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  #1201  
Old 06-18-2019, 01:09 PM
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Mary Pat Campbell
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NEW JERSEY

https://burypensions.wordpress.com/2...ob-number-one/
Quote:
Job Number One

Spoiler:
The Sunlight Policy Center released another report yesterday blasting the New Jersey Education Association (NJEA), this time for their complicity in the bankruptcy of the retirement system that included a helpful history though I disagreed on a couple of points.


Unsurprisingly,the NJEA blames it all on the state: “The state’s failure to fund its share of pension costs is the only reason for [the] pension crisis faced by the state.” (page 6)

That wold be true if the state and localities were (a) provided with honest contribution amounts to fund the benefits being promised, and (b) had to put in the money. There would absolutely be no crisis if the state and localities were to put in annual contributions of $15 billion (to start).

Unions don’t object to the underfunding because they know the law protects their pensions no matter how bad the situation gets.

COLAs too?

The NJEA Flips the Legislature. In one of the more remarkable feats of political power in modern New Jersey history, the NJEA showed its enormous political clout when newly elected Gov. James Florio revived the idea of shifting responsibility for teacher pensions to school districts. After a New Jersey Supreme Court ruling mandated increased state aid to poor districts, Florio sought to raise taxes and devise a new school funding formula while relieving the state of the teacher pension burden as part of the 1990 Quality Education Act. NJEA President Betty Kraemer highlighted why the NJEA feared such a shift: “In a few scant years, increasing pension costs will eat into the dollars available for programs in schools. Local property taxes will have to rise to sup-port programs.” When Florio and other Democrats enacted the pension shift and subsequently moved tax dollars from state education aid to property tax relief, the NJEA endorsed 46 Republicans and three Democrats and put its full muscle behind flipping the legislature in the ensuing 1991 legislative election. The result: The NJEA was credited (and credited itself) with turning a Republican minority into a veto-proof Republican majority.As noted in a national news report, “Most observers said the NJEA played the biggest role in turning Democratic majorities in the Assembly and Senate into veto-proof Republican majorities.” The pension shift was postponed and ultimately repealed. (pages 15-16)

Faced with legislative elections in 2001, lawmakers fell over themselves to please the NJEA, granting both existing and prospective retirees a 9 percent pension increase. Further,the law was passed in conjunction with statutory provisions excusing non-funding of both the newly enhanced and preexisting benefits for several years. As a final sop to the NJEA, the law temporarily reduced employee contributions from 4.5 percent to 2.5 percent. In a particularly underhanded move aimed at creating “surplus” assets to fund the enhancement, the legislature reached back to June 30, 1999, to value pension assets when they were $5.3 billion higher than under the then-current valuation method—even though by 2001 the dot-com bust had in reality reduced the value of those pension assets by billions of dollars. (page 19)

The only thing the NJEA did not achieve was full funding. Politicians, keenly focused on self-preservation and presented with the choice of pleasing the NJEA or keeping state taxes down, did both—they gave the NJEA what it wanted on retiree benefits but did not spend the money to fund them. Sure, the NJEA made some noise at rallies and in the press and filed a few lawsuits, but until 2015, it never directly punished lawmakers for underfunding the way it punished them for trying to shift pensions to local districts, cutting state education aid, or reducing benefits. Instead, during the time that pensions were being shortchanged, both incumbents and NJEA-endorsed candidates were elected at extremely high rates. (pages 26-27)



https://sunlightpolicynj.org/wp-cont...ion-crisis.pdf

Quote:
JOB NUMBER ONE:
NJEA’S LEADING ROLE IN NEW
JERSEY’S PENSION CRISIS
Spoiler:
....
[page 28]

The Inevitable Result: A Fiscal Calamity That Will Damage the Whole State

As a result, the state is headed toward a fiscal train-wreck. As Figures 3 and 4 show,
retiree benefit payments are predicted to climb to an unsustainable $11 billion and 26
percent of the budget by FY2024. As the Study Commission concluded—and even the
NJEA has acknowledged—the state simply does not have the money to pay for these
benefits without either severe cuts in services or massive tax increases—and most likely
both.132 Yet that was the broken system that the NJEA wanted to lock into the state
constitution – without any reform and regardless of the consequences to the state and
its citizens.
When these bills come due, important programs that our citizens rely on will be
negatively impacted and the whole state will suffer. The Path to Progress workgroup
summed up the situation well:
New Jersey faces a fiscal crisis of unsustainable legacy pension and benefit costs … if this crisis is
not resolved, it will be impossible to meet our commitment to fully fund public schools, expand
pre-school, and make New Jersey affordable for families, senior citizens, and businesses.133
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  #1202  
Old 06-18-2019, 01:56 PM
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CALIFORNIA
CALPERS

https://www.mercurynews.com/2019/06/...sion-windfall/
Quote:
Borenstein: CalPERS must stop transit workers’ pension windfall
BART employees, VTA trying to capitalize on six-year-old legal fight between Jerry Brown and Barack Obama

Spoiler:
It’s been six years since the Obama administration tried to block then-Gov. Jerry Brown from applying his pension law changes to transit workers.

Finally, in November, after losing four court rulings, the federal government, now under the control of the Trump administration, abandoned its misguided meddling in California’s efforts to make much-needed fixes to its underfunded public employee retirement system.

But the political hangover remains, as the South Bay 's Valley Transportation Authority and individual workers from BART on Wednesday try to convince CalPERS that they nevertheless deserve fatter pensions than other public employees hired since 2012.

The case affects 1,431 workers statewide. CalPERS ' board should reject their claim, protect taxpayers and uphold the <a href="https://www.mercurynews.com/wp-content/uploads/2019/06/Proposed-decision-Attachment-A.pdf" target="_blank" rel="noopener noreferrer">findings of its administrative law judge</a> that transit employees are bound by Brown 's pension law changes.

Those changes, which took effect in 2013, reduced retirement benefits for new employees. It quickly set off a legal showdown with Obama’s labor secretary, Thomas Perez, who sided with a national labor union looking to undermine the pension changes.

The fight centered on a 1964 federal law that was designed to ensure public transit agencies didn 't bust unions as they acquired financially troubled private transportation companies.

It was passed in an era when private-sector unions were more powerful. Congress was concerned that the new public transit workers would lose collective bargaining rights they had gained in the private sector.

