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  #421  
Old 05-25-2020, 08:56 PM
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CHICAGO, ILLINOIS

https://www.chicagobusiness.com/greg...cession-moodys
Quote:
GREG HINZ ON POLITICS
May 19, 2020 12:53 PM
City, state pension risk worse than in subprime recession: Moody's
The bond rating firm again whacks local policies pretty hard, saying that despite a big increase in contributions, the retirement systems are relatively worse off as the economy again nosedives.

Spoiler:
In a predictable but still distressing report, Moody’s Investors Service says Chicago's and Illinois’ already weak public pension systems face greater fiscal risks from today’s COVID-19 calamity than they did during the subprime mortgage recession of 2007-09.

The key risk: Governments that have lost tax revenue because of COVID will be tempted to slash their contributions. But if they do so, funds in worse shape than they were a decade ago will be dinged even more, risking insolvency in some cases.

RELATED ARTICLE
Pandemics come and pandemics go, but this ailment never leaves
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Here’s specifically what Moody’s says.

For decades, both the city and state failed to contribute to the funds the amount calculated by actuaries to pay promised benefits. The situation worsened considerably during the subprime mortgage crash, when the state skipped some payments entirely and the city kept its contributions well below what was required.

Since then, both have made modest improvements. The state has ramped up its contributions to roughly $10 billion a year from half that in fiscal 2012 and has moved workers hired after Jan. 1, 2011, to a new system with reduced benefits, so-called Tier 2. The city under then-Mayor Rahm Emanuel moved toward actuarial-level contributions thanks to a series of property tax hikes.

But neither yet is putting in what it should, says Moody’s, which has been the most critical of local pension practices of the major bond rating agencies. The state, for instance, still is short a whopping $3 billion a year, or 6 percent of its annual non-federal revenue. Moody’s calls that the “tread water” gap. The city is doing better but still is hundreds of millions of dollars a year short, even though its tread water gap fell from 13 percent of its operating revenue in fiscal 2018 from 20 percent in fiscal 2014.

The bottom line is that while city and state pension contributions as a percentage of payroll costs have increased two- to sixfold, depending on the fund, the tread water gap as a share of payroll generally is much higher now than it was a decade ago. Like the city’s municipal fund, which covers white-collar workers. Its tread water gap as a share of payroll moved from 11.4 percent then to 32 percent now. Or the giant Illinois Teachers' Retirement System, which went from 11.5 percent to 18 percent. And all of this is coming in the midst of a near depression.

So what happens now?

Both Mayor Lori Lightfoot and Gov. J.B. Pritzker have said they’re going to make the required payments under their long-term funding plans. We’ll see if they stick to that if tax revenues remain weak.

If the city and state renege, they “risk severely hampering future pension asset accumulation,” Moody’s said, and even potential insolvency. But if they instead divert other monies to pay pensions, that “may increase bondholder risk,” driving up interest costs for future borrowing.

Costs as a percent of payroll generally will start declining in about a decade, depending on the pension fund involved, Moody’s says—assuming regular required contributions are made. But 2030 is a ways away.

Neither Lightfoot nor Pritzker created this problem. Now they have to deal with it and, lots of creative accounting not withstanding, it's not going away.

3:45 P.M. UPDATE: Asked about the Moody's report at his daily COVID briefing, Pritzker said he is committed to making the statutory pension contribution of about $10 billion in fiscal 2021. But as Moody's pointed out, that's about $3 billion less than their "tread water" level. Pritzker said it would be "a pretty good challenge" to do more than the law requires right now.

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  #422  
Old 05-28-2020, 03:17 PM
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NEW JERSEY

https://www.nj.com/coronavirus/2020/...es-plunge.html
Quote:
N.J. public worker pensions could lose $115M in funding as lottery ticket sales plunge

Spoiler:
The New Jersey Lottery is expected to come up about $115 million short in its $1 billion annual contribution to the public worker pension fund as the pandemic slows ticket sales, a treasury official said Wednesday.

