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  #51  
Old 01-09-2019, 02:46 PM
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Mary Pat Campbell
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SAN FRANCISCO, CALIFORNIA
ESG

https://www.ai-cio.com/news/san-fran...jor-esg-force/

Quote:
San Francisco Employees’ Retirement System Becomes Major ESG Force
In the span of a year, the system has become one of the largest players among US pension systems.


Spoiler:
Almost overnight, the San Francisco Employees’ Retirement System (SFERS) has gone from a bit player to a major force among US pension plans in making investments using factors such as sustainability and advocating that companies in its portfolio be better corporate citizens by reducing emissions.

The changes follow years of disagreement between the city of San Francisco’s governing body, the Board of Supervisors, and the retirement system. In 2013, the supervisors approved a resolution calling on the independently structured retirement system to divest of its holdings in fossil fuel companies. The retirement board and staff took no action, maintaining divestment would be a violation of its fiduciary duty. In 2017, the Board of Supervisors intervened again, with supervisor Aaron Peskin threatening to put up the issue for voters to decide.

A legal battle over whether the retirement system could be forced to divest never happened because retirement board members started to push for divestment.

The media spotlighted the $24.4 billion pension system when its board approved a more limited divestment plan on October 10 to begin a process that would result in the divestment of five fossil fuel companies if they don’t transition to cleaner energy companies.

Divestment if companies don’t comply with SFERS requirements for progress is expected to take one to three years. Another 18 companies were put on a watch list.

SFERS invests in dozens of energy companies, so the plan doesn’t fully comply with the wishes of the Board of Supervisors, but for now, the supervisors have quieted their tone.

What is clear is the Board of Supervisors in environmentally friendly San Francisco would not have any qualms with the pension system’s increased sustainability and other responsible investing efforts.

Since the beginning of 2018, the pension system has committed $1.4 billion, or more than 5% of its assets, to low carbon or other investment strategies with an environmental, social, or governance (ESG) focus, making it one of the biggest ESG players among US public pension plans.

Board documents, memos, and interviews show that prior to 2015, the pension system didn’t have dedicated strategies related to sustainability. Total ESG investments between 2015 and 2017 were $240 million, meaning more than $1 billion was committed in 2018 alone.

The key initiatives in 2018 by the San Francisco system include:

A $500 million commitment to a Goldman Sachs Asset Management passive index equity strategy that is weighted towards companies with lower emissions. On aggregate, the index aims to achieve investing in companies with 50% lower emissions than the Russell 1000 index.
A $500 million commitment to a reduced carbon equity strategy managed by Generation Investment Management, the London-based money manager co-founded by Vice President Al Gore. The active strategy aims to have 70% to 80% less carbon emissions than the MSCI All Country All World Index.
A $50 million commitment to Sustainable Asset Fund II managed by Vision Ridge Partners. The fund invests in sustainable real assets including solar, EV charging, and energy efficiency.
A $50 million commitment to New Energy Capital Infrastructure Credit Fund II, L.P., managed by New Energy Capital Partners. The fund invests in renewable clean energy or clean infrastructure projects including solar, wind, energy storage, and energy efficiency.
A commitment of up to $300 million to Cartica Investors, an activist investor that engages with emerging market companies within its public equity portfolio with the goal of improving the company’s ESG record.
In addition, in December 2017, SFERS committed up to $100 million to the private equity firm TPG’s Rise Fund, an impact investing fund that invests through an ESG framework.

SFERS Chief Investment Officer William Coaker Jr. said at the Oct. 10 meeting that he knew of no other pension plan in the US that had invested more percentage-wise using ESG factors than the San Francisco system. Coaker would not discuss the ESG program with CIO, saying the system’s record spoke for itself.

Long-time SFERS board member Victor Makras, who left the SFERS board in 2018, said “relentless pressure” by board members over a five-year period led to the broader ESG divestment policy. He said Coaker, who joined the system in 2014, was so intent on other investment portfolio priorities, that sustainability investing didn’t rise to the top of the priority list.

“I think the chief investment officer was so focused on hedge funds that he allowed the rest of the portfolio to ride on itself,” said Makras, who had been pushing for SFERS to focus more on sustainability investing as well as divestment of fossil fuel securities.

Another difference in the larger ESG focus is the hiring of a full-time director, Andrew Collins, as head of ESG investing, said the system’s general consultant, Allan Martin, at the Oct. 10 meeting.

“I don’t want to underestimate the hiring of a director of ESG,” said Martin. “Every company I ever worked in, when they have a problem, they put together a committee and the committee comes up with brilliant ideas to fix it, but if you don’t say to someone it’s your job to deal with this, it never gets done.”

Martin said that Collins is responsible for SFERS’s progress in ESG investing in such a short time period.

SFERS has also joined other global institutional investors active in Climate Action 100+, an initative aimed at curbing the emissions of the 100 worst polluters among global corporations. As part of its membership, the San Francisco system became the lead negotiator with two global supergiant oil and gas companies on reducing their emissions, Collins told the board in October.

Collins commented on the overall push by SFERS towards responsible investing in an Oct. 10 memo to the system’s board.