So the Urban Mass Transit Act made transportation funding contingent on Labor Department determination that contract benefits would be preserved and bargaining rights would continue. The law remains in effect today.

Fast forward nearly half a century to 2013, when Brown’s pension law changes took effect. Perez, siding with the Amalgamated Transit Union, determined that the California pension changes violated the federal transit act because they restricted what could be collectively bargained — and he threatened to withhold $1.6 billion of federal transit grants. <div id="div-gpt-ad-Cube_Article" class="dfp-ad dfp-Cube_Article" data-ad-unit="Cube_Article">


But federal courts, <a href="https://www.eastbaytimes.com/2015/03/06/daniel-borenstein-obama-administration-punishes-gov-brown-for-pension-changes/" target="_blank" rel="noopener noreferrer">starting with Judge Kimberly Mueller</a> in Sacramento, repeatedly rejected Perez’ move. While the 1964 law protects collective bargaining rights, she ruled on Dec. 30, 2014, it does not insulate transit workers from statewide changes that also affect other workers and does not foreclose all state regulator powers.

The Department of Labor 's ``failure to consider the realities of the process of public sector bargaining renders its decision arbitrary and capricious,'' Mueller ruled.

Finally, in November, the U.S. Department of Labor, now a part of the Trump administration, dropped the court fight. In <a href="https://www.mercurynews.com/wp-content/uploads/2019/06/061419-DOL-ruling.pdf" target="_blank" rel="noopener noreferrer">a letter Friday</a> to ATU, the agency rejected the union’s latest bid to block funding for California transit agencies, and determined essentially that Brown and the state had been right all along.

Meanwhile, back in California, rather than risk losing federal transit funding, Brown and state legislators in late 2013 temporarily suspended implementation of the new pension law for transit workers.

While the fight over federal funding was being litigated, newly hired transit workers were granted the same ``classic'' pension benefits as those provided employees who started work before the state retirement law changes took effect.

But the terms of the suspension were clear: It would end if and when a federal court ruled that Perez had erred in his attempt to cut off federal transit funding, which is exactly what Mueller did on Dec. 30, 2014.

Thus, CalPERS determined that workers who were hired between Jan. 1, 2013, and Dec. 30, 2014, accrued pension benefits at the more-generous ``classic'' rates for that time period. But, after that, they were ratcheted back to the rates in the new pension law — making them subject to the same limits as all other public employees in the state.

Now the South Bay’s Valley Transportation Authority and individual employees of BART hired during that time period are challenging the CalPERS rollback.

They essentially argue that the Legislature didn’t mean what it said in the law. They say that the Legislature intended for them to permanently receive the higher benefits.

A CalPERS administrative law judge has rejected that tortured reasoning. Now it’s up to the pension system’s board to decide whether to uphold the ruling or hear the case itself.

It’s time to put an end to this political silliness. As it is, thanks to the misguided rulings of the Obama administration, those workers received up to two years of inflated pension accruals.

The Legislature was clear that it intended the windfall to be temporary. Anything more would be a giveaway of public money.

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  #1203  
Old 06-18-2019, 04:03 PM
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ILLINOIS

https://willcountygazette.com/storie...their-pensions

Quote:
Roll Call: DeLuca votes for allowing teachers to “spike” their pensions

Spoiler:
State Rep. Anthony DeLuca (D-80) on May 31 voted for a $40 million budget package that included a hidden gem for teachers -- the removal of a 3 percent cap on end-of-career pension spiking for Illinois educators.

Signed into law by Gov. J.B. Pritzker on June 5, Senate Bill 262 included a provision that effectively doubles the cap for four years. If a school district increases a teacher’s salary by 6 percent each of those four years before he or she retires, the pension payout from the Teachers Retirement System (TRS) also increases by more than 24 percent.

The average Illinois teacher saves about 3 percent of what they will eventually collect in retirement, or $30,000 for every $1 million in pension benefits. The difference is picked up by taxpayers.

With TRS only 40 percent funded and currently holding $75 billion in debt -- the most of all five state-run pension funds -- analysts say higher property taxes will result from the pension spiking.

A report by independent research firm Wirepoints.com calculated that Illinois teacher pension benefits have grown 1,092 percent since 1987, or about 10 times inflation.

District 80 includes all or parts of Chicago Heights, Matteson, Andres, Olympia Fields, University Park, Park Forest, Wilton, Wilton Center, Symerton and Manhattan.


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  #1204  
Old 06-19-2019, 11:58 AM
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CALIFORNIA
CALPERS
MANAGEMENT

https://www.nakedcapitalism.com/2019...h-bourqui.html

Quote:
Why Is CalPERS Still So Afraid of Elisabeth Bourqui?
Spoiler:
Those of you who follow the ever-lengthening chronicle of misconduct by CalPERS’ staff may recall l’affaire Bourqui. CalPERS is acting like it still has an awful lot to hide about her abrupt departure.

In early January, Chief Investment Officer Ben Meng, who had joined mere days before, sent an e-mail which quickly got to the press, that star hire Elisabeth Bourqui, who had joined as Chief Operating Investment Officer in May 2018, had resigned. CalPERS pointedly failed to resort to any of the normal face-saving devices when an executive is pushed out.

Since the defenestration can’t have originated with Meng (he was barely on board and could not have formed an impression of Bourqui), the only other possible instigator is CEO Marcie Frost. The manner of Bourqui’s departure reflects poorly on her maturity as a manager and as a person. Thuggish behavior by a second-tier financial player like CalPERS toward a star recruit will make other high caliber players think twice about joining CalPERS. So Frost did damage to CalPERS…to what end?

As we wrote in January:

It is hard to convey adequately how badly this resignation reflects on CEO Marcie Frost. It confirms her inability to attract and retain competent professionals. Recall that Frost not only hired but doggedly defended resume fabulist Charles Asubonen, who was booted shortly after CalPERS did what it should have done when we presented Frost and the board with detailed documentation of his fabrications.

For such an accomplished professional as Bourqui to join CalPERS said that the institution still had enough cachet to attract top people. Her unceremonious exodus is sure to give pause to anyone capable that CalPERS tries to recruit for a senior position.

The fact that Bourqui left without any transition or advance warning means it is well nigh certain that she had a dispute with Marcie Frost. Recall that the departures of the head of private equity, Real Desrochers, the former Chief Operating Investment Officer Wylie Tollette, and Chief Investment Officer Ted Eloupoulos were all announced in advance.

