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  #1  
Old 01-01-2016, 05:40 AM
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Default Public Pensions Watch 2016

Happy New Year!

The list is getting kind of long, so let's spoiler it

Spoiler:


1. Public plans in trouble, Sept 2008

2. Public plans in trouble, part 2, Jan 2010

3. Public Plan Watch III: the reckoning, Jan 2011

4. Public Pensions Watch IV: the saga continues, Jan 2012

5. Public Pensions Watch 2013, Jan 2013

6. Public Pensions Watch 2014, Jan 2014

7. Public Pensions Watch 2015, Jan 2015

....and if you like those threads, you may also be interested in:

Puerto Rico watch

Chicago debt watch

Illinois debt watch

Muni watch

MEP watch

Post with comment letter summary for ASB on Public Pensions:

http://www.actuarialoutpost.com/actu...postcount=1421


Here's to another year of watching!
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Old 01-01-2016, 05:43 AM
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CLASS ACTION LAWSUIT
ASSETS

http://www.benefitspro.com/2015/12/3...cebook-moves-f

Quote:
A federal judge in a New York district court has certified two classes of plaintiffs in a claim alleging Facebook mislead investors prior to its 2012 initial public offering.

Earlier in December, U.S. district judge Robert Sweet named the North Carolina Retirement Systems, Arkansas Teacher Retirement System and the Fresno County Employees’ Retirement Association among the lead plaintiffs representing a class of institutional investors.

Facebook is reportedly appealing the certification of the classes in appellate court.

RELATED


PBGC: Multiemployer program apocalypse delayed 3 years

New funding is delaying the projected insolvency date for the Pension Benefit Guaranty Corporation multiemployer insurance program.
In certifying two classes of plaintiffs, Judge Sweet is combining some 40 claims that Facebook withheld inside company information about how increased mobile usage would affect future revenues.

....
Shares of Facebook’s $16 billion IPO were priced at $38. They fell to about $17.50 four months later, in September 2012, in part on fears that the company was struggling to monetize its mobile platform. The stock stayed below the price of the IPO for about a year.

The public pensions involved claim to have lost about $7 million from IPO investments.

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Old 01-01-2016, 05:44 AM
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NEW JERSEY

https://burypensions.wordpress.com/2...cusing-courts/

Quote:
In an nj.com op-ed former State Treasurer Clifford Goldman lays out the problem with public pensions in New Jersey:
Quote:
In a few years, when the pension funds are completely depleted, including the money contributed by employees, the government system as we know it will collapse. In 2013, the pension funds paid out $4.9 billion. The required annual payment will be much higher when the pension funds run out of money. In a recent Official Statement for a State bond issue, the state projected that the first pension fund will be out of money in 2021, the others a few years afterwards.

Surely, executives, legislators and journalists know this. Still, it is business as usual in Trenton. The legislature discusses such things as eliminating the estate tax, raising billions for a rail tunnel, or funneling future tax revenues to private companies. They enact bond issues as if the money will be there to pay them off.
.....
There are some problems with this analysis:
1. The actual payouts from the pension system are around $10 billion annually.

2. Judges are appointed by the governor with the approval of the legislature so, on the important rulings anyway, they devolve into rubber stamps for what those politicians really want, which is not always what they put in their laws.

3. You cannot legislate or adjudicate money into existence especially in the highest taxed state in the nation.

4. You can cut spending in other areas but when those cuts endanger the incomes of people who provide $2,700 checks each election cycle, that politicians really want, the obvious solutions never make it to the table.
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Old 01-01-2016, 05:55 AM
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KENTUCKY TEACHERS
PENSION OBLIGATION BONDS

http://www.courier-journal.com/story...ture/77471852/

Quote:
According to the latest analysis, Kentucky Teachers’ Retirement System has only 55 percent of the money needed to cover benefits over the next 28 years, and overall, it faces $13.9 billion in unfunded liabilities.

The system sold off $650 million in assets last year to help pay out benefits and expects to liquidate another $750 million this year.

Lawmakers have debated solutions to the problem for more than a year, but heading into the session they remain at odds on proposals to resolve the financial gap.

Gary Harbin, head of the teachers' retirement system, warns that without a significant funding plan in the next budget, Kentucky will face two pitfalls: One, the system will continue on a downward spiral of selling assets that should be invested for teachers in the classroom today. Two, bond rating agencies are likely to lower the state’s credit rating again.

At some point, recovery becomes too stressful for the budget to handle, he said.