“This places SFERS as a national leader in terms ·of investing a significant percentage of plan assets in a manner that considers climate risks and opportunities,” the memo said. “Few other US public pensions with plans assets similar in size to SFERS have been as active. “

In fact, percentage-wise compared to its total asset allocation, the San Francisco pension system’s commitment of more than 5% to investing with a focus on ESG factors is bigger than those made by large pensions plans, such as the New York State Common Pension plan, the New York City Pension plans, California’s public employees and teachers’ plans, an analysis by Collins concluded.

The analysis showed that none of those plans’ ESG investments exceeded 3% of their total assets.


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Old 01-10-2019, 01:38 PM
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Mary Pat Campbell
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CHICAGO, ILLINOIS

https://www.forbes.com/sites/ebauer/...c#3fd0aede5742
Quote:
The Problem With Chicago's Pensions Is That There Is No Low-Hanging Fruit

Spoiler:
Readers, earlier this week, I described the litany of benefit increases in the Chicago Municipal Employees' pension plan, increases which were not matched with corresponding increases in employer contributions, and which include the 3% fixed postretirement increases which outgoing mayor Rahm Emanuel referenced in his December speech calling for pension reform. And eliminating this sounds like some tempting low-hanging fruit to solve the problem.

Folks, there is no low-hanging fruit.

Or, rather, the low-hanging fruit has already been picked.

After all, my recitation of benefit increases stopped in 2004. Subsequent changes were primarily a matter of governance policies, until the creation of Tier II benefits for employees hired in 2011 or later, and the creation of Tier III benefits for employees hired in mid-2017 or later. The Tier II basic benefit formula was unchanged, but the overall benefit value was reduced in multiple ways: the normal retirement eligibility age was increased from 60 to 67, with reduction factors for early retirement, beginning at age 62, doubled and exceptions to the reductions for long-service employees removed. The cost-of-living adjustment was set at half the rate of inflation, and does not compound, which over time will cause benefits to fall considerably behind relative to inflation, and a cap on pensionable salary was set at a bit over $100,000, which is only partially indexed for inflation, so that, over time, more and more employees will be impacted by this cap. This set of reforms is similar to that of the Tier II system for Illinois teachers, state employees and university employees. Tier III, however, is not the same as the state's Tier III, which is a whole 'nother story, but is more-or-less a simple increase in employee contributions, up from 8.5% to 11.5%, with, as partial compensation, a drop back down to 65 and 60 as the normal and early retirement ages.


So, on the one hand, the city wisely stopped digging. But the Tier II and III systems are troubling in their own way, because they're not sustainable. In 2017, the Tier II limit was $112,408. Based on the valuation assumption of 2.5% interest, that limit increases to $132,000 in 2030, $150,000 in 2040, and $169,000 in 2050. Which sounds like it's time to take out the World's Tiniest Violin, until you do the inflation-adjusting math and see that in 2050, expressed in the 2018 equivalent, pension-eligible pay would be capped at $76,000. For comparison, the current average salary for plan participants is $54,542, taken as before from the most recent actuarial report. And, though I've been focusing on the city employees' plan, and the provisions for the various plans do differ, the average salary for the Laborers' Annuity and Benefit Fund is $74,604; for the policemen's plan, $91,064; and for the firemen's plan, $97,039.

The actuaries' long-term projections are another way to understand the magnitude of the benefit cuts for newly hired employees. The actuarial term for the value of the pension accrual in the year of the plan valuation is the Normal Cost. At the same time, valuation reports calculate the expect employee contributions in any given year; subtract the latter from the former and you have what's called the Employer Normal Cost, which is the value of the year's accrual that the employer has to cover beyond what the employee pays in. For the Municipal Employees' plan, in 2017, because the majority of the employees are still Tier I employees, the value of the employer normal cost as a percent of payroll is 6.2%. In 2030, that drops down to 2.3%. In 2043, when nearly all of the original Tier I employees will have retired, the value of the benefit provided by the city of Chicago beyond what employees pay in, drops down to 1.0%. And, remember, these employees do not participate in Social Security -- this is not a 1%-of-payroll benefit in addition to their FICA employer contributions. This is 1% of pay, period. (The situation is different at the other three plans; all plans are affected by the pay cap but the police and fire plans, for example, still have far younger retirement ages.)

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For how long will the city's labor unions tolerate this situation? One presumes they tolerated the current benefits not because they can't do math, but because they figure they have time enough before the caps start to cause their members significant pain, to reserve that battle for the future. If Chicagoans of the future are lucky, norms will have shifted enough by then for those future benefit improvements to be more 401(k)-like, and perhaps they'll begin to participate in Social Security, but changes of some sort or another will have to be made. Consider this, too: at present, once the city has fully ramped up to the full post-phase-in contribution levels, assuming that plan experience and asset returns match the actuarial assumptions, they'll be paying contributions to the Municipal Employees' plan equal to 47% of workers' pay. Based on my calculations using the data in the actuarial report, if the Normal Cost increased at a rate equal to that of the projected compensation increases, instead of the much lower increases due to benefit cuts, as a ballpark estimate of the impact of unwinding these unsustainably-too-harsh benefit cuts, it would take city contributions at the rate of 76% of payroll, through 2058, in order to reach this 90% funding goal. I have not repeated this hypothetical alternative calculation with the remaining three city plans; but, for comparison, assuming no benefit changes, the existing contribution schedules as a percentage of payroll after phase-in are 59% for the police plan, and 72% for the firemen. For the Laborers' plan, the best funded but smallest of the four plans, the contribution schedule is not a level percent of pay but ranges from 45% to 50% of payroll. Where will that money come from?