The coronavirus and stay-at-home orders have led to a big drop in lottery ticket sales, which are down 13.3% in the first 10 months of the fiscal year, making the lottery unlikely to muster enough cash to make its full $1 billion contribution.


The $1 billion lottery payment slated for this year is more than a quarter of the $3.8 billion the state will pay into the public pension fund. Even that is just 70% of what actuaries say the state should be putting in to avoid piling on more pension debt.

Former Gov. Chris Christie and the state Legislature in 2017 agreed to pledge the New Jersey Lottery as an asset to the pension system to slash its unfunded liabilities and guarantee it about $1 billion in cash each year.

Previously, lottery proceeds helped fund higher education programs, psychiatric hospitals, centers for people with developmental disabilities and homes for disabled soldiers.

CORONAVIRUS RESOURCES: Live map tracker | Newsletter | Homepage

Revenue updates from the Treasury Department show that the lottery ticket sales took hits in March and April. In March, proceeds were more than 27% below March 2019, and in April proceeds were nearly 26% lower than the same month last year.

Assistant Treasurer Dini Ajmani told the State Investment Council on Wednesday that the drop off in sales means the lottery is projected to come up about $115 million short.


“There’s only one more month left and we don’t expect sales will improve to a point where we’ll close that gap,” she said.

Gov. Phil Murphy’s administration could try to make up for the lottery’s shortfall from the state budget or it may simply lower the payment, but the treasurer said in a revenue update released last week that decision will be put off until the next fiscal year, which begins Oct. 1.

“This is one of many difficult proposed solutions designed to help us close a roughly $2.7 billion projected shortfall for the current fiscal year,” Treasury spokeswoman Jennifer Sciortino said Wednesday.
https://www.njspotlight.com/2020/05/...eid=264ccc1575
Quote:
Pandemic Could Drive Annual Returns for Public-Worker Pension System into the Red
JOHN REITMEYER | MAY 28, 2020 | BUDGET, CORONAVIRUS IN NJ
Investment returns for first 10 months of fiscal year edge into negative territory; value of pension funds in April drops to $74B, down almost $6B

Spoiler:
Returns for New Jersey’s already troubled public-worker pension system are in danger of finishing the year in the red as the economic effects of the coronavirus pandemic continue to hit long-term investments.

The total value of the pension funds dropped below $74 billion as of the end of April, after having risen to near $80 billion in the months leading up to the onset of the pandemic, according to new figures reviewed on Wednesday during a meeting of the New Jersey State Investment Council.

In addition, investment returns for the first 10 months of the current fiscal year were in negative territory, at -2.5%.

“The global economy has been shocked to a degree not seen since the Great Depression,” said Corey Amon, the director of the state Division of Investment, during the meeting Wednesday.

Adding to the fiscal turmoil are plummeting state Lottery revenues, which have been a dedicated source of funding for the pension system since 2017. Through the end of April, Lottery revenues were way off target for fiscal 2020 and are now in danger of falling more than $100 million short of projections.

Pension checks still coming
Despite the short-term losses, the pension funds are still able to issue benefit checks to retirees, as overall liquidity remains sound.

While the overall numbers put more pressure on the state budget, Department of Treasury officials say they have no plans to short upcoming state pension payments, as required by a recent law mandating quarterly contributions. At least one payment, however, is scheduled to be deferred.

The pension system covers retirement for some 800,000 current and retired workers across seven funds. It is financed with contributions from workers, from payments made by their respective state and local government employers and from revenue that flows in on a monthly basis from the Lottery.

The pension system operates under a 7.5% annual assumed rate of return. Whenever returns fall short of that benchmark, more of the funding burden falls to government employers since contribution rates paid by workers are fixed in law.

Returns fell below the assumed rate in fiscal 2019, even as the funds generated net-positive gains of over 6%.

Extending the fiscal year
Earlier this year, Gov. Phil Murphy and lawmakers decided to extend the end of fiscal 2020 for state-budgeting purposes in the wake of the pandemic. They also pushed the deadline for paying state income taxes from April 15 to July 15. But that change, which moved the end of the fiscal year from June 30 to September 30, doesn’t impact the accounting for the pension system.