“That’s what we are trying to avoid – reaching a point that the state’s budget and the 4 million people of the state can’t support this benefit because we let the debts grow too long,” Harbin said.

......
Democratic House Speaker Greg Stumbo says he will refile a bill from last year to authorize up to $3.3 billion in pension obligation bonds. KTRS could use proceeds from the bonds to pay benefits, allowing their investment assets to remain in the market and continue earning money. Stumbo's bill also calls on the state to incrementally increase retirement contributions over a period of about eight years until it reaches full funding.
......
Supporters of bonds say they would provide immediate funds to stabilize cash flow problems at KTRS and allow the budget to slowly transition into making full contributions. The deal allows KTRS to refinance debt and makes economic sense, proponents say, considering that investment earnings are expected to outpace the interest on bonds.

But the proposal faces steep opposition among Republicans. Critics say that bonds are too risky, stacking debt upon debt when investment returns are uncertain.

Republicans also argue that a new benefit tier for future hires and other structural changes are an essential part of any solution to help the system meet current obligations and avoid racking up more shortfalls. They say that traditional pensions have proved unsustainable in the private sector and that state government must follow suit to protect taxpayers.

But teacher groups – and many Democrats – oppose changes to benefits, especially moving future hires to a 401(k)-style pension plan. They say the change would cost more money, at least in the short run, and leave teachers with an unreliable retirement, making it difficult to recruit and retain quality educators.

......
KTRS has spoken out in favor of Stumbo's bond bill, arguing that it would stabilize the system's cash flow problems and help the state budget transition to full funding.


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Old 01-01-2016, 05:57 AM
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HEDGE FUNDS

http://www.thefiscaltimes.com/2015/1...aOw%2Elinkedin

Quote:
Hedge funds have underperformed the S&P 500 for years: The HFRI Fund Weighted Composite Index returned an annualized 3.2 percent for the five years ended Nov. 30, compared to 12.5 percent for the S&P 500 for the five years through Dec. 22. But, despite some signs that investors are now losing patience with the underperformance, the industry still enjoyed an inflow of $80 billion in the first three quarters of this year, according to research firm Preqin. So far this year, 57 more hedge funds have opened for business than have closed.

So what gives? Why do investors — including many public pension funds — remain willing to pour their cash into such a lagging investment class?

The simplest answer is that many investors are still chasing the outsized returns that top hedge funds provide. Public pensions, which as of last year faced unfunded liabilities of $1.1 trillion, according to the Center for Retirement Research at Boston College, may feel particular pressure to pursue lofty returns.

Many public pension funds are still running on the assumption that they can earn returns of 7 percent to 8 percent a year, even though history has proven otherwise, says Martin Fridson, chief investment officer at money management firm Lehmann, Livian, Fridson Advisors in New York.

"That's not going to happen buying domestic stocks and bonds" at this point, he notes. So the choices are to reduce benefits, which is often opposed by government officials and/or prohibited by state constitutions; to cut government spending; or to invest more aggressively.

"Pension fund managers say to themselves that if we put 10 to 20 percent into alternative investments and earn 20 percent a year or some other unrealistic number, that will help us close the gap," says Fridson, who once managed a high-yield bond hedge fund and also acted as a pension consultant for New York City. "It's not based on sober projections of returns, but just saying that the answer is an [outsized] return, because that's how we reach our assumptions."

......
To be sure, not all investors are sending good money after bad into hedge funds. The nation's largest pension fund, California Public Employees' Retirement System (Calpers), decided last year to dump its entire $4 billion commitment to hedge funds, saying the investments were too complex and costly.

And, of course, the top hedge funds still perform quite well. "If you can identify superior performance beforehand and get in, that makes sense," Fridson says.

That's so simple -- why don't they do that?
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Old 01-01-2016, 06:03 AM
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CALIFORNIA
UNFUNDED LIABILITY