Also, to clarify, the funding schedules are based on holding contributions steady as a percent of projected payroll from 2023 to 2058. In 2023, that's about 18% of the city budget. But if city budgets increase on average at a rate less than these assumed payroll increases, either by prudent budgeting or due to population and tax base drops, the actual pension contributions as a share of total city spending will not be level at all but will climb year-after-year.

The city has also cut benefits in a second way: as of the end of 2016, it ended its promises to pay postretirement medical benefits. Although at the state level, the Illinois Supreme Court struck down attempts to reduce OPEB ("Other Post-Employment Benefits") promises in 2014, the city believes it has a case for moving forward with these cuts. As Stephen Eide at City Journal explained in 2015,

Chicago has argued that the stipulation didn’t apply to its reforms because the city has taken pains for decades to clarify to retirees that OPEB was “limited by settlement agreements and statutes to discrete periods of time,” the last of which expired in 2013.

Not surprisingly, the city has been sued and cases are ongoing.

And the third possible, though more difficult-to-achieve, sort of low-hanging fruit is a reduction in future service-based benefits for existing employees. Although I believe strongly that this is necessary, the unfortunate reality is the cost savings associated with this move is small. The impacts are not provided for all plans in all actuarial reports, but for the Municipal Employees' plan, the actuarial liability, that is, the value of benefits accrued-to-date, amounts to $16.3 billion. The value of future service accruals for existing employees (which is not included in the valuation math) amounts to an additional $1.7 billion - a large sum of money, to be sure, but not so much so that reducing this figure will have a significant impact on pension funding.

So what about the 3% COLA? Eliminating this is not at all easy to achieve (and the subject of a future article).

All of which means that, having made all possible easy cuts, remaining changes become much more difficult.


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  #53  
Old 01-10-2019, 02:46 PM
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Mary Pat Campbell
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OREGON

https://www.opb.org/radio/programs/t...n-system-debt/
Quote:
The $22 Billion
Question: Understanding PERS
Spoiler:
Oregon’s Public Employees Retirement System is in billions of dollars of trouble. But it's not just an abstract number: this is a story about real people’s lives and it affects all Oregonians.

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Maybe you already know a lot about Oregon’s Public Employees Retirement System. Or maybe you feel like you should know more, but every time you try to learn about it your eyes start to glaze over. Most likely, you know enough about PERS to know that there’s a problem — a problem that amounts to $22 billion.

Basically, there’s a gigantic gap between what public employers owe in pension costs and the money they actually have. And, obviously, every dollar that’s spent on pensions can’t be spent on anything else.

You can really boil it down to these big questions:

What do we — as a state — owe to the people who were promised a certain kind of retirement?
What does everyone deserve, in terms of crucial public services like education and public safety?
And what happens if the answers to those first two questions are at odds?
We talked to a number of people affected by, and trying to fix, PERS to try to find some answers to these questions.

The Activist
Everice Moro worked for the Estacada School District for 30 years. She was the lead plaintiff in a lawsuit about PERS cuts.
Everice Moro worked for the Estacada School District for 30 years. She was the lead plaintiff in a lawsuit about PERS cuts.

Bryan M. Vance/OPB

Everice Moro was an educational assistant in the Estacada School District for three decades.

“I can tell you that the hourly wage when I left, after 30 years, was $14.61,” she said.

Moro’s husband, David, also worked for the school district. He was a custodian. They were both what’s known as “classified employees.”

“When we both worked for the district, we still qualified for free lunch for our kids when they were in school,” Moro explained.

Many public employees, like the Moros, agreed to a kind of tradeoff: in return for lower salaries than what they might get in the private sector, they’d receive more generous retirement benefits.

In 2013, the Oregon Legislature passed a bill that slashed more than $5 billion from future pension payouts by reducing the cost-of-living adjustment for those pensions. Lawmakers called it “the grand bargain.” Unions called it “the grand theft.”

Public employee unions sued and successfully overturned many of those changes. Moro became the lead plaintiff in the lawsuit.

“I committed my life to this job that I loved, but I don’t think I should be punished because I did that job and I was good at that job and I stayed at that job for all those years,” she said. “Here’s what you promised me and now you’re going to take it away? No. That’s not OK.”

The Employer
Joe Gall is the city manager of Sherwood, Oregon.
Joe Gall is the city manager of Sherwood, Oregon.

Bryan M. Vance/OPB

Joe Gall is the city manager of Sherwood, a city of about 20,000 people in Washington County. Over the last four years, the amount that his city pays in PERS costs has nearly doubled.