That means unless there’s a huge rally before the end of June, investment returns are on course to fall well short of the 7.5% assumed rate for the 2020 fiscal year. And if returns land in the red for the full fiscal year it will be the first time that’s happened since 2016.

During Wednesday’s meeting, Amon outlined some of the ways the economic fallout from the pandemic has affected long-term investments as the new figures, which are preliminary, reflected negative returns of -7% coming in just between January and April.

Among the underperformers are investments in energy companies and real-estate investment trusts, or REITs. In recent months, groups of retirees and environmentalists have urged the investment council to shed its fossil-fuel investments.

Amon noted stakes in U.S. Treasuries and high-grade securities helped to cushion the blow. He also noted that some investment values are outdated and are likely to be changed in the coming weeks, including returns for private-market investments.

“Absolute returns will likely move lower as valuations and benchmark returns are updated,” Amon said.

On the Lottery side of the pension system’s ledger, total revenues were off by more than 13% year-over-year as of the end of April, according to the latest tax-collection figures from Treasury. The pension system assumes about $1 billion in revenue will be generated from Lottery receipts annually, but assistant state Treasurer Dini Ajmani said during Wednesday’s meeting the target will likely be missed by more than $100 million in fiscal 2020.

“We don’t expect that the sales will improve to a point where we’ll close that gap,” Ajmani said. “So that’s going to be a shortfall into the pension fund.”

New Jersey’s pension system has already been rated as the nation’s worst-funded, and Murphy, a first-term Democrat, has been slowly ramping up state contributions to help address the system’s huge unfunded liability under a payment plan that was started by Republican predecessor Chris Christie. A big cause of the pension-funding hole is a failure by past administrations to make full annual pension contributions, including during economic downturns, when some payments were skipped altogether.

Pension contribution on track — Treasury
But Ajmani said there are no plans to miss a roughly $684 million quarterly state pension contribution that is scheduled to be made at the end of June, even as the state’s own budget is facing tremendous strain during the pandemic.

“We plan on making that (June 30) payment in that timeframe,” Ajmani said.

Still, the next phase of the pension-funding ramp-up is scheduled for late September, and Ajmani said right now a quarterly contribution of nearly $1 billion is scheduled to be deferred into October, coinciding with the beginning of a planned nine-month fiscal “year” 2021.

“We are forced into making very, very tough decisions,” Ajmani said as she detailed the state’s own budget challenges.

However, most local governments have been making their pension contributions even as they’ve begun to deal with their own revenue losses caused by the pandemic, she said.

“The good news there, is almost all local governments have paid their bills,” Ajmani said.
https://burypensions.wordpress.com/2...ment-defaults/
Quote:
NJ Pension Payment Defaults
Spoiler:
The New Jersey State Investment Council met yesterday and the headlines were on lottery losses that will never be made up, investment losses that will never be made up, and quarterly contributions to be made (for now). However it was the upbeat conclusion of the njspotlight story that is the real news.

[M]ost local governments have been making their pension contributions even as they’ve begun to deal with their own revenue losses caused by the pandemic, [assistant state Treasurer Dini Ajmani] said.

“The good news there, is almost all local governments have paid their bills,” Ajmani said.

‘Almost all’?


Based on Union County check registry data for 2019 contributions to PERS and PFRS were:





The monthly payments would have been the employee contributions while the large payments in the first week in April would have been the annual employer contribution.

Without functioning OPRA laws (or government watchdogs) there is no way of knowing which local governments defaulted on their payments though April 7, 2020. It may not have been too many then but by April 7, 2021, who knows?


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  #423  
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https://www.wsj.com/amp/articles/the...es-11590791639

Quote:
The State Pension Crisis Goes Beyond the Big Blue States
Politicians and fund administrators everywhere wasted the reform potential of an 11-year bull market.
By Steven Malanga
May 29, 2020 6:34 pm ET
Spoiler:
Legislators from Illinois and New Jersey provoked an outcry in April when they asked Washington to bail out their failing pension systems. Senate Majority Leader Mitch McConnell offered instead to let states file for bankruptcy. His message: Don’t expect aid for problems that have little to do with fighting the novel coronavirus and the economic slowdown accompanying it.

