Tag: contributions

Teacher Retirement Systems: A Ranking of the States

Mary Pat Campbell

Link: https://bellwethereducation.org/publication/retirement-systems-ranking

Graphic:

Excerpt:

Teacher retirement plans are called “gold plated” by their proponents and critics alike, when in fact half of teachers will never see a pension at all. Only about one in five teachers gets a full pension. And in many cases retirement benefits shortchange teachers and make it harder for them to save for their retirement. 

In Teacher Retirement Systems: A Ranking of the States, Bellwether Education Partners ranks how state retirement systems serve U.S. teachers and taxpayers:

….

Retirement programs don’t serve all teachers equitably. For teachers who work in the classroom for fewer than 10 years, 34 states receive an “F” for how well retirement plans prepare them for retirement. For teachers who work in the classroom for more than 10 years, but do not stay until retirement age, 23 states receive an “F” ranking.

Link to full report: https://bellwethereducation.org/sites/default/files/Teacher%20Retirement%20Systems%20-%20A%20Ranking%20of%20the%20States%20-%20Bellwether%20Education%20Partners%20-%20FINAL.pdf

Author(s):

MAX MARCHITELLO
ANDREW J. ROTHERHAM
JULIET SQUIRE

Publication Date: 31 August 2021

Publication Site: Bellwether Education Partners

Treasurer Muoio Announces New Jersey Has Paid the Full State-Funded Portion of the Pension Contribution for the First Time in More than 25 Years

Mary Pat Campbell

Link: https://www.state.nj.us/treasury/news/2021/07012021.shtml

Excerpt:

State Treasurer Elizabeth Maher Muoio announced that the Treasury Department today kicked off the start of the new fiscal year by paying the full state-funded portion of the $6.9 billion pension contribution slated for Fiscal Year 2022 (FY 2022). This marks the first time in more than 25 years that New Jersey is making the full Actuarially Determined Contribution to the Pension Fund, plus an additional $505 million contribution, and also the first time in years that the state has made a lump sum payment, rather than quarterly payments.

The Treasurer also announced that by making the contribution in one lump sum, the State is now expected to save taxpayers roughly $2.2 billion over 30 years, rather than the $1.5 billion in savings initially anticipated if the state had made quarterly pension payments this year.

Publication Date: 1 July 2021

Publication Site: Dept of the Treasury, New Jersey state

Elorza’s pension proposal relies on a risky approach and an adviser linked with 38 Studios

Mary Pat Campbell

Link: https://thepublicsradio.org/article/why-elorzas-latest-proposed-pension-fix-faces-a-lot-of-questions-

Excerpt:

Providence’s pension crisis has its roots in the late 1980s. That’s when the city’s Retirement Board approved unusually generous compounded cost of living adjustments for more than 2,500 city workers and retirees. Decades later, that move helps explain why there’s a $1.2 billion gap between the pension balance and the amount owed to current and future retirees.

The pension crisis has defied attempted solutions for years. Providence officials say the city has just 22% of the money needed to meet its long-term pension obligations. And the amount of the city budget consumed by the pension is growing 5 percent a year, to about $93 million currently. Without a change, that annual payment will rise to $227 million by 2040.

Mayor Jorge Elorza said these pension costs are unsustainable.

“It’s only a matter of time before they continue to squeeze everything else out of our budget, so that we’re cutting deeper and deeper into the bone,” he said during a recent news conference.

Elorza’s plan involves selling $704 million in pension obligation bonds. The idea is that these bonds could generate enough of a return to boost the pension system’s funding to more than 60 percent.

Author(s): Ian Donnis

Publication Date: 1 June 2021

Publication Site: The Public’s Radio

How Stupid are Credit Rating Agencies?

Mary Pat Campbell
How Stupid are Credit Rating Agencies?

Excerpt:

Yes, unfunded liabilities as of June 30, 2020 are “more than $60 billion”. Much more ($128 billion under GASB68 and and $94 billion using understated valuation liabilities). But, setting that aside , how is Sweeney planning on reducing that massive debt?

Simple: lower pension payments…..

Clearly, we need to do everything we can to cut the cost of our annual pension payments at both the state and local levels in order to continue to guarantee the retirement payments our retirees have earned and to reduce the unfunded liability that is such a burden to taxpayers.

That is why we have developed legislation to enable our state and local pension systems to add revenue-generating assets like water and sewage treatment systems, High Occupancy Toll (HOT) lanes, parking facilities and real estate to provide new, diversified sources of revenue for their investment portfolios.