“And if those costs were not rising at such a high rate, some of the resources that we’re going to be spending on PERS costs could be allocated towards additional police officers,” Gall explained. “Sherwood is a very safe community … And as our city grows and we get more businesses and more residents, our police department is not growing — in terms of staffing — to keep up with that growth. And they are worried and concerned that we are going to lose that distinction of being a very safe community. And that’s real to people.”

Gall says the solution to the very real problem Sherwood and other communities are facing is not going to come at the local level.

“The solution, quite honestly, is in Salem,” he said.

The Governor
Former Oregon Gov. Ted Kulongoski made some changes to PERS in 2003. 
Former Oregon Gov. Ted Kulongoski made some changes to PERS in 2003.

John Rosman/OPB

The politics of PERS are at least as complicated as the economics. Ten years before Oregon Gov. John Kitzhaber signed that “grand bargain” to try to rein in PERS costs, his predecessor, fellow Democrat Ted Kulongoski, did something similar.

Those reforms also raised the ire of public employee unions, who were able to partially overturn them in a court challenge. The state’s largest public employee union also backed a primary challenger to Kulongoski when he ran for reelection in 2006 after making those changes to PERS. He defeated that challenger and went on to victory in the general election.

“They just shot at me and missed,” he said.

Kulongoski says part of the political problem is that most taxpayers don’t have the kind of generous pensions that public employers have.

“They’re very fair and what they want is everybody to be treated fairly. That means they don’t want a perception that one’s doing much better than them when they’re paying for it.”

The Politico
Former Republican lawmaker Julie Parrish is working on a ballot measure to try to address the ballooning costs of PERS.
Former Republican lawmaker Julie Parrish is working on a ballot measure to try to address the ballooning costs of PERS.

Courtesy of Julie Parrish

Julie Parrish is a Republican from West Linn who served four terms in the Oregon House before being voted out this past November. She is passionate about the urgency of reducing PERS costs.

“If we don’t do anything about PERS, it will swallow every available dime that is in the growth of our government,” she said. “You can keep raising taxes and you can keep throwing money at our state government, but it is being consumed by PERS and if you don’t fix it, you will be paying more for less services.”

Parrish won’t be involved as a lawmaker anymore, but she’s working on a ballot measure to prohibit public employers from borrowing money to pay down their pension costs. She hopes that this would put enough pressure on lawmakers that they would be forced to make drastic changes to reduce the costs of the whole system.

“The voters are going to have to get engaged with this,” she said.

The Reporter
Oregonian reporter Ted Sickinger still finds PERS fascinating after reporting on it for over 10 years. 
Oregonian reporter Ted Sickinger still finds PERS fascinating after reporting on it for over 10 years.

Bryan M. Vance/OPB

Ted Sickinger has reported on PERS for more than a decade for the Oregonian/OregonLive and he probably knows as much about the system as anyone in the state.

“You know, I still find the dynamics of this whole thing fascinating. It’s really complex politically, legally, economically, and people are passionate about it. They read these stories and they react to them, sometimes in ways that I can’t predict,” he said.

Asked what he sees as the biggest public misconceptions about PERS, he said, “Maybe one of them is that if we ignore this, it’ll go away.”

Needless to say, it won’t.

Looking ahead to the 2019 session, Sickinger says that if the Legislature doesn’t make changes, a ballot measure is inevitable.

“And that looks a lot more draconian than anything that the Legislature is going to touch.”

The Employee
Justin Kuunifaa is a nurse and has been a public employee for his whole career. 
Justin Kuunifaa is a nurse and has been a public employee for his whole career.

Bryan M. Vance/OPB

Justin Kuunifaa is a nurse at the Southeast Portland Health Center. He’s originally from Ghana and he’s been a public employee for his entire career. Kuunifaa is a Tier 3 public employee, which means his benefits are less generous than his peers in Tier 2 and Tier 1, who were hired before him.

“Frankly speaking, it would be significantly harder for me to stay in public service if PERS were to be cut,” he said. “Despite the fact that these are some of the patients that need care the most and who I love and am honored to work with, I would have to leave them behind to go find a job in the private sector where I could make more money.”

What’s Next?
It’s unclear whether lawmakers will take up any major changes to PERS in the 2019 legislative session. It’s politically tricky for Democrats, who control both chambers as well as the governorship, because public employee unions are a big base of support for them.

“It will be difficult,” said former Gov. Kulongoski. “There is a way to resolve it, but it’s going to take somebody who’s willing to get out and pay the political risk of doing something.”


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Old 01-10-2019, 02:46 PM
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Mary Pat Campbell
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PENNSYLVANIA

https://www.jonesday.com/pennsylvani...rt-01-07-2019/
Quote:
Pennsylvania Pension Review Commission Releases Final Report

Spoiler:
The Pension Review Commission has determined its recommendations to improve the management and performance of the state’s largest public pension systems

A Pennsylvania commission—tasked with evaluating and making recommendations for the state's two largest public pension systems—held its final meeting on December 20, 2018, and approved its final report.

The report issued by the Pennsylvania Public Pension Management and Asset Investment Review Commission ("Commission"), outlines seven general recommendations to the General Assembly, the Governor, and the trustees of each of the two retirement systems. We will provide further in-depth analysis of these recommendations in a future Commentary.