The crisis in state pension systems is a result of decades of fiscal mismanagement. The problem, however, goes well beyond deeply indebted Illinois and New Jersey. Many state and municipal retirement funds have been on an unrelenting downward trajectory for 20 years, failing to gain ground even during the 11-year bull market that followed the 2007-09 recession. Now, with the economy in tatters because of the coronavirus, more government pension systems are close to a crisis, and taxpayers are running out of time to demand a solution.

The figures are startling. At the end of the 1990s, most pension systems were fully funded, with no debt. But the steep market declines of 2000 and 2001 drove funding levels down to 89% by 2003, and debt soared to $233 billion, according to Pew Research. Though pension administrators assured taxpayers the funds would rebound, the plunge in financial markets in 2008 sent systems reeling again. By 2010 state funds were on average only 75% funded, and unfunded liabilities had tripled to $750 billion. Years of subsequent market gains haven’t reversed the trend. By 2018 state pension debt had reached $1.2 trillion, and the latest market downturn has almost certainly sent it soaring again.

This fiscal nightmare stems in part from politicians’ habit of increasing employee benefits while markets are booming, thereby squandering fund surpluses. California’s Legislature gave workers rich new benefits in 2000, allowing some 200,000 employees to retire with full pensions at 55 and granting Highway Patrol officers pensions equal to 90% of their final salaries. Although executives of the California Public Employees’ Retirement System, which was 120% funded at the time, assured legislators they could pay those benefits without additional contributions from governments, subsequent market downturns have forced the state and local governments to increase their annual contributions to $15 billion last year, up from $362 million in 2000. Calpers’ funding level, meanwhile, shrank to 70% last year—and is even lower now.

Politicians have consistently neglected to contribute to these systems even during good budgetary times, preferring to fund more popular programs. While the economy was expanding from 2015-17, 27 states failed to put enough money into pensions systems to reduce their debt, according to a Pew survey.

Meanwhile, elected officials and pension administrators have endorsed overly optimistic economic assumptions that made their systems look affordable. In 2007, for instance, most state funds projected an annual return of 8% or more on their investments. Under intense criticism, many have now pared down projected returns to 7.25%, but doing so has added billions of dollars of debt. Here’s a reality check: Over the past decade, state pension systems averaged only 6.8% actual returns, according to Wilshire.

Even before the most recent market drop, a striking number of funds were already at or dangerously close to crisis levels. A 2019 study by Milliman identified a dozen state and big municipal plans with less than half the funding needed to fulfill their obligations, and another 14 with funding below 60%. That included the Pennsylvania school retirement system (54%), South Carolina’s retirement system (54.1%), the Massachusetts teachers’ system (54.8%), and the state plans in Colorado (58.8%) and Missouri (59%).

This is worrisome because, as Calpers officials admitted after a 2015 review of their operations, once a pension system slips below half-funded, it may be impossible to save it no matter how much taxpayers contribute. The money that should be earning market returns simply isn’t there. That’s why it’s urgent for taxpayers to demand reforms now.

One alternative, proposed in 2015 by a bipartisan New Jersey study commission, would close the state’s deeply indebted defined-contribution plan and migrate workers into a cash-balance program that provides a modest annuity roughly equivalent to Social Security, supplemented by a 401(k)-style savings plan. The Garden State’s powerful unions blocked that plan, but other states might consider adopting it.

Another option, enacted by Utah, allows workers to join their defined-benefit plan only if they agree to pay any extraordinary costs incurred from market downturns. Otherwise, workers enroll in a 401(k)-style contribution plan that limits taxpayer liability.