Initial reports indicated that Bourqui was well liked and well respected by employees, so it seems inconceivable that her performance was sub-par. It seems pretty clear what the real issue was. As one said:

There is no way this is not about private equity.

And from another prominent stakeholder:

This is bad. She was honest.

So Frost did damage to CalPERS…to what end?

The plot thickened later in January when Bouqui took the very unusual step of appearing at that month’s board meeting with a prominent employment lawyer in tow. Bourqui was seeking an audience with the board, which was obviously a non-starter.

Nevertheless, Bourqui’s bold move sent a clear public message that she thought there was something of significance that the board needed to hear, meaning staff was withholding important information.

As we wrote:

Recall that Bourqui’s sudden departure didn’t smell right….

Even though the Ben Meng e-mail of January 7 started, “Elisabeth Bourqui has submitted her resignation as CalPERS Chief Operating Investment Officer (COIO) effective today,” tellingly, CEO Marcie Frost was using a different formulation to stakeholders on Tuesday: “I didn’t fire her.”

Bourqui’s remarkable public appearance sends a strong message that she didn’t regard her departure as voluntary and intends to Do Something about that. And Frost’s statement is awfully convenient. It leaves open the question as to whether someone else fired Bourqui, or whether she technically wasn’t fired, but was “rejected on probation,” which the term of art for how California civil service employees who have not finished the one-year probationary period are terminated.

However, it does not appear that Bourqui followed up on her saber-rattling. Even though the bar for dismissing an California state employee on probation is very low, one grounds for contesting “rejection on probation” is retaliation.1 And given that the firing was carried out in a manner intended to harm Bourqui (and Frost has a reputation for vindictiveness going back to Washington), it would lend credence to a charge of retaliation.

But judges don’t like people showing up in court who have not exhausted other channels first. If Bourqui were going to go toe to toe with CalPERS, you’d have expected her first to appeal her rejection on probation to the State Personnel Board. The window for Bourqui to have appealed closed months ago.2

So why is what happened to Elisabeth Bourqui still of interest? CalPERS is going to way too extreme lengths to stymie Public Records Act requests about her.

We requested a copy of Bourqui’s resignation letter on January 8. CalPERS made a number of spurious claims for claiming the document didn’t have to be disclosed, when the First Amendment Coalition has explained why that is bogus. It provides case citations, discusses the relevant rulings, and concludes:

Based on the foregoing, Courts have found letters rescinding employment (i.e., termination) were subject to disclosure…

Additionally, California courts however have established a fairly liberal standard for disclosure of public records relating to complaints or investigations of misconduct by public employees.

So in other words, if Bourqui had been terminated and CalPERS had written a letter with derogatory information about her, that would still be disclosable, as in the personnel exemption would not apply. CalPERS’ refusal to produce Bourqui’s letter implies it was not of the “I quit Monday” sort, but had derogatory information about CalPERS, which CalPERS is not entitled to hide.

Although CalPERS is so clearly in the wrong that its refusal to provide the Bourqui letter sets up a comparatively easy Public Records Act suit, it didn’t seem worth the energy and outlay,3 particularly since all it might do is confirm that Bourqui was unhappy about the private equity investment scheme, which seems to be foundering under its own weight anyhow.

But CalPERS is acting guilty as sin regarding Bourqui, which in turn raised the possibility that her resignation letter had a damning bill of particulars about CalPERS leadership. Support for this view comes from the way CalPERS is refusing to cough up documents on a very simple Public Records Act request, which as you’ll see, we sent in on January 7. CalPERS said it would get the response to us on April 17, which already looked like slow-walking the response.



Contrast the three-months plus CalPERS allowed for the production of Bourqui-related documents to the actual response to this Public Records Act request on JJ Jelincic, e-mailed on June 7:



In a bit over two months, CalPERS found all the Jelincic documents, screened them, and sent the response over 11 e-mails, most of which contained 20 to 30 documents.

It is pretty sure that some of the documents were improperly withheld, since CalPERS has a policy of making less than complete Public Records Act request responses, and then coughing up more records when the requester gets ugly. Needless to say, this is not the behavior of a governmental body that believes in accountability and is conducting itself with the best interest of the public in mind.

One tell is the response letter’s invocation of the catchall, Government Code 6255, which “exempts records from disclosure when the public interest in nondisclosure clearly outweighs the public interest in disclosure.” Courts almost without exception reject withholding records based on this “balancing test”. Not only is it tantamount to an admission that the government body has no real basis for hiding those particular documents, but judges are wise to the fact that agencies like CalPERS treat hiding their dirty laundry as somehow being in the public’s interest, when the language is clear that the only thing that matters is the public’s interest, not the agency’s.

But CalPERS would nevertheless at least be taking the time to screen out all of its internal nattering about its efforts to pin the “leaks” tail on the Jelincic donkey via a sham investigation conducted by Lily Becker in the corporate-whistleblower-squasing section of law firm Orrick, in addition to looking for any embarrassing material and then coming up with thin excuses as to why they didn’t turn it over.

That is a long-winded way of saying that if CalPERS could process the Jelincic PRA in two months, there’s no reason for it taking three-plus for the Bourqui documents I requested.4

Except CalPERS isn’t taking three months. We’re now up to eight months plus.

On April 17, CalPERS sent a letter pushing back its delivery date to June 17.

On June 14, CalPERS blew off producing the documents again:


Now it may be that CalPERS has decided to retaliate for my submitting this request on June 3, even though public agencies are subject to the requirement to produce documents on a timely basis, and CalPERS was already not timely. The fact that both sets of records are now set for August 23 sure looks like CalPERS is playing cute:



This isn’t the first time that CalPERS has all too obviously withheld Public Records Act requests in an effort to feather its own nest.

Recall that last July, CalPERS tried to engage in election-rigging. It had set the delivery date for records that would have supported statements that Jason Perez made in his ballot statement in challenging Board President Priya Mathur’s seat for July 31, too late for him to use them to rebut her objection before an administrative law judge.

But the administrative law judge unexpectedly said she wanted to see Perez’s evidence and gave him till August 2. Without going through the gory details, here is the bottom line:

As you can see from the document embedded at the end of this post, the claim that the Public Records Act response was not ready was false. The cover letters are the very last thing to be prepared in the Public Records Act process. The cover letter was dated July 31, showing that the response was ready on July 31 and there was no legitimate reason for delaying its release until August 3. CalPERS is trying to damage control for Mathur’s misrule as Board President.