At a high level, the most impactful recommendations include:
Move to fully index all public market investments;
Establish a centralized investment office that would be responsible for the systems' investment functions and would leverage the combined size of the two pension funds to seek more favorable investment terms;
Establish policies at the two public pension systems, encouraging public reporting of investment costs and expenses at the fund and manager level;
Enact legislation mandating—and repeal existing laws that frustrate—increased public reporting for all investment expenses; and
Adopt risk reducing measures such as risk budgets, risk balancing policies, limits on levels of illiquid investments, and focusing on leverage levels.

The Commission also included a separately printed appendix at the request of Commissioner Bernie Gallagher, who voiced concerns about the report's tone in a previous meeting. The appendix provides "additional context" to the parts of the report Commissioner Gallagher believed needed "further qualification."

We previously discussed the Commission's work in Alerts such as "PA Commission Scrutinizes Active Management of Public Pension Assets," "Pennsylvania's Imminent Report on Investment Fees: What's Coming Next?," and "Pennsylvania's Commission Continues to Probe the Value of Active Management."

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Old 01-10-2019, 02:48 PM
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CALIFORNIA
OPEBs

https://calmatters.org/articles/comm...time-bomb/amp/
Quote:
My turn: California’s other fiscal time bomb

Spoiler:
California’s state and local agencies have $187 billion in unfunded retiree health care and other benefit liabilities that threaten to crowd out public services, such as public safety and education, that Californians expect government to provide.

Fortunately, state and local officials have more options to manage these other post-employment benefits than they do for public pensions. It’s urgent that they start exercising these options.

The estimated $187 billion in unfunded liabilities comes from a Reason Foundation review of audited financial statements published by the state, University of California system and several hundred local governments, including counties, cities, school districts, community college districts and other special districts for the 2017 fiscal year.

The bulk of the unfunded liabilities are carried by the state —$88 billion— and a handful of large agencies, such as Los Angeles County, with $25 billion in unfunded post-employment benefits, and the University of California system, with $19 billion.

Perhaps the biggest impact is being felt by the Los Angeles Unified School District, which is struggling with declining enrollment and long-term budget issues. Lower enrollment means reduced state aid.

Since post-employment benefit costs are relatively fixed, they become an increasing burden as the school district’s revenue falls. In the case of Los Angeles schools, post-employment benefit costs for retired teachers and staff amount to $700 per student annually and consumed 4 percent of the district’s total revenue in 2017, according to data in the district’s own audited annual financial report.

Unlike pensions, other post-employment benefits, including healthcare coverage, are not covered by the California Rule, which locks in an employee’s ability to continue accruing benefits under current or more generous terms.

If an employee’s pension benefit is now growing at 3 percent of his or her salary for each year of service, the California Rule requires that this benefit growth rate continue.

By contrast, state law provides no similar floor for other post-employment benefits, so they can be altered or abolished by each government, although such changes are subject to collective bargaining for represented employees.

At the extreme end, for example, the city of Stockton terminated retiree health benefits when it filed for bankruptcy but left public pension benefits untouched.

Of course, terminating retiree benefits without notice is not the desired outcome and one that can and should be avoided through sound public policy.

This means that governments should pay for other post-employment benefits as they are earned, a practice known as pre-funding, and that the benefits promised to government workers should be sustainable. Fortunately, there are several avenues for more responsible policy.

Many agencies constrain other post-employment benefit liabilities by asking retirees to pay a portion of their own health insurance costs.

Agencies such as L.A. Unified that currently make the full premium payment should consider introducing a retiree responsibility component, especially for higher-income retirees who can afford to pay for a portion of their own benefits.

Further cost savings can also be achieved by reducing or eliminating coverage for a retiree’s dependents.

It is usually less costly to provide retiree health benefits to people over 65 because this group is eligible for Medicare.

Governments that offer other post-employment benefits should limit benefits for their retirees over the age of 65 to the cost of Medicare wraparound policies that cover gaps in federal coverage for things like prescriptions and deductibles.

Medicare expansion or single-payer health care policies could greatly reduce or eliminate state and local other post-employment benefit liabilities but these programs would be shifting the costs elsewhere and could have more serious fiscal downsides for taxpayers.

For example, a California single-payer plan passed by the state Senate in 2017 was estimated to cost $400 billion annually.

Unfunded post-employment benefit obligations represent a growing burden on public agencies. While federal or state health care legislation might someday help resolve the problem, such changes would be controversial and costly. Rather than hope for a bailout, governments now facing large unfunded post-employment benefit obligations should look toward realistic reforms.

Pre-funding, requiring retirees to pay for a portion of their own benefits, and limiting dependent coverage are the most sensible paths to start digging out of the $187 billion hole facing taxpayers and future retirees.

Marc Joffe is a senior policy analyst at the libertarian Reason Foundation in Los Angeles, marc.joffe@reason.org. He wrote this commentary for CALmatters.