For some pension funds, stronger medicine is necessary. The New Jersey teachers’ retirement plan is 26.5% funded, according to Milliman, and pays nearly $1.7 billion more in pensions every year than it receives in contributions, Although Mr. McConnell backed off his state-bankruptcy plan, in 2016 the Manhattan Institute proposed model legislation that would allow states to place their pension systems alone in bankruptcy to reorganize.

There are other options for reform, too. But they all require something that’s been missing: political will. Something else that’s needed, time, is running out.

Mr. Malanga is a senior fellow at the Manhattan Institute and senior editor of City Journal.


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https://tonyisola.com/2020/05/what-h...D2FlNHZpwKAlPI
Quote:
What Happens To Pensions During Bear Markets?

Spoiler:
Pensions and bear markets are a toxic combination.

The combination of near-zero interest rates and double declines in stock prices wreak havoc on future promised obligations.

If the teacher’s pensions are an indication of what’s to come, it may be time to prepare for a perfect financial storm.

Young teacher’s pensions and salary stagnation wind up taking up the slack for pension shortfalls.

Most states spare current retirees the pain of reduced checks except for the annual cost of living adjustments.

If history is any guide, this will be the case if market losses continue.

Many states were having trouble funding their pensions before the pandemic.

The share of funding going toward pension obligations has almost doubled since 2001.


Most pensions expect investment returns north of 7%. Hitting this aggressive goal is questionable. Even if they do, the future promised benefits could end up falling short.

Market returns don’t occur in a straight line. If bear markets break out during a large generational shift of retired workers – watch out.

Look at what happened to CALSTRS in 2008, the largest teacher retirement plan serving over 650,000 educators.

According to Chad Adleman

In 2008, CalSTRS assumed it would earn 8 percent on its investments. Instead, it lost 4 percent. In 2009, CalSTRS again thought it would make 8 percent. Instead, it suffered a 25 percent decline. After a couple of roller-coaster years, CalSTRS assets declined a total of about 3 percent from 2007 to 2012.

That may not sound too bad, but CalSTRS’s obligations to pay future benefits kept right on growing. From 2007 to 2012, those liabilities grew 29 percent, or about $48 billion.

Between declining assets and rising liabilities, CalSTRS went from being 89 percent funded in 2007 to 67 percent funded in 2012. Its unfunded liabilities — the gap between what it had saved and what is owed to current and future retirees — grew from $19 billion to $71 billion.

Despite these measures, the unfunded liability stood at $107 billion as of last April. Current market conditions widened the deficit.

A combo of higher contribution rates, more sacrifices for new teachers, frozen salary schedules, and less money for classroom instruction are the only way to make the numbers work.

Due to the unfunded liabilities of many states, this is a nationwide trend. From 201 to 2018, pension funding costs occupy a greater percentage of state education budgets.


Source: Teacher Pensions Blog

Static teacher base salaries and wages over this same time confirm the adverse effects of these deficits.

Not every state is in this predicament. New York’s pension system is rock solid. Illinois, Kentucky, Connecticut, and others are in deep trouble.


These statistics highlight the need for low cost, transparent 403(b) plans.

God knows the havoc pandemic related state revenue shortfall will have on these unfunded liabilities.

Raising taxes during a recession isn’t an option.

Young teachers shouldn’t have to pay for the mistakes of past generations with reduced benefits. Only about a quarter of new teachers can expect to break even on their pensions.


Source Bellwether Education Partnership

Pensions are vital to the retirement prospects of our nation’s public school teachers. In some states, tough choices lay ahead to fulfill these promises.

The first step toward making teachers retirements secure is reforming the sorry state of their defined contribution plans.

Grabbing the low hanging fruit by transforming teacher’s 403(b)s into cheaper and more transparent options is a no-brainer.

Its time to harvest the crop.

Teachers and other public employees have little control over state budgets.

Contributing to a low-cost 403(b) plan is a right, not a privilege.

The next set of decisions won’t be nearly as easy.


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https://www.forbes.com/sites/ebauer/...hy-it-matters/

Quote:
Public Pensions, Public Protests, And Why It Matters
Spoiler:
What do the protests engulfing the country have to do with public pensions? More than you’d think.