Mathur lost by a 16 point margin, so CalPERS’ efforts to put its finger on the dial proved futile. But look at the lengths to which they went.

But another way to look at this is that CalPERS’ desperate efforts to hide the Bourqui matter is merely an augury that whatever end they are trying to achieve will fail. As a wag put it, it’s not hard to notice that the rug under which CalPERS is trying to shove things is already awfully lumpy.

_____

1 As we discussed in our earlier post:

But…you might be saying….what if Bourqui really did resign? It’s not so clear cut. California recognizes that there is such a thing as resigning under duress, which in California is called “constructive dismissal” and is categorized in the California Civil Jury instructions as a sub-set of the law on “wrongful termination”.

2 Perhaps Bourqui’s lawyer did such a good job of persuading CalPERS that they’d overplayed their hand with Bourqui and she had a strong case that CalPERS decided to make a financial settlement in return for a gag order. As we discuss soon, Bourqui’s resignation letter is disclosable under the Public Records Act, and on top of that, Bourqui would largely control the one area where CalPERS could argue for redactions, that of personnel privilege. But a cash for release deal should not take all that long to negotiate.

3 If I prevailed, I would have my legal fees and costs reimbursed, but suits also take time and energy, plus some judges are super deferential to state agencies.

4 Dear Matt Jacobs and Brad Pacheco, if you think the answer is to drag your feet on all my PRAs, I can easily establish that you are discriminating against the press in your response time by looking at other PRAs. And bear in mind that a deep-pockets news organization that has won FOIA fights against government bodies much bigger and better lawyered-up than CalPERS is mucho unhappy with your PRA responses and already looking for a point of entry. So it would not be wise to establish a track record that would aid them in litigation.
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  #1205  
Old 06-21-2019, 07:09 AM
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Mary Pat Campbell
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LOYALTON, CALIFORNIA
CALPERS
BENEFIT CUTS (and now, restoration)

https://www.sacbee.com/news/politics...231750978.html

Quote:
CalPERS pensions mostly restored for retirees who sued after losing promised income

Spoiler:
Three Loyalton retirees will receive about 83 percent of the pensions they were promised for careers in the tiny Sierra County town’s government, according to settlement agreements the town released Wednesday.

The payments resolve a lawsuit retirees John Cussins, Patsy Jardin and Donald Yegge filed after the California Public Employees’ Retirement System reduced their benefit checks by about 60 percent in November 2016.

CalPERS reduced the checks after Loyalton stopped making required payments to the pension fund.

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Loyalton Mayor Sarah Jackson said at least four of the five city council members who let the retirement payments lapse have been replaced.

Jackson said the new council is more committed to fiscal discipline, which it will need to be to afford the roughly $3,500 monthly payments for the retirees the agreements call for. The town’s annual operating budget is about $1.25 million, she said.

“This council’s been very committed to try to complete the settlement in a way that is workable for all people,” Jackson said. “We all concur that it was unfortunate that this happened in the first place, so we’re just trying to make the best of the situation.”

The three lump-sum payments total about $74,000, according to the settlement agreements. The city released the agreements in response to a California Public Records Act request. The agreements show the last signatures were added June 6 to the settlements, which were subject to the council’s approval at a June 18 meeting.

Jackson said the town, which has around 750 residents, is selling a mini-excavator and an equipment trailer and taking a close look at the rest of its inventory to come up with the money.

Like hundreds of other local governments in the state, Loyalton paid CalPERS to administer its workers’ pensions. CalPERS invests the payments and disburses benefits.

After Loyalton stopped making periodic payments in 2013, CalPERS told the town it would have to pay about $1.7 million to ensure the fund could keep paying the retirees’ pensions in full.

Loyalton didn’t pay, so CalPERS reduced the retirees’ benefits. For a while, the town paid the difference — about $5,000 per month — but then stopped at the end of 2017.

The retirees initially named CalPERS in the lawsuit but the $365 billion fund was quickly dropped from it.

The decision to trim Loyalton pensions affected only a handful of retirees, but it startled CalPERS members around the state because it marked the first time that CalPERS cut a former government worker’s pension.

CalPERS again reduced pensions a few months later, in March 2017, for nearly 200 former employees of a defunct job training agency that had been backed by four cities in Los Angeles County. That organization also quit making payments to CalPERS.

CalPERS members expressed anxiety about the benefit cuts in the pension fund’s 2017 survey. It showed declining confidence in CalPERS, particularly among local government executives.

Loyalton only has four retirees eligible for CalPERS pensions, including the three who sued. One more employee likely will become eligible in the future, Jackson said. She said she doesn’t know what the town will do when that person retires.


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Old 06-21-2019, 07:11 AM
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CALIFORNIA
CALPERS

https://www.pionline.com/pension-fun...nomic-downturn

Quote:
CalPERS officials consider using leverage on portfolio in an economic downturn

Spoiler:
CalPERS officials might leverage the portfolio as part of a plan to help the pension fund weather an economic downturn.

The topic came up in a response by CIO Yu Ben Meng to a question from Lynn Paquin, California Controller Betty T. Yee's designee on the board, regarding what investment policy changes the staff could request so staff members could act more quickly in the event of a market drawdown.

"Yes, very good question. So, for example one of the undesirable outcomes during a drawdown is we don't have money to deploy to take advantage of a market dislocation," Mr. Meng said. "And one of the ways to generate additional liquidity is put on leverage on the total fund. So, we borrow money."

This would impact the total fund's leverage policy, Mr. Meng noted.

However, he added that the emerging plan is currently under development and the staff will return to the investment committee to seek an investment policy change if needed.

Mr. Meng declined to comment further on whether the staff plans to leverage the entire fund in preparation for or in the event of a market downturn.

We're having (and have had) discussions about the use of leverage in the asset allocation work for years, spokeswoman Megan White said in an email.

Officials for the $365.1 billion California Public Employees' Retirement System, Sacramento, can use some leverage on the portfolio already, Ms. White noted. CalPERS' treasury management policy references "borrowed liquidity," which is the short-term use of leverage to help maintain the pension fund's target risk profile. Borrowed liquidity requires CalPERS to have a plan to unwind the debt if the duration extends past 90 days. CalPERS' investment policy also allows the use of leverage within global fixed income, global equity and real assets.