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Old 01-13-2019, 09:21 AM
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CHICAGO, ILLINOIS
PENSION OBLIGATION BONDS
https://www.wirepoints.com/tee-up-th...ons-quicktake/
Quote:
Tee Up The Can For A Big Kick On Chicago Pensions - Quicktake

Spoiler:
It’s a “no-brainer.” It doesn’t even amount to borrowing money. Incredibly, that’s what the new chairman of the powerful Chicago City Council Finance Committee, Patrick O’Connor, says about borrowing to pay off Chicago’s pension debt.

It’s in an interview of O’Connor by the Chicago Sun-Times’ Fran Spielman.

Maybe Chicago’s new mayor will have a different opinion, but O’Connor’s comments are a pretty clear indication Chicago is headed towards a pension obligation bond.

We have a different opinion on pension obligation bonds and we are not alone. Some of our earlier articles on them are linked below.


https://chicago.suntimes.com/news/oc...ion-borrowing/
Quote:
O’Connor promises quick action on structure for $10B pension borrowing


Spoiler:
Calling it a “no-brainer” the City Council’s new Finance Committee chairman on Friday promised quick action to set up the structure for issuing up to $10 billion in pension obligation bonds.

Mayor Rahm Emanuel urged the City Council last month to sign off on a $10 billion pension borrowing to save beleaguered Chicago taxpayers “as much as $200 million” in his successor’s first budget.

He also argued that there is “not an endless amount of time” for aldermen to act because the window of opportunity created by lower interest rate may soon close.

On Friday, Ald. Pat O’Connor (40th) strongly agreed.


“The pension borrowing, I think, is a no-brainer. I’m hoping to get that through…You’re not borrowing any money. You’re setting the stage to allow the money to be borrowed….The market is what dictates whether we can do bonds or not,” said O’Connor, Emanuel’s City Council floor leader.

“If the market is favorable when a new mayor and a new council come in, it might be favorable in May or June and totally unfavorable in July and August. It takes months to get this in place. So, in order to avail yourself of the opportunity to refinance, you would need to have this thing in place to do it when the new council comes in.”


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Standard & Poor’s has warned that pension obligation bonds “in environments of fiscal distress or as a mechanism for short-term budget relief” could threaten Chicago’s BBB+ bond rating. Municipal finance experts have also raised concerns, pointing to pension-bond defaults in Detroit, California and Puerto Rico.

But O’Connor argued Friday that not issuing pension obligation bonds was equally risky and, in fact, a missed opportunity to minimize the pain from another punishing round of post-election tax increases.

“Rather than hamstring a council by not putting it in, we’ll be responsible and give them another tool to fight the pension crisis,” he told the Chicago Sun-Times.

“Frankly, the question should be to the mayoral candidates: Are you gonna use it? Because that’s the more salient question. That’s what Chicagoans need to know. The fact that you have a good kicker doesn’t mean you’re gonna use him in a certain situation in the ballgame.”

By coaxing Ald. Edward Burke (14th) to relinquish the Finance Committee chair that has been his power base for decades, Emanuel hoped to secure the final months of his legislative agenda before the mayor leaves office.

That includes a final contract that would pave the way for visionary billionaire Elon Musk to build a “Tesla-in-a-tunnel” high-speed transit system between downtown and O’Hare Airport.

Transportation Commissioner Rebekah Scheinfeld has warned aldermen to seize Musk’s offer or risk having the mercurial Musk walk away from Chicago and take his idea to another city.

O’Connor strongly agreed.

“I don’t know him. But I’m told that he’s a little quirky and he might decide that it’s not worth the battle. I mean — look what happened with the Lucas Museum. They just decided, ‘I’m not putting up with this nonsense,'” O’Connor said.

“It’s a reason to have a quick hearing. It’s a reason to have a quick discussion. I don’t mean quick in the sense of slip-shod or not complete. I mean quick in time.”

O’Connor said he would have loved to have been among the aldermen who traveled to California to take a bumpy, but exhilarating test ride on Musk’s innovative tunnel system.

“It’s an intriguing thing. Frankly, it saves us a ton of money…This is a significantly different thing than high-speed rail. But it still accomplishes getting people back and forth from O’Hare in a quick way,” he said.

What might not be so quick, O’Connor said, is Finance Committee action on Emanuel’s plan for $1.5 billion in tax-increment-financing subsidies to unlock the development potential of four mega-sites in and around the downtown area, including Lincoln Yards.

“Creating a tool for a future council I don’t think is a controversial vote. Creating a vote that expends…hundreds of millions of dollars –– that’s something the council is gonna have to be deliberate,” O’Connor said.

“I will spend as much time as necessary to determine whether it happens…It’s not that I’m not gonna rush. I’m gonna hold the meetings that would be required to allow it pass or fail. But I don’t have the authority or the ability to make it pass or fail.”