Author(s): John Bury

Publication Date: 17 June 2021

Publication Site: Burypensions

Chicago Park District pension revamp takes fund off road to insolvency

Mary Pat Campbell

Link: https://fixedincome.fidelity.com/ftgw/fi/FINewsArticle?id=202106081343SM______BNDBUYER_00000179-ec17-d1ac-a5fb-ef37eda90001_110.1

Excerpt:

The Chicago Park District pension funding overhaul approved by lawmakers moves the fund off a path to insolvency to a full funding target in 35 years, with bonding authority.

State lawmakers approved the statutory changes laid out in House Bill 0417 on Memorial Day before adjourning their spring session and Gov. J.B. Pritzker is expected to sign it. It puts the district?s contributions on a ramp to an actuarially based payment, shifting from a formula based on a multiplier of employee contributions. The statutory multiplier formula is blamed for the city and state?s underfunded pension quagmires.

“There are number of things here that are really, really good,? Sen. Robert Martwick, D-Chicago, told fellow lawmakers during a recent Senate Pension Committee hearing. Martwick is a co-sponsor of the legislation and also heads the committee.

?This is a measure that puts the district on to a path to full funding over the course of 35 years,” he said. “It is responsible. There is no opposition to it. This is exactly more of what we should be doing.”

The district will ramp up to an actuarially based contribution beginning this year when 25% of the actuarially determined contribution is owed, then half in 2022, and three-quarters in 2023 before full funding is required in 2024. To help keep the fund from sliding backwards during the ramp period the district will deposit an upfront $40 million supplemental contribution.

The 35-year clock will start last December 31 to reach the 100% funded target by 2055.

Author(s): Yvette Shields

Publication Date: 8 June 2021

Publication Site: Fidelity Fixed Income

‘Full funding’ for pensions – two ways to skin a cat

Mary Pat Campbell

Link: https://www.truthinaccounting.org/news/detail/full-funding-for-pensions-two-ways-to-skin-a-cat#new_tab

Excerpt:

Spending plans that “fully fund” pension obligations by making statutorily required contributions — amounts required by legislators, by law — do not necessarily fully fund pensions. In fact, Illinois has a sad history of passing laws with funding that falls far short of actuarial requirements — the amounts necessary to keep pension (and related retirement health care) debt from rising over time.

For an example, take a peek at the Illinois Teachers’ Retirement System (TRS). Their annual report for 2020 is available here. The table on pdf page 2 shows that the system has accumulated more than $50 billion in invested assets, but this massive amount actually falls far short of the nearly $140 billion in present value obligation for future pension payments, leading to a nearly $90 billion unfunded liability.

…..

The practice of distributing unfunded promises to pay money in the future has been a key of the tool chest that politicians have employed in misleading the citizenry that Illinois has lived up to constitutional balanced budget requirements, when in truth it has done anything but.

Author(s): Bill Bergman

Publication Date: 8 June 2021

Publication Site: Truth in Accounting

2021 Update: Public Plan Funding Improves as Workforce Declines

Mary Pat Campbell
2021 Update: Public Plan Funding Improves as Workforce Declines

Full Report: https://crr.bc.edu/wp-content/uploads/2021/06/SLP78.pdf

Graphic:

Excerpt:

The aggregate funded ratio improved from 73 to 75 percent from FY 2020 to 2021. At the same time, contribution rates rose from 21 to 22 percent of payrolls.

While initial expectations for public pensions were low due to COVID, financial markets rebounded and municipal tax revenues were quite resilient.

Yet one other COVID-related factor – cuts to the state and local workforce – impacted public pension finances in FY 2021.

These cuts had little impact on funded status and required contribution amounts, but they do explain the rise in contribution rates, which are expressed as a share of lower payrolls.

Author(s): Jean-Pierre Aubry, Kevin Wandrei

Publication Date: June 2021

Publication Site: Center for Retirement Research at Boston College

The Chicago Park District’s 30% Funded Pension Plan – And More Tales Of Illinois’ Failed Governance

Mary Pat Campbell

Link: https://www.forbes.com/sites/ebauer/2021/06/07/the-chicago-park-districts-30-funded-pension-planand-more-tales-of-illinois-failed-governance/?sh=7ce1216054fa

Graphic:

Excerpt:

The Illinois legislature ended its regular legislative session on May 31, in a flurry of legislation passed late into the night. One of those bills was a set of changes to the 30% funded pension plan of the Chicago Park District. Were these changes long-over due reforms, or just another in the long line of legislative failures? It’s time for another edition of “more that you ever wanted to know about an underfunded public pension plan,” because this plan illustrates a number of actuarial lessons.