"These asset class leverage capabilities have been in place since late 2008 when staff requested the board insert it into the global equity policy to allow us to run notional leverage via equity exposure, from derivatives being supported by assets other than cash," Ms. White said.


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Old 06-21-2019, 07:13 AM
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https://patch.com/illinois/across-il...rsight#new_tab

Quote:
The best and worst examples of public pension oversight
Three very different approaches to state employee retirement benefits in Illinois, Wisconsin, and Oklahoma

Spoiler:
As of fiscal year 2017 the state of Illinois had $134.3 billion in unfunded pension benefits, up from $62.4 billion in 2009. The 2017 Illinois figure is higher than all five of its neighboring states and the 50 state average. In fact, Illinois' promised benefits are more than double the combined unfunded pension liabilities of those five states. These staggering figures make it all the more curious that the Illinois state legislature and Governor Pritzker recently reversed the decision of the previous legislature and Governor Rauner to cap final year pay raises for teachers prior to retirement at 3 percent, reducing the cap from 6 percent. Teacher pensions in Illinois are determined by final year salary, so reverting to the 6 percent cap boosts unfunded pension liabilities by billions of dollars annually.

Kentucky's level of unfunded pension benefits is also alarmingly high. Matt Bevin has spent most of his tenure as governor focused on pension reform. Yet, the AP reported in February that Kentucky is $54 billion in debt, with 80 percent of that ($43.3 billion) attributable to unfunded pensions. All of this may sound like boring policy talk, but it will determine whether or not the states our children and grandchildren live in will be fiscally stable enough to patrol highways, staff elementary schools, and cleanup after natural disasters. These are the most basic functions of government.


Wisconsin was not included in the chart above because its level of unfunded pension liabilities is only $260 million, a figure too small to visibly appear on the bar graph. When Governor Scott Walker took office the Badger State was facing a $3 billion budget deficit. Then Walker signed the fiercely controversial Act 10, which significantly reformed the state's pension structure and restricted collective bargaining rights. Five years later, the MacIver Institute reported that Act 10 saved taxpayers over $5 billion. In fairness, Wisconsin's unfunded pension benefits were only $20 million in 2009 before he took office, but Walker's reform still closed a massive hole in the budget that enabled him to allocate over $2 billion in direct tax relief. Contrary to the shoddy math of Illinois lawmakers, the supposedly balanced budget they just passed has a real deficit of at least $4.9 billion. I'm sure Scott Walker would be happy to offer some friendly advice.

Michigan, Alaska and Oklahoma were also financially strained by pension obligations, so they took a different approach and transitioned to 401k style retirement programs for their state employees. When Oklahoma Governor Mary Fallin signed her state's pension reform bill in 2014, she argued that it provides career flexibility to state workers and mitigates the problem of unfunded pension liabilities. The system, which became effective in 2015, requires all new state employees to contribute a minimum 3 percent of earnings and matches their contributions up to 7 percent. When these workers find new jobs, they can take their 401k money with them which allows them more mobility.

Jason O'Day is an online marketing and social media intern at Truth in Accounting, a nonprofit organization based in Chicago that researches government financial data.


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Old 06-21-2019, 07:15 AM
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CHICAGO, ILLINOIS

https://www.illinoispolicy.org/light...icagos-budget/

Quote:
LIGHTFOOT MUST PURSUE PENSION REFORM, REASONABLE LABOR CONTRACTS TO FIX CHICAGO’S BUDGET

Spoiler:
Persistent budget deficits, enormous and growing pension obligations, a high debt burden and labor contract negotiations all await Lori Lightfoot as she settles into office.

New Chicago Mayor Lori Lightfoot gets no honeymoon. Instead, she inherits daunting fiscal challenges without easy solutions.

Chicago’s structural budget deficit dates back to at least 2005. Outgoing Mayor Rahm Emanuel’s administration announced the fiscal year 2020 gap could be as high as $700 million, driven mostly by higher pension payments caused by poor investment performance in 2018 among the city’s pension funds.

The pension pressure will continue during Lightfoot’s tenure: The city’s pension funds require rapidly increasing contributions during the next four years.

Also, Chicago’s bond debt totaled $9.6 billion at the end of fiscal year 2017, a 57% increase in 10 years. Moody’s Investors Service assigned a junk bond rating of Ba1 to that debt in July 2018.

Lightfoot should lead by putting the city on the path to fiscal stability – without resorting to tax hikes on a city with a shrinking population that has seen $864 million in tax hikes during Emanuel’s administration. Unfortunately, she already is telling taxpayers to expect more pain.

Instead, Lightfoot should call for the Illinois General Assembly to take up pension reform and should negotiate reasonable contracts that hold down the city’s labor costs. With pension reform and restraint in spending and taxing, the city could rebuild its finances, conserve money for basic services and keep more residents from leaving the city.

Chicago’s structural budget deficit must be solved

Lightfoot is starting the budget process for 2020, which will be tough given the city’s chronic structural deficit and skyrocketing pension costs.

Chicago’s structural budget deficit – caused by the city habitually spending more than it collects in revenues – reached a high of $655 million in 2011 and gradually came down to a projected $98 million for fiscal year 2019. That was just the city’s day-to-day operating deficit for basic services. The gap was projected to increase to $252 million in 2020, but that did not include an additional $276 million contribution to police and fire pension funds. As the Emanuel administration prepared to exit City Hall, they increased their estimate of the 2020 budget deficit to as much as $700 million because the pension funds suffered losses in 2018 rather than achieving the 7-percent investment target.

To cover the budget deficits in the past, the city has resorted to selling assets and using reserve funds. According to the 2019 Budget Overview, the last one prepared by the Emanuel administration, Chicago will have $8.9 billion – revenues from taxes, fees and fines, but excluding grant money – to spend this year.

These revenues will go to pay the city’s expenses. While personnel-related costs are the highest, a combined 37% of the city’s budget, including all of the city’s property tax revenues, will go to pensions and principal and interest payments on Chicago’s debt.

How Chicago is spending local funds in 2019

The 2019 Budget Overview presents a balanced budget by making assumptions that savings can be achieved in different ways, such as on equipment cost reductions, government reform and better fiscal management. However, experience shows the city consistently spends more than it receives regardless of what the budget states.