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Old 01-13-2019, 02:11 PM
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DIVESTMENT

http://ipfiusa.org/wp-content/upload...ons-Paper_.pdf

Quote:
DIVESTMENT
The Impact of
Political Decisions
on Public Pensions

EXECUTIVE SUMMARY
Public pensions are increasingly being politicized and used as a means to affect social or political change.
These actions act directly against the fiduciary responsibility that fund managers have to their plan beneficiaries.
One of the most common tools used in these cases is divestment, or stripping plans of investments deemed to
be against a social or political goal. Public pensions at all levels across the country are facing calls to divest of
everything from fossil fuels to tobacco to private prisons and other industries.
At the forefront of the divestment movement are Mayor Bill de Blasio and Comptroller Scott Stringer of New
York City. It has been one year since Mayor de Blasio announced that NYC would divest from fossil fuels within
the next five years. Furthering his efforts to strip New York City’s five pension plans of fossil fuel stocks, the city
issued a request for information (RFI) to gather public input to inform their divestment plans. What has resulted
is a mixed bag, with some stark opposition to the plan, considering that the cost would be detrimental to the
retirees. In response to the RFI, IPFI provided a report detailing the costs, ineffectiveness, and inherently wrong
nature of the City’s plan to divest. Subsequently in December 2018, the New York City’s Comptroller issued a
request for proposals (RFP) to support the city’s intended divestment strategy for three of the city’s five public
pension funds. Proposals are due by February 8, 2019 and the contract is reported to begin in December 2019.1,2
While IPFI as an organization steadfastly opposes any plan that politicizes a public pension fund, the issue of
divestment requires a closer look, particularly in light of divestment’s costly effects on pensioners and their
retirement savings. The public deserves to know the facts about this misguided strategy.
Through a close analysis of academic research and case studies, we explain the inherent problems
of divestment.
1 https://comptroller.nyc.gov/rfp/rfp-...ement-systems/
2 https://www.pionline.com/article/201...uel-divestment
• Divestment is rooted in arguments based on global urgency, political necessity, or morality. This is inherently
against the fiduciary responsibility of public pension fund managers. While there may be a financial pretext to
support the divestment argument, it is ultimately a tool to affect corporate, social, or political change; not a tool
to increase financial returns of the fund.
• Divestment as a means of creating change is ineffective. Numerous studies have found that divestment
campaigns produce no discernible impact on share prices or company valuations, therefore having a minimal
effect on the corporate behavior that divestment movements are looking to change.
• Expert financial management firms disagree on divestment strategies. In New York City, financial
management firms questioned the effectiveness of divestment and disagreed on the divestment strategies.
If such experienced firms are questioning divestment, then public pensions should as well.
• There are real, expensive costs associated with divestment which directly harmed public pensions.
Past pension divestments in California show the loss of returns associated with divesting from specific industries.
Furthermore, studies show that pension funds would lose millions of dollars if they divest from fossil fuels.

....
more at the link

https://burypensions.wordpress.com/2...d-front-group/

Quote:
Fossil-Fueled Front Group

Spoiler:
That is how the Institute for Pension Fund Integrity (IPFI) has been labeled as they produce white papers supporting the positions of their backers including one that came out this week on The Impact of Political Decisions on Public Pensions which looks to drive home the point that “pension funds would lose millions of dollars if they divest from fossil fuels”, thus harming participants. They cite studies done in New York City, Colorado, and California but ignore a few things:


Public pensions are overwhelmingly Defined Benefit in nature. Participants (in theory) will get their benefits. It is taxpayers, through their governments, who bear the risk (in theory).
If you divest from something that leaves money to invest in something else. Couldn’t the whole climate change crowd be a front group for the solar panel industry? See how it played out in Union County.
If IPFI is correct that the “literature seems to agree that divestment as a means of creating change is ineffective, and more and more, pension funds are rejecting calls to divest” then why is IPFI in business (except to make money)?
There is a need to focus on integrity in public sector pension plans but it is not on account of what these funds are investing in but rather what they are not investing in because they do not have the money they are supposed to have. $4.4 trillion would buy a lot of white papers.


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Old 01-14-2019, 09:47 AM
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TEXAS
https://www.ai-cio.com/news/texas-te...n-commitments/

Quote:
Texas Teachers’ Closes Out Year with $1.8 Billion in New Commitments Across 12+ Strategies
Commitments primarily focused on real estate and infrastructure.

Spoiler:
The Texas Teachers’ Retirement System approved over $1.8 billion in commitments to more than a dozen strategies during December, a recently issued report from the pension revealed.

A majority of the capital committed was allocated towards vehicles that primarily focus on real assets investments, such as infrastructure, real estate, and energy. However, private equity vehicles with large buyout strategies received some attention from the $154 billion investor.

Sweden-based EQT received the most capital from TRS, clocking in $450 million across three strategies. The new EQT Infrastructure IV fund, which is aspiring to raise about $9 billion in capital, received $200 million from TRS. Subsequently, two real estate strategies, EQT Real Estate II and a co-investment vehicle, received $100 million and $150 million, respectively.

The investor also deposited a significant amount of capital into Alamo L.P., a separately managed account hosted by KKR that invests in several asset classes. The SMA received contributions for its infrastructure ($100 million), large buyout private equity ($225 million), and opportunistic real assets ($13.9 million) strategies.

The remainder of the institutional investors’ December 2018 activity is summarized below:



TRS is currently at 76.9% funded, and it is projected to take 31 years for TRS to reach 80% funded.