Here’s some reporting coming out of Detroit, via the Detroit Free Press.

“Following a script seemingly set the day before, protests in downtown Detroit and in many cities nationwide began Saturday afternoon with crowds of peaceful marchers voicing chants about racial justice.

“But after dark, those crowds were less peaceful. In Detroit, Friday night's protest had become tense and led to arrests, and it even involved a fatal shooting, although that was later determined to be unrelated to the protesting.

“Saturday night was worse. Participants threw rocks and fireworks at police, refusing to disperse until hundreds of officers converged to use tear gas and make dozens of arrests, according to reporters at the scene. . . .

“In Detroit, there'd been a turning point Saturday at dusk, witnesses said. At around 8 p.m., several black protest leaders had used bullhorns to urge a crowd gathered on Michigan Avenue at 3rd Street, estimated at more than 1,000 peaceful demonstrators, to “go home — be safe.” An hour later, as darkness fell, a din of shouting and a pounding drum echoed through downtown streets as a seemingly different group surged through Greektown, swelling rapidly by the hundreds, reporters said. . .

“Earlier Saturday, black leaders in metro Detroit said they wanted no part of protests that, as shown by Friday night’s unrest, were more about anarchy than political change.

“National Action Network-Michigan President the Rev. Charles Williams II said that his group of racial-justice advocates was not going to be involved in any additional protests in Detroit.

“‘We made it very clear to all of our members today that we will not be participating in any unknown protest with unknown leaders or no phone numbers or identification,’ Williams said Saturday. . . .

"’You can protest in your own backyard,’ said the Rev. Wendell Anthony, president of NAACP Detroit, referring to white suburbanites who foment violence and destruction in Detroit.

"They are putting another knee on the neck of black folk because we got to live here with this pandemic still going on,’ Anthony said Saturday.”

In the end, the journalists report on tear gas and rock-throwing. A subsequent article at the Detroit News provides a count of 84 arrests. But unlike Chicago, for instance, there were no reports of looting. There were no reports of police vehicles or businesses set on fire. And, unlike yet other cities, there were no reports of entire blocks of businesses or public buildings set on fire or bystanders or law enforcement injured or killed.

At the same time, by sheer coincidence, the Center for Retirement Research released an updated analysis of the funding levels of the 200 public pension plans in its database. They calculate, first of all, that the funded ratios for public plans overall will drop from 71% at year-end 2019 to 69.5% at year-end 2020, then further calculate funded ratios in 2025 assuming based on two different economic scenarios: in the case of a faster recovery, they project a drop to 62.7%, and in the case of a slower recovery, a drop to 55.5%.

But some plans are projected to fare far worse. Considering the 2020 year-end projected funded status, Illinois has 6 of the worst 15. Looking at the 2025 projections shows an even worse situation: the Chicago Municipal pension, worst-of-the-worst, drops from 21% to an astoundingly-low 3.6% funded status. The largest Illinois pension, that of the Illinois teachers, drops from 40.1% to 31.9%. This is bad news — and that’s assuming that the state and city continue to make their required contributions rather than taking contribution holidays; regular readers will recall that if the city fails to do so, it faces actual insolvency, and, at the state level, even if it makes its contributions, it will nonetheless fall far short of its 90%-funding-by-2045 goal.

Now, Detroit’s not on the “worst-20” list, though its pension is still struggling, even after the benefit cuts in the course of its bankruptcy: the general pension plan for Detroit city employees was funded (pre-covid) at a 70.3% level, and the plan for police and fire employees (legacy, after the bankruptcy reform) was 72.8% funded.

But Detroit is a city that does not, cannot take anything for granted. Consider again the words of the NAACP president Anthony: “They are putting another knee on the neck of black folk because we got to live here with this pandemic still going on.” And separately, on my personal blog, I spent some time refreshing my memory on the Malice Green case — in November of 1992, after rioters caused so much destruction in Los Angeles the prior spring, city leaders as well as Green’s family themselves becoming leaders, prevailed on the city to mourn peacefully.