According to Chicago’s Comprehensive Annual Financial Report, or CAFR, for 2017, the most recent available, the city spent over $900 million more than its revenues in 2017. Since 2011, the city’s net deficit – the amount by which the city’s short- and long-term liabilities exceed its assets – has increased to over $28 billion.

Chicago's expenses have exceeded revenues every year since 2011

In 2011, the net deficit was only $2.6 billion. Despite claims that the city has made progress by reducing the structural budget deficit since 2011, Chicago’s financial condition has deteriorated dramatically since then because the city spends more than it receives, and its long-term liabilities have grown because of higher pension obligations and debt.

Chicago taxpayers bear a high debt burden

Chicago taxpayers bear the highest total debt burden among the country’s 10 largest cities, an astounding $119,000 per taxpayer, according to Truth in Accounting. The group counts the city’s pension and other direct debt, such as general obligation bonds, as well as debt for other governmental units for which Chicago taxpayers are responsible, such as Cook County and the state of Illinois.

Of the governmental agencies in Chicago that are funded by taxpayer dollars, the largest is Chicago Public Schools, or CPS. For its fiscal year ended June 30, 2018, CPS brought in a little over $6.5 billion in revenue and spent just under $6.5 billion. CPS also took $2.9 billion in property taxes, more than twice what Chicago receives from its property tax levy.

CPS has pension and debt challenges as well. Over 21 percent of what was spent in fiscal 2018 went to pension and retirement benefits ($763 million) and debt service ($651 million). The Chicago Teachers Pension Fund was only 48% funded and had almost $12 billion in debt as of June 30, 2018.

A long-term plan for fiscal stability requires pension reform

Chicago’s budget problems can’t be solved without addressing the city’s pension crisis. The four pension funds the city controls have over $27 billion in debt and are only 26 percent funded. Lightfoot has suggested those figures may be even worse. Those funds are the Municipal Employees’ Annuity and Benefit Fund, the Laborers’ Annuity and Benefit Fund, the Policemen’s Annuity and Benefit Fund and the Firemen’s Annuity and Benefit Fund. Required contributions to those pension funds are set to increase dramatically. This threatens to overwhelm the city’s budget and crowd out spending on critical city programs – without stopping the growth in total pension debt.

Chicago pension contributions set to spike twice over the next decade

In the first year of the Lightfoot administration, the required pension contribution to the four city-controlled pension funds will increase by $121 million over the fiscal year 2019 amount, to top $1.3 billion. The increase in contributions will accelerate rapidly and reach over $2.1 billion in 2023, a roughly $1 billion increase from just four years earlier.

According to Chicago’s 2017 CAFR, pension payments absorb most of Chicago’s property tax levy, with the balance going to debt service. Property taxes were already increased by $543 million during the Emanuel administration. Nearly all of the $321 million in water and sewer tax increases and 911 fees passed since 2015 will go directly or indirectly to pensions as well.

That is why it is essential that Illinois pass a constitutional amendment that protects earned pension benefits but allows changes in future benefit accruals. As Emanuel did before leaving office, Lightfoot should endorse an amendment to the restrictive pension clause in the Illinois Constitution so the growth in future pension obligations can be curtailed. Consolidating Chicago’s pension funds with downstate funds could also generate significant savings. Fund consolidation could take advantage of economies of scale, eliminate duplicative administrative costs and create greater investment opportunities, according to the Civic Federation.

Lightfoot must negotiate labor contracts that Chicagoans can afford

As she faces a steep budget deficit, increasing required pension contributions and a shrinking city population to pay for it all, Lightfoot will need to hold firm in her negotiations on new collective bargaining agreements with the city’s unions.

Between 2007 and 2017, the Fraternal Order of Police, the Coalition of Unionized Public Employees, the Chicago Firefighters Union and the American Federation of State, County and Municipal Employees received salary increases between 21 and 26 percent. The city simply does not have money for increases like those again.

Chicago has 44 union contracts, all of which expired in 2017. Contracts with the 34 trade unions, which represent 22 percent of the city’s workforce, have been renegotiated through the Coalition of Unionized Public Employees. The new contracts granted 2.1 percent annual pay increases, in line with economic realities, but did not do away with costly work rules and prevailing wage requirements.

As Lightfoot negotiates with police and firefighters, which represent 38.5 percent and 14.6 percent, respectively, of the city’s workforce and a majority of its personnel expenses, she should heed the advice of the Office of Inspector General, or OIG. The OIG identified characteristics of the contracts that should be reconsidered because they affect the city’s capacity to innovate and modernize its operations to deliver services more efficiently and transparently. These include:

“Side letters,” amendments outside of the contracts that create ambiguity and undermine transparency. Some of these remain in effect after a contract has expired and can prevent efficient contract enforcement and administration. According to the OIG, there are 42 police and 51 firefighter side letters in their contracts.
A lack of adequate “reopener provisions” that would allow the city to reopen contract negotiations in the event of a deterioration of the city’s finances during an economic downturn.
“Duty availability pay” for which no specific purpose is stated in contracts but is understood to compensate police and fire personnel because they may be called to duty on their days off. Chicago paid over $56 million in duty availability pay in 2016.
“Compensatory time buybacks” that permit police personnel to accumulate up to 200 hours of compensatory time annually in lieu of overtime during their careers and cash it in upon retirement. Chicago paid out almost $19 million in compensatory time buybacks between 2013 and 2017.
“Holiday on furlough days,” also known as “Daley Days,” that consider fire personnel to have worked on a holiday if the holiday occurs during a vacation.
Employees should bear more of their health care costs. Currently, health insurance premiums paid by city employees are capped at $2,228 annually regardless of salary. By contrast, the national average for employees at private sector firms with more than 200 employees is $4,917.
The fiscal path for Lightfoot is difficult but achievable

There are no easy or quick solutions to Chicago’s fiscal problems. It will take many years for the city to dig out from its pension and other debt obligations. But Mayor Lightfoot must show the leadership and courage necessary to take steps needed now to put the city on the path to fiscal stability.

The first step must be advocating for a state constitutional amendment to reform Chicago’s pension systems to protect earned benefits while slowing the growth in new pension obligations.

However, even if an amendment to the pension clause is passed by the General Assembly, it must be approved by Illinois voters in a general election. The earliest this could happen is 2020. Lightfoot need not wait for a full constitutional amendment to be passed to achieve savings. While urging the state legislature to pass the amendment, she could propose pension contributions based on new post-reform benefit formulas. If the amendment fails, required contributions would revert to those under the current formula.