80% is not OK. Governance – who gets to set the contributions? Funded status can collapse very quickly and be very difficult to rebuild. Need to use actuarial analysis not just legislator’s brainstorms

Author(s): Elizabeth Bauer

Publication Date: 7 June 2021

Publication Site: Forbes

Illinois 2022 budget: The state’s financial cliff will be waiting after the federal largesse runs out – Wirepoints

Mary Pat Campbell
Illinois 2022 budget: The state’s financial cliff will be waiting after the federal largesse runs out – Wirepoints

Graphic:

Excerpt:

Wirepoints calculates that retirement costs will consume 26 percent of the 2022 budget. The state is set to contribute $9.4 billion in General Funds to pensions, pay $777 million in pension bond costs, and pay an estimated $1 billion in retiree health costs.

In total, that’s $11.2 billion of the $42.3 billion budget consumed by retirement expenditures.

On top of the payments from the General Fund, another $1.2 billion in pension payments will come from other budget funds, meaning the state’s total retirement costs will be an estimated $12.4 billion in 2022.

Author(s): Ted Dabrowski, John Klingner

Publication Date: 2 June 2021

Publication Site: Wirepoints

My Word | The rhetoric does not match the arithmetic on public pensions

Mary Pat Campbell
My Word | The rhetoric does not match the arithmetic on public pensions

Excerpt:

In 2015 Eureka started paying down its unfunded pension liability. These pension debt payments were $921,000 in 2015, $1 million in 2016, $3.9 million in 2017, $4.6 million in 2018, $5.4 million in 2019, and $5.7 million in 2020. Going forward, these debt payments will increase from $6 million in 2021 to $8.4 million in 2029, and are currently scheduled to continue until 2038. In 2015, Eureka cut $834,000 from the Eureka Police Department budget. Heading into budget talks in early 2020, EPD Chief Steve Watson talked of how EPD had seen a 19% reduction in staffing since 2016. Eureka followed up these previous cuts to EPD in its FY 2020-2021 budget with a funding cut of $1.1 million and loss of six more positions, including four officers, for EPD.

…..

The rhetoric does not match the arithmetic. Pension debt payments are funding taken out of the budget and represent tax dollars that are not invested in the community and that citizens see no current services for. Not exactly keeping funding local. With so many governmental agencies in the same debilitated economic situation due to pension obligations, the economic evidence does not support the claim of governments being prudent in their spending. Constant increases in funding for pension obligations along with cuts to law enforcement and other services do not support the idea that tax dollars are the taxpayers’ dollars as a priority expenditure.

Author(s): Patrick Cloney

Publication Date: 2 June 2021

Publication Site: Times-Standard

Letter: Why should taxpayers bear CalPERS risk?

Mary Pat Campbell
Letter: Why should taxpayers bear CalPERS risk?

Excerpt:

The city [Chico] has been receiving more sales tax, property tax, developer fees, and Utility Tax revenues every year as development brings more people to Chico. Instead of maintaining and improving infrastructure, Staff has poured these funds into their pension deficit, $11,500,000 this year, by 2025, $13,000,000. This money is allocated from all the department funds, at the expense of infrastructure and services.

Instead of pursuing new taxes that will hurt our local economy, council needs to switch from CalPERS’ defined benefit plan to a defined contribution plan, like 401Ks. Why should the taxpayers but never the employees bear the burden of the risks taken by CalPERS? The POB scheme, which Dowell admits is “gambling,” puts ALL the burden on the taxpayers, forever. Any new revenues will go to the pension obligation first.

Author(s): Juanita Sumner, Chico

Publication Date: 26 May 2021

Publication Site: Oroville Mercury-Register

Municipal Pension Funding Increased in Recent Years, but Challenges Remain

Mary Pat Campbell

Link: https://www.pewtrusts.org/en/research-and-analysis/fact-sheets/2021/05/municipal-pension-funding-increased-in-recent-years-but-challenges-remain

Graphic:

Excerpt:

The first metric is net amortization, which measures whether total contributions to a public retirement system are sufficient to reduce unfunded liabilities if all actuarial assumptions—primarily investment expectations— are met for that year. Plans with positive net amortization are expected to retire pension debt over time and therefore improve their funded status. 

Pew reviewed the three-year average for net amortization. This figure provides a more complete picture of contribution adequacy given the impact of volatile investment performance and demographic experience on plan assets. In total, the 33 cities in Pew’s analysis achieved positive amortization (104% of the benchmark) from 2015 to 2017. However, individually, more than half of the cities had negative amortization. Notably, Chicago and Dallas contributed less than 50% of the benchmark. In contrast, New Orleans contributed 174%, or $132 million, which was well over the city’s benchmark over the time period. For cities that are poorly funded, net amortization can indicate that they are on a path toward sustainably funding their pension plans. For example, New Orleans and Philadelphia have both increased their contributions significantly in recent years to achieve positive net amortization and decrease unfunded liabilities. On the other hand, better funded cities that fell short of the benchmark may face growing pension debt absent a policy change or adjustment.

Author(s): David Draine

Publication Date: 18 May 2021

Publication Site: Pew Charitable Trusts