Yes, Detroit is still very troubled, still has a very high degree of poverty, still struggles to educate its children, and so on. But the Grand Bargain of the city’s bankruptcy, in which city and suburban leaders came together, saving such city treasures as the Detroit Institute of Art and mitigating pension cuts, was, from my vantage point, transformative. And this effort to keep protests peaceful is another indicator that the city — both elected and community leaders — knows it cannot relax its efforts.

Consider, too, that just before the coronavirus financial impacts began to be felt, on March 6, the Detroit News reported that “Mayor Mike Duggan on Friday presented ‘the tightest budget’ he has faced since taking office, with a focus on pumping more dollars into raising police officer pay, expanding animal control and making one-time infusions to boost the city's rainy day fund and a retiree pension trust.” Having ended the prior year with a $123 million surplus, Duggan proposed boosting both the city’s rainy-day fund as well as making supplemental pension contributions. And, when faced with budget shortfalls instead, the mayor and city council acted, earlier in May, to implement cuts to keep the budget balanced.

In the meantime, in Chicago, the city’s 2020 budget had already precariously relied on wishful-thinking revenue, and the city has neither made any cuts nor provided any information on how it plans to cope with shortfalls. And the state of Illinois has refused to make any cuts — no furloughs, no pay cuts, not even the deferral of scheduled pay hikes — and just passed a budget which it deemed to meet the state constitutional requirement that it be balanced, solely by means of an assumption that the federal government will, in some manner or another, fill in any gaps.

Is it just bean-counting, to care about budgets during a pandemic? Is it too much of a stretch to say there’s a connection between the degree of destruction in a protest-riot and public pensions? Of course there’s far more to the story, but making hard choices to enable funding pension plans or kicking the can for future generations, and actively working to forestall riots or choosing to believe that insurance will cover the losses anyway — it all matters, and it’s all fundamentally a question of accepting responsibility rather than believing it can be shunted off to others or to future generations.
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https://reason.org/commentary/state-...m_medium=email

Quote:
State Pension Challenges – Unfunded Liabilities Before and After COVID-19
This new interactive tool shows how one year of bad returns can affect the funding status of public pension plans and previews the challenges ahead for state-run pensions.
Spoiler:
State pension plans are short on funding for promised benefits by more than $1 trillion, but this shortfall didn’t develop overnight. Over the past couple of decades, pension funds have had trouble keeping up with the accrual of liabilities, largely due to investment returns below expectations and insufficient annual contributions. Due to these conditions, most pension plans failed to fully recover from market losses in 2008. Now, with 2020 shaping up to be a difficult year for market returns, state pension plans face yet another threat to their ability to provide secure and affordable retirement benefits to public workers.

Pension funding involves calculating the cost of promised benefits and making sufficient contributions into a fund so that it can grow through investment gains to meet the cost of providing benefits. Two of the most common metrics to gauge the health of pension funds are the dollar value of unfunded liabilities and the funded ratio percentage, both of which are dependent on the value of accrued liabilities and the value of assets.

This new interactive tool from the Pension Integrity Project allows you to see the history of asset and liability values for state-run pension plans across the nation. The tool also includes a 2020 market forecast feature that adjusts to the selected return scenario of the user’s choosing.

By selecting a state’s public pension plans, users can see how plan assets have progressed in comparison to the cost of the benefits promised to state workers. Adjusting the 2020 return input shows how one year of bad returns can affect the funding status of a plan and gives a preview of the challenges ahead for state-run pensions.

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The growth in funding shortfalls amid a record streak of bull market outcomes highlights a major problem in pension policy. And this issue is sure to be exacerbated by losses stemming from COVID-19. Looking forward, state policymakers need to find ways to restructure public pension plans so they are more resilient to market turbulence and are better able to recover from unforeseen events.




The Pension Integrity Project at Reason Foundation offers pro-bono consulting to public officials and other stakeholders to help them design and implement pension reforms that improve plan solvency and promote retirement security.
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