https://medium.com/@DavidGCrane/flas...340#.thbye7tuw

Quote:
Flash: California Issues $9 Billion in Debt
Did you know that California just issued $9 billion in debt? There wasn’t a press release— in fact, the announcement was buried on page seven of a report quietly posted on a website — even though this debt is larger than 95% of California’s outstanding General Obligation Bonds.
This debt takes the form of one year’s increase in unfunded pension obligations to employees of the state’s K-12 system. Last year those liabilities were $58 billion. Now they’re $67 billion. The $9 billion addition is as real as any other debt. Arguably it’s more real because, as the Stockton decision demonstrated, bankruptcy courts are more likely to cut bond obligations than pension obligations.
......
Stay tuned. More debt will be quietly issued in January when the state reports the growth in other pension obligations. In the meantime, ask yourself how such debts get created without voter approval and why the creditors who will pocket the $20 billion are allowed to finance the elections of legislators who create those obligations.
Of course, every day that liability is growing. But we hear about it officially ratcheting up only annually.
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Old 01-01-2016, 06:14 AM
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NEW YORK
CORRUPT POLITICIANS

http://www.msn.com/en-us/money/marke...ion/ar-BBo3uh2

Quote:
Convicted former senator looks to collect $95,000 pension

Dean Skelos, former leader of the New York state Senate, has filed the paperwork to begin collecting a state pension of up to $95,000 per year, according to NBC New York.

There's just one problem—he's a convict.

Earlier this month, a jury found Skelos guilty of using his influence to arrange payments and jobs for his son Adam, who was also convicted. The ruling unseated the Long Island Republican from the legislature but it didn't expel him from eligibility for benefits due to his 35 years of public service.

In fact, in 2011, lawmakers had voted to withhold pensions of corrupt or convicted officials, however, that change does not apply to state officials who entered the pension system before that year.

http://www.timesunion.com/local/arti...on-6729076.php

Quote:
Barbs traded over Skelos' pension
GOP cries foul after Democrat Kaminsky calls for ban on convicted felons cashing in

....
"I'm appalled that Dean Skelos has the gall to line his pockets with taxpayer dollars by taking a huge pension," said Kaminsky, a former federal prosecutor who is thought to be the prime candidate to vie for the open seat in April. "I am proud to lead the fight to close this egregious loophole. This year, I sponsored legislation to ban convicted public officials from receiving pensions because taxpayers shouldn't have to foot the bill for a convicted felon's retirement."
Kaminsky is viewed as a potential candidate for Skelos' seat, which was vacated by his conviction earlier this month on eight corruption counts. Republicans currently hold a bare 32-member majority in the chamber, though it requires the assistance of Sen. Simcha Felder, a Brooklyn Democrat who caucuses with the GOP.
Perhaps with an expected April special election in mind, Senate Republican spokesman Scott Reif called Kaminsky "a fraud and a phony" who "should be ashamed of himself."
"It was Kaminsky and the New York City Democrats who failed to pass an agreed-upon measure this year to prohibit public officials convicted of felonies from receiving their pensions," Reif said. "While the Senate acted decisively, Kaminsky and his Assembly Democrats buried their heads in the sand."


Public officials who entered the public retirement system after November 2011 can already have their pensions stripped if they commit crimes related to their public service. Efforts to extend that potential punishment to lawmakers and others who entered the system before that date requires a constitutional change.
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Old 01-01-2016, 06:52 AM
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SAN DIEGO, CALIFORNIA
REFORM DENIED

http://www.voiceofsandiego.org/topic...n-diego-again/

Quote:
The state labor board has thrown down a doozy of a decision against the city, attacking former Mayor Jerry Sanders and other politicos’ machinations in advance of the June 2012 ballot initiative that gave most new city employees 401(k)s instead of pensions.

The result could cost the city a ton of money, restart the pension system that had been closed for new employees and generally cause pandemonium – and all because Sanders wanted his name on the pension initiative.

It goes back to the discussions about how to get the measure, Proposition B, on the 2012 ballot. The mayor is the city’s chief labor negotiator and state labor law clearly states that city employees are entitled to bargain for their benefits. Sanders and others tried to get around this by saying that he was acting as a “private citizen” not the mayor by backing the initiative. Had Sanders tried to negotiate the deal with labor groups, it’s likely the majority of the City Council would have stymied him. But he also had the option to let others do the initiative themselves. Labor unions sued throughout the process and the state’s Public Employees Relations Board released its final ruling Tuesday. (Scott Lewis did a rundown of this legal case a few years ago in a piece about City Attorney Jan Goldsmith.)

And what the board said the city now has to do is astounding:

* Pay all the city employees in the 401(k) system lost wages with 7 percent interest from each year they lost out.

* Pay the labor unions’ legal costs, including funding future legal action related to the case.

* Restore the benefit system to what it was before Prop. B

It’s unclear how any of this would actually happen. The tax rules regarding retirement systems are really complicated. And the labor board specifically said it was not repealing Prop. B. Thus, the provisions would have to remain in the City Charter but ostensibly not followed, which seems to present a whole other set of legal issues.

