and municipal workers. I am still a strong supporter, but the status quo regarding our employee pensions is not sustainable. We must have a sustainable, affordable plan, and the only way to do that is to slow down the rate of growth in retiree benefits and for the city to pay the true costs after the reforms are enacted. Note that the proposed changes affect future benefits, not the benefits retirees are receiving today. The size of future checks may not grow as fast, but the amount of checks going out today will not go down. On that, you have my word.

If we don't make changes, you can add another $130 million to the anticipated budget shortfall for the coming fiscal year. It doesn't matter who you are, where you live or what your annual income is; every one of us will be adversely affected by the decisions we will have to make to close that gap.
.....
Turner is mayor of Houston.

https://www.tribtalk.org/2017/03/24/...ction-is-high/

Quote:
For Houston pension crisis, cost of inaction is high

This week, the Houston delegation descended on Austin to fight for a Houston pension solution and the financial future of our city.

Put simply, addressing the city’s unfunded pension liability is the most critical financial challenge Houston has ever faced.

A bit of background: Over the last 16 years, the city’s three pension systems have gone from being overfunded to where we are today — facing anywhere from a $6.1 billion to $8.1 billion net pension liability, depending on the discount rate used.

That unfunded liability isn’t stagnant, either. For every day that the Texas Legislature does not pass a bill to repair Houston’s pension systems, the liability grows at a rate of $1 million per day. That’s more than $41,000 per hour, or nearly $700 per minute. It goes without saying that this puts the city in an untenable financial situation that must be resolved. There is simply no alternative.

This problem has developed over many years and for many reasons, but the reality is this: The city is facing a financial crisis that — if left unresolved — could cripple it for years to come.

The good news is that Houston officials have come to the Capitol with a strong plan for reform. The plan — also known as “Houston’s Pension Solution” — would pay off the outstanding liability and do it in a budget-neutral fashion. It’s a fiscally responsible plan that solves the problem and puts the city back on firm financial footing, but the state must sign off on the changes before the city can proceed.

The plan has local support but still faces hurdles in the Legislature. There have been calls to move the systems from defined benefit plans, where benefits are guaranteed no matter how investments fare, to defined contribution plans, similar to 401ks in the private sector, where benefits depend on investment returns. That is not a financially viable solution, does not address the already accrued liability and does not uphold the city’s promise to its retirees.

There is also an effort to require a vote before the city can issue pension obligation bonds. While the will of the voters should be heard as often as possible, current state law does not require a referendum on the issuance on pension obligation bonds.

Since he was sworn in, Houston Mayor Sylvester Turner has worked to develop consensus around the concept of “shared sacrifice.” During that time, he has received buy-in from the Houston City Council, the three pension boards, the local business community and all involved stakeholders. In today’s political environment, it’s hard to find that kind of bipartisan consensus.


....
Chris B. Brown
Houston City Controller

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Old 03-27-2017, 05:00 PM
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CHICAGO, ILLINOIS

http://chicagocitywire.com/stories/5...s-shrug-it-off

Quote:
$999 million out, $90 million in: Chicago pension funds see the abyss, shrug it off


In 2015, the City of Chicago’s two employee pension funds paid out $999 million to 29,286 retirees.

But, according to the Illinois Department of Insurance, which tracks public pensions, the two funds themselves only generated $90 million in investment income that year.

Where did it get the other $909 million?

The answer, at least in part, explains why Illinois Governor Bruce Rauner vetoed Chicago Mayor Rahm Emanuel’s proposal to slightly raise the amount new city employees contribute to the two funds, which are supposed to provide for their retirements.

Rauner called it “trying to fix a drought with a drop of rain.” An analysis of the funds in question by Local Government Information Services, which publishes Chicago City Wire, suggests the governor was being generous.

Neither the Municipal Employees Annuity and Benefit Fund of Chicago nor the Laborers & Retirement Board Employees Benefit Fund of Chicago in question-- as well as city taxpayers’ other four funds covering policemen, fire fighters, teachers and park district workers-- generate anywhere near what is required to fund promised retirements for their beneficiaries.

All six operate as government-sanctioned Ponzi schemes, paying retirees with contributions made into the fund by active city employees, as well as taxpayers contributing on those employees behalf.

$5.4 billion short

In 2006, Chicago’s two employee pension funds held a combined $8.5 billion in assets.

Since, they have paid out more than that-- $8.511 billion-- to retired City of Chicago workers.

The funds themselves only generated $3.1 billion in investment returns over the period.

Keeping them afloat are contributions by Chicago property taxpayers ($1.7 billion) and active employees ($1.5 billion), who assume they are saving for their own retirements. They’re not.

Over the last ten years, the MEABF managed to covered its annual beneficiary payouts and other expenses with investment returns twice-- in 2006 and 2009. In the other eight years-- the fund ran large deficits, the impact of which was softened by employee and property taxpayer contributions.

LABF fared better, managing enough investment returns to cover its payouts in six of ten years. But it has burned money the past two years-- including in 2015, when fund investments lost $22.3 million-- $12.3 million investing in corporate bonds and $10 million in fees to investment managers for the pleasure.

....
Using historical investment returns and employment trends, and assuming steady employee and property taxpayer contributions, LGIS projected when MEABF and LABF will be drained of assets.

In 2023, MEABF will be $249 million short. Annual benefit payments that year and in subsequent years will top $1.3 billion.

In 2025, LABF will be $183 million short. Its annual benefit payments in 2025 will reach $238 million.

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Old 03-27-2017, 05:02 PM
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https://mishtalk.com/2017/03/26/pens...big-to-ignore/

Quote:
Pension Problem Too Big To Ignore?
26
Sunday
Mar 2017
Posted by Mish | March 26, 2017 10:00:32 | Economics ≈ 70 Comments
Bloomberg writer Danielle DiMartino Booth says the Pension Crisis Too Big for Markets to Ignore.

But I have a question: If the problem is too big to be ignored, why is nearly everyone complacent?

Only a handful of sites including MishTalk, ZeroHedge, and Jack Dean at Pension Tsunami discuss the problem with any frequency.
....
How Long Can This Go On?

How long everyone can remain complacent over a brewing pension crisis is a mystery.

It will not even take a market crash to cause panic. A major pension fund blowing up could do it. Chicago and Dallas are possibilities.

A recession could trigger a panic, especially if bond yields rise and equities sink simultaneously. A simple earnings scare could cause panic.

Meanwhile, market valuations are the most stretched in history by many measures.
....
Forecast Analysis

GMO forecasts seven years of negative real returns. Allowing for 2.2% inflation, even nominal returns are expected to be negative for seven full years.

Even +3.0% returns would wreck pension plans, most of which assume six to seven percent returns.
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