As personnel-related expenses consume the largest portion of the city’s budget, it is imperative that Lightfoot insist in upcoming labor negotiations on pay raises that are in line with economic reality and affordable for Chicago taxpayers. She should also consider other ways to make city government more cost effective, such as requiring employees to pay a greater share of their health care costs and eliminating or limiting expensive provisions such as compensatory time buy-backs.

The full results of some of Lightfoot’s efforts may not be felt until after she leaves office, but she must resist the easy out of hike taxes and avoid focusing on short-term results. She needs to make tough choices and take the long view of the city’s fiscal situation, or Chicago faces a dim future.
https://wirepoints.org/ignoring-the-...ension-reform/
Quote:
Ignoring the elephant in the room: Sun-Times advice to Chicago Mayor Lightfoot skips pension reform - Wirepoints Original
Spoiler:
The Sun-Times Editorial Board has recommended several reform ideas Chicago Mayor Lori Lightfoot should pursue to reduce the sting of future tax hikes on Chicagoans. Cut workers’ comp costs. Get rid of “aldermanic menu money.” Eliminate unnecessary offices, etc. Every one of the Board’s eight recommendations (see Appendix) are good and each should be pursued to their fullest extent.

The problem is, even if every recommendation is implemented, the city will optimistically save only about $100 million annually. The city’s official budget alone is short by as much as $1 billion, and that budget ignores the true costs of the city’s pensions. The real deficit is much larger and the debts the city faces are already insurmountable.

Unfortunately, the Sun-Times ignores the elephant in the room – structural pension reform. There’s no fixing Chicago’s problems until pension costs are addressed. And that requires changing the state constitution’s pension protection clause.

If the Sun-Times really meant what it said – that it wants to avoid “…slamming Chicagoans with higher taxes” – it would immediately call for Illinois politicians to put a pension protection clause amendment on the ballot.

The same goes for Mayor Lightfoot. She recently said she wants to find cuts in the budget, but that tax hikes were unavoidable: “There’s no question we’re going to have to come to the taxpayers and ask for additional revenue [tax hikes]’. Absent from her is any talk of a constitutional amendment, something her predecessor Rahm Emanuel embraced just before leaving office.

If Lightfoot needs any convincing of the need for an amendment, she may want to look at how pensions have swallowed the budget in the last decade.

Total city expenditures were up 7 percent, or $506 million, from 2008 to 2017. How much of that was pensions? Effectively all of it. Pension spending was up $515 million, or 125 percent, over that same time period. Pension costs ate up all the new spending.

To make room for them, Chicago cut funding to services including Culture and Recreation (down 12 percent), Streets and Sanitation (down 37 percent), Health (down 33 percent), and outlays for Capital Projects (down 58 percent).



The pressure on every budget line item will only continue as pension costs are expected to rise, even under the best of conditions. By 2023, city pension costs will be over $2.2 billion, compared to the $900 million of 2017.

And when a recession comes along, as it inevitably will, the pension funds could experience a decline in assets, putting even more pressure on taxpayers to fill the pension shortfalls.

Chicago’s municipal, fire and police funds, all at less than 30 percent funded, are already dangerously close to insolvency. They may not be able to handle another serious stock market correction. And that’s bad news for the city workers and retirees who are counting on getting retirement checks in the future.



More tax hikes not solution

As we’ve covered in other reports, pensions are not just a city budget issue, either. Chicago households are on the hook for what we call impossible government-worker related debts. Based on the official pension and retiree health care shortfalls reported by the state and local governments, each Chicago household can expect to be burdened with nearly $90,000 in state and local government worker retirement debts over the next couple of decades. That includes the debts of the city, the Chicago Public Schools, Chicago’s share of Cook County government pension debts, as well as those of the state.

If we use Moody’s more conservative pension calculations to arrive at that household burden, those debts jump to nearly $145,000.



Burdens that big mean more and more Chicagoans will choose to leave the city rather than stick around to pay that debt. And anybody contemplating moving to Chicago will be deterred. Why should anyone move to Chicago and be stuck with a $145,000 bill for services that have already been rendered?

Chicago needs reforms, both big and small

The Sun-Times’ reforms are all well and good, but Chicagoans won’t feel better if the mayor’s tax hikes are just a bit smaller. The city’s residents have already been hit with a record property tax increase and new city fees in recent years. And the state’s latest budget and capital bills – laden with more taxes and fees and a doubling of the gas tax – will only make their tax burdens worse.

Lightfoot can’t tax her way out of Chicago’s financial crisis. Until she embraces pension reform, and papers like the Sun-Times join in, the city’s financial struggles will only get worse.

***************

Appendix: Sun-Times’ suggested reforms

Under a scenario where the city manages to slash the cost of police lawsuits, workers’ comp and the aldermanic spending menu by an optimistic 30 percent, savings from the below reforms would likely total about $100 million annually.

Eliminate city clerk and treasurer’s office. Eliminating both offices would save a maximum of about $4 million a year. That’s the combined expenditures of both departments in 2017.

Management of pension fund investments. A 2015 article by Pensions and Investments reported that “by negotiating with managers to secure aggregated pricing, the $144 million paid to investment managers across all 11 pension funds (city and county) annually could be reduced by $25 million to $50 million”

Police lawsuits. Police lawsuits cost about $500 million over an eight-year period, or about $60 million per year.

Workers’ comp. Chicago’s worker’s compenation program costs the city about $100 million a year.

Aldermanic menu money. The city’s “aldermanic menu program” spends about $66 million annually.

On-line portal for permits. An online portal for city permits would likely save a small amount on administrative costs – the larger savings would accrue to businesses.

Consolidate city and county election services. In 2011, the Joint Committee on County-City Collaboration estimated a Cook County merger would save $5 million to $10 million a year.

Collective bargaining agreements. The Sun-Times says Lightfoot should “hold tough” when negotiating new labor contracts, but it only recommends “holding down” raises instead of freezing and reducing overall compensation to a level Chicagoans can afford. A slowdown in raises won’t save money – it will only slow down the growth in spending.
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Old 06-21-2019, 07:33 AM
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ILLINOIS

https://www.dailyherald.com/news/201...take-with-them

Quote:
How many collecting Illinois pensions have moved to other states, and how much did they take with them?