Mike Zucchet, the head of the city’s white-collar labor union, said the city should immediately begin negotiating with its employees for how to fix this.

“If they don’t pay now, they’re going to pay later and the city is going to continue to suffer for it,” Zucchet said.

http://www.nbcsandiego.com/news/loca...363868441.html

Quote:
In 2012, San Diego voters approved Proposition B, which replaced "defined benefits" pensions with 401(k)-style retirement plans.

The Prop. B campaign gathered a record 116,000 signatures, at a cost of more than $1 million, and was passed by a two-thirds majority.
Labor unions challenged the measure on grounds that management had violated a state law known as the Meyers-Milias-Brown Act (MMBA) , requiring the city to engage in good-faith “meet-and-confer “ negotiations.

Critics said former San Diego Mayor Jerry Sanders illegally collaborated with citizen initiative groups to end the traditional pensions for all new hires except police officers.
On Wednesday, the California Public Employment Relations Board (PERB) agreed and ordered the City of San Diego to reinstate traditional pensions, and retroactively reimburse the employees “for the value of any and all lost compensation, including but not limited to pension benefits . “
.......
DeClerq said Sanders had reneged on a promise not to subject fire fighters to the terms of Prop. B, and to exempt them along with members of the San Diego Police Officers Assn., who continue to receive traditional pension benefits.

“We tried and tried to get them to meet and confer,” he recalled, “but they refused. They just blatantly shut us down and said ‘No, we’re not doing it’.”

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Old 01-01-2016, 06:54 AM
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http://blogs.wsj.com/moneybeat/2015/...tate-capitals/

Quote:
State lawmakers are paying attention to pensions.

And the focus isn’t limited to retirement benefits of public-sector employees, which have been cut at equal rates by Democratic and Republican governors since 2009. The growing support of pension overhauls by Democrats has strained relations with unions, as the Wall Street Journal reported Wednesday.

From Alabama to Wyoming, 45 states put into law some 245 pension-related bills in 2015, according to the National Conference of State Legislatures. That’s up from 89 such laws taking effect in 37 states just three years ago, according to the NCSL database.

The topics of the legislation range from early-retirement incentives to military service credits to fossil-fuel divestiture.

......
For states with pension holes, even those led by Democrats, the increased legislative activity is unlikely to slow in future years, according to Luke E. Martel, a group director at NCSL overseeing retirement research.

“We will continue to see states controlled by Democrats enacting pension changes,” Mr. Martel said.

.....
Nearly all states since 2009 have instituted some type of pension-benefit overhaul, according to the National Association of State Retirement Administrators. Those changes have ranged from cycling workers onto 401(k)-style accounts to increasing worker contributions to hiking minimum retirement ages.
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Old 01-01-2016, 06:55 AM
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SAN FRANCISCO, CALIFORNIA
DIVESTMENT
PRIVATE PRISONS

http://www.sfweekly.com/sanfrancisco...nt?oid=4375219

Quote:

The San Francisco Employees' Retirement System (SFERS), the city's $21 billion pension fund, is no stranger to demands that it invest "responsibly." City officials have demanded that the city divest its holdings in gun manufacturers and fossil fuels; in 2013, housing activists demanded that the city sell off its shares in Wells Fargo because of alleged predatory lending practices that fueled the foreclosure crisis.

That divestment campaign ultimately failed. But now, some activists are alleging that San Francisco's investment in Wells Fargo also funds private prisons.

Earlier this year, the Afrikan Black Coalition — an alliance of the black student unions across the nine University of California campuses — demanded that UC sell $425 million in shares of the bank, which is one of the largest financiers of the for-profit prison companies Corrections Corporation of America (CCA) and the Geo Group (GEO).

As of September, the bank held shares worth $33.8 million in Corrections Corp of America — a 25 percent increase from the previous quarter — and $12.5 million in shares in GEO Group, according to its own financial statements.

For its part, Wells Fargo denies any connection to private prisons.

"Wells Fargo Funds — which are owned by the Funds' investors, not Wells Fargo — currently holds a very small position in GEO and CCA as part of a passive index fund," bank spokesman Ruben Pullido wrote in an email. "SEC filings can make it appear that Wells Fargo is the owner, but we are not. In fact, the holdings of the mutual funds must be segregated from Wells Fargo's own assets in accordance with applicable laws."

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