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Old 01-14-2019, 09:49 AM
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CONNECTICUT

https://www.ai-cio.com/news/connecti...pension-fixes/

Quote:
Connecticut Task Force in Extra Innings to Find Pension Fixes
Commission still grappling over plan to tap state assets like office buildings to feed ailing retirement program.


Spoiler:
The task force commissioned with studying Connecticut’s $37 billion pension problem was supposed to report its recommendations by January 1, but hasn’t yet finalized its plan.

Assigned with uncovering ways to shore up the Constitution State’s underfunded plans, the Pension Sustainability Commission last week decided to continue into overtime. The main issue the panel is grappling with is how to convert state-owned assets—like office buildings, parking lots, and raw land—into a trust fund that can earn money to feed the pension program

State Rep. Jonathan Steinberg, a Westport Democrat and the unit’s chairman, said the team should determine a final list of recommendations for the General Assembly within the next several weeks.

Some panelists, however, did not see the possibility in achieving its goal of generating $1 billion in income, doubting that sufficient assets could be found for the trust.

“I’m not sure there are sufficient assets” available for the task, said Ted Murphy, a local real estate professional and committee member.

This was echoed by Erin Choquette, a legislative and policy adviser at the state Department of Administrative Services.

Implemented in the 2018-19 fiscal budget, the commission was initially scheduled to cease action at the start of the 2019 legislative session. Its goal was to uncover $1 billion in pension savings, but Steinberg knows it’s only a small piece of the solvency puzzle.

“No matter how many assets there are, it’s not solving the entire pension problem,” he said.

Should the state form the asset trust, it would be the first time any government would do so, according to Michael Imber, a panel member.

Another area Steinberg’s coalition considers is using state lottery revenue to help prop up the $17 billion Teachers Retirement System, a suggestion made by former state Treasurer Denise Nappier. The team is asking Nappier’s successor, Shawn Wooden, for his views on this topic.

The Connecticut state program is 41% funded.


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KENTUCKY

https://www.ai-cio.com/news/fitch-re...gs-allegation/

Quote:
Fitch Rebuts Kentucky Governor’s Ratings Allegation
The agency says the state’s lack of pension overhaul won’t hurt its rating, despite Bevin’s warning.


Spoiler:
A top credit rating agency countered the Kentucky governor’s claims that the state Supreme Court’s overturning of his last-minute pension reform would tarnish the state’s rating.

New York-based agency Fitch Ratings issued a report detailing Kentucky’s need to shore up its pension funding, which faces a $40 billion shortfall.

Last year, Gov. Matt Bevin attempted to resolve the issue by inserting a pension reform into a sewage bill in the 11th hour of the legislative session, which was passed the next day.

The new law would reduce benefits for local government workers, hitting the teachers the hardest as it sought to switch new hires into a 401(k)-style plan and cut the number of sick days to be used toward retirement. Attorney General Andy Beshear, a Democrat who is currently looking to replace Republican Bevin as governor, contested the bill and it was struck down by the Franklin Circuit Court, appealed by Bevin, then rejected again by the Supreme Court months later.

Frustrated with the results, Bevin called a special session in December on the grounds that lack of reform would damage the state’s credit rating.

“For the sake of all current and future Kentuckians, the legislature must act immediately before the commonwealth incurs further credit downgrades that will cost tens of millions of dollars for taxpayers and further limit the Commonwealth’s ability to pay for essential services, including education and healthcare,” he said when he declared the late hearing.

In the report, Fitch denied this was the case.

“The special session ended without a bill; however, leadership indicated plans to revisit the issue in the regular session that began this week,” said Fitch in a release, adding that it expects further litigation should Bevin and the legislature try further reforms. “Given the modest savings anticipated, the proposed pension benefit changes, and any related litigation, would not affect the state’s rating.”

Should a new bill surface with similar provisions to the plan the court denied, Fitch says funding improvements will “emerge slowly” since new hires with the modified benefits will gradually replace legacy retirees. “These changes are unlikely to materially affect Fitch’s view of Kentucky’s long-term liability burden,” Fitch wrote.

Bevin told journalists at a press event the Fitch report was “the most nonsensical thing.”

“Read any credit rating agency report that has come out in the last 10 years about Kentucky and I would defy you to find anybody that doesn’t mention our pension crisis,” he told the Bowling Green Daily News before noting the state’s poor financial shape.

At 31% funded, Kentucky is among the worst-off in the country.

Fellow credit rating agency Moody’s previously described last year’s kerfuffle as a “credit negative” for the state, but did not lower its rating.

Proposals that don’t lower benefits include legalized gambling and marijuana to generate extra revenue, which are ideas Bevin is not on board with.

“If we think that smoking pot and gambling is going to pay our pension problem, we are kidding ourselves,” he said at Wednesday’s Kentucky Chamber Day Dinner, according to WKYT.com.

He is, however, OK with medicinal use of cannabis.

Rather than focus on pension overhauls, Fitch said it will base its view of the state’s rating on its budget practices and performances, as 2018 tax reforms created a “sizeable” profit.

“The challenge would be exacerbated by any downturn in the economy and revenues,” said Fitch.


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