Spoiler:
More than 71,000 people collecting public pensions from six statewide retirement plans have moved out of Illinois, taking more than $2.4 billion annually with them.

That's roughly 18% of all the pensioners in those systems, according to a Daily Herald analysis of financial data obtained through public records requests with the six pension programs.

Florida leads all migration destinations with 14,030 Illinois pensioners, followed by Arizona and Wisconsin with more than 5,600 Illinois public pension recipients now living in each of those states.

According to a National League of Cities report, 90% of retired public employees generally stay in the area where they worked. But Illinois' higher migration rate for public pensioners mirrors the ongoing population decline in the state, which has seen a drop of 157,000 residents since 2013, according to U.S. Census Bureau estimates.

The ripple effects of the outbound migration of pensioners is the loss of their buying power, less representation in Congress and decreased federal subsidies. Combined, the six pension funds in the analysis will pay out nearly $13.9 billion this year, with about 82% of that staying in Illinois.

All states experience some migration of pensioners to other areas. Although there are no national comparisons, a check of several other states shows Illinois' departure rate among pension recipients is higher. About 16% of Iowa's pension recipients have migrated to other states, according to officials at the Iowa Public Employees' Retirement System. In 2015, California pension officials reported roughly 15% of their public pension recipients relocated to another state.

"We already know there's an issue with older individuals and higher property taxes," said Jeremy Groves, an assistant professor of economics at Northern Illinois University. "Which might explain why Wisconsin is such a high migration destination, especially if they're moving to the southern area, because they're still close to Illinois while escaping that property tax burden."

The analysis included nearly 400,000 retirement, survivor, disability and other annual payouts from the Illinois Municipal Retirement Fund, Illinois Teachers' Retirement Fund, State Universities Retirement System, State Employees' Retirement System, Illinois Judges' Retirement System and the General Assembly Retirement System. Information from the Cook County Pension Fund, Chicago Public Schools pension fund and the nearly 700 separate suburban and downstate police and fire pension funds was not available, but those funds represent thousands more pensioners.

Some experts believe some pensioners stay because Illinois is one of the few states that do not tax retirement benefits. Two of the others are Florida, the top destination for Illinois retirees with public pensions, and Texas, at No. 7.

"There are two main reasons why people make these migration decisions. One is a lower tax burden, and the other is lower cost of living," said Adam Schuster, director of budget and tax research at the Illinois Policy Institute, a conservative government finance research group.

Retirees from the state university system are most likely to leave Illinois. More than 22% of state university pensions are now sent out of Illinois, representing almost $600 million a year.

The teachers pension system provides the largest amount of retirement benefits annually. More than $1.2 billion of the nearly $6.4 billion in payouts this year will be made to 25,203 pensioners living in other states, about 21% of recipients.

More than 14% receiving pensions from IMRF, the statewide pension system with the most members, live out of state and receive about $315 million a year.

Meanwhile, former state government employees are most likely to stay put. Only 13% of state employee retirees with pensions have left Illinois, accounting for a little more than $300 million in pension money, according to the analysis. That's up from 12% living out of state in 2014, according to a Reboot Illinois report from four years ago.

Illinois public pension recipients who leave the state average pensions of $34,053 a year, compared to an average pension of $35,573 for those who stay put.

But those who retire to 15 states or U.S. territories have higher average annual pensions. Ten pension recipients now living in the U.S. Virgin Islands average an Illinois pension of almost $43,000 a year, according to the analysis. Another 143 who retired to Hawaii average Illinois pensions of $39,575.


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Old 06-23-2019, 09:32 AM
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ILLINOIS

https://illinoistimes.com/article-21...be-fooled.html

Quote:
A full pension payment? Don’t be fooled.

Spoiler:
Many have reported that the state legislature, in its budget agreement, made its “full” payment to the five state pension systems. While this may be technically true, it is misleading because it ignores the actual contribution that is required to fund the pensions. The state’s action is equivalent to someone paying only the required minimum payment on a credit card and claiming they made the “full” payment.

The state’s fiscal year 2020 appropriation for the Teachers’ Retirement System (TRS) alone, is $4.8 billion, but it should be $7.8 billion. This is a shortfall of $3 billion and follows the trend that the state has perpetuated (or perpetrated) for decades. So how can legislators and others claim a full payment was made?

In the mid-1990s the state legislature, recognizing the underfunding issue, passed a law termed the “ramp.” The law stated that state contributions to the pension plans would be made on a “ramped up” schedule, meaning each year the state contribution would rise until the plans reached a funding target of 90% by 2045. Think of a mortgage where payments start out large and decrease over time – the ramp was designed in reverse, with payments low, especially during the first 15 years, and rising over time.

So, based on this “ramp” plan, yes, the state made its “full” contribution.

But the ramp plan was flawed from the beginning because it ignores actuarial standards – calculations required in the industry. For years the pension plan actuaries and the state actuary have warned legislators of the consequences of continuous underfunding of the pensions.

Since the beginning of the Teachers’ Retirement System in 1939, the state has only paid the actuarial contribution one time. It is important to remember that every teacher and administrator made their annual, required contributions to the system. Every school district made the annual required contributions also.

Using the “ramp” plan, the state isn’t truly making a “full” payment because it shorts the pension systems by billions every year. Money that is required using actuarial standards – a practice used by most states – would have kept us out of the overwhelming pension cost that the state now sees.

Back to your credit card. If you pay the total balance due each month, you avoid any interest charges. If you pay the minimum amount, you incur interest charges that are applied to the unpaid amount. Technically, you have made your “full” payment, since only a minimum payment is required. But doing so just increases what is due later.

That is exactly what the state has done. Each year, with a multibillion-dollar shortfall in the required state contribution, interest charges accrue. That interest charge has continued to accrue, leaving an unpaid bill of nearly $78 billion for TRS (with a total of $134 billion for all five state pension systems).

People decry the huge pension cost. But if the state had made its actuarial payment every year over decades, the pension payment would only be $1 billion – much less than the ramp or the actuarial calculation.

Every $1 not paid today will require $3 down the road.

So, the next time someone says the state made its “full” pension contribution, don’t be fooled. Correct them with the facts.

Cinda Ackerman Klickna has been a trustee on the Teachers’ Retirement System Board for 16 years. Her father, who died in January, one day before his 101st birthday, was a state employee and began writing letters to the editor back in the 1960s about the plight facing pensions. He was so right.


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