Tag: contributions

Readers React: Blame Pa. legislators for public pension mess

Mary Pat Campbell

Link: https://www.mcall.com/opinion/readers-react/mc-opi-let-schreiber-public-sector-pension-benefits-20210518-e5cwxkfscrdupc5v6vebixqxhe-story.html

Excerpt:

Between roughly 1997 and 2009, legislators decided to pay less of the employer contribution amount than statisticians deemed necessary. In kitchen table terms, those legislators chose not to pay their bills.

Now that creditors are demanding those bills be paid, critics are claiming the payouts are undeserved, and too generous.

It’s really a shame so many seem to feel it’s OK to not pay bills from the past because the interest is too high. I bet few business owners would accept nonpayment because customers chose to not pay when billed and now claim payments are too high.

Author(s): Thomas Schreiber

Publication Date: 18 May 2021

Publication Site: The Morning Call

Harvey, Illinois’ ARP relief dragged into pension fund conflict

Mary Pat Campbell

Link: https://www.bondbuyer.com/news/harvey-illinois-arp-relief-dragged-into-pension-fund-conflict#new_tab

Excerpt:

A Harvey, Illinois, pension fund claims it’s entitled to share in the Chicago suburb’s American Rescue Plan funds and wants to block the distribution of aid until a judge decides.

The financially stressed suburb south of Chicago, which has battled over the last decade with its public safety pension funds, the city of Chicago, and bondholders about its obligations, settled a legal dispute with its police and firefighters’ over past due payments in 2018.

The Firefighters Pension Fund is now staking a claim on Harvey’s share of the $350 billion for local, state and tribal governments in the coronavirus relief package President Biden signed in March, arguing Harvey’s share is subject to the 10% claim on city tax funds that flow through the state and are sent directed to the fund the city agreed to in a 2018 settlement.

Author(s): Yvette Shields

Publication Date: 14 May 2021

Publication Site: Bond Buyer

Politics Report: The Mayor’s Choice

Mary Pat Campbell

Link: https://www.voiceofsandiego.org/topics/politics/politics-report-the-mayors-choice/

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Excerpt:

Almost all of that is in the required contribution the city must make to its pension system. Yes, San Diego politics will always somehow find a way back to pensions. Pensions and Mark Fabiani.

Nick Serrano, the mayor’s deputy chief of staff, even clapped back at a critic who accused the mayor of giving more money to the police department while making cuts elsewhere.

“Because the City has a pension obligation we have to fulfill. The increase to the police budget is the City’s pension payment — it’s not a service level increase. Nice try,” Serrano wrote on Twitter.

The pension spike: This year, the city is grappling with a $49.3 million increase in its pension payment. To the extent pensions matter as a civic issue it’s in this: the payments. That amount of money can pay for a lot of things – parks, rec centers, libraries, firefighters and cops, etc.

About $36.8 million of the increase is tapping the city’s general fund, and police make up 42 percent of the general fund. Here’s how pension increases have affected the police department’s budget over the last five years:

Author(s): Scott Lewis, Andrew Keatts

Publication Date: 24 April 2021

Publication Site: Voice of San Diego

Pennsylvanians pay extra for public pensions

Mary Pat Campbell

Link: https://www.inquirer.com/business/psers-teachers-cost-deficit-shared-risk-sers-pension-20210424.html

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Excerpt:

Forced to cover the higher pension checks, state and local taxpayer funding for PSERS, the big retirement plan for public-school educators, has risen year after year, soaring from just over $600 million in 2010 to $5 billion this year.

Now a little-noticed provision of a reform passed in 2010, known as the “shared risk” rule, has come back to haunt PSERS officials — and teachers, too.

Under the rule, teachers, not just taxpayers, must pay more into the $64 billion pension system whenever profits fall short on investments.

In an embarrassing admission, its board said on Monday that the policy meant many teachers will face a hike in their payments this year. This was the first time this has happened since the law was adopted.

The board for PSERS — the Public School Employees’ Retirement System — acknowledged it had previously endorsed an inflated number for investment returns, a figure it incorrectly thought was just high enough to spare teachers any increase.

Author(s): Joseph N. DiStefano

Publication Date: 24 April 2021

Publication Site: Philadelphia Inquirer

What NJ Tells Creditors On Benefits

Mary Pat Campbell
What NJ Tells Creditors On Benefits

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Excerpt:

According to the EMMA website New Jersey borrowed another $400 million last week for which they had to provide an Official Statement which included 20 pages on the situation with public pensions and benefits. Excerpts follow.

…..

The contribution of the Lottery Enterprise is valued as of June 30, 2020 at $12.569 billion, based on a 30-year straight line amortization. However, the first reevaluation of the value of the Lottery Enterprise required by LECA has not yet been performed. If the contribution of the Lottery Enterprise were not taken into consideration in calculating the funded ratio of the Pension Plans, the funded ratio of the Pension Plans as of June 30, 2020 would have been 37.6% instead of 49.8%. (page I-60)

Author(s): John Bury

Publication Date: 3 May 2021

Publication Site: Burypensions

PSERS and its troubles: A guide to the woes facing Pa.’s biggest pension plan

Mary Pat Campbell

Link: https://www.inquirer.com/business/psers-sers-pension-fbi-scandal-investigaton-teachers-20210411.html

Excerpt:

The board in December found that PSERS yearly investment returns had averaged 6.38% over the last nine years — just above the 6.36% threshold needed to avoid an increase in pension payments from 100,000 school employees hired since 2011.

In 2010, the state adopted a so-called “risk sharing” mandate that requires school staff to pay more, as taxpayers do, when PSERS investments underperform. The law mandated that the review in 2020 look at average returns over the past nine years.

Author(s): Joseph N. DiStefano, Craig R. McCoy

Publication Date: 11 April 2021

Publication Site: Philadelphia Inquirer

Public Pension Plans Are Thirsty for Liquidity

Mary Pat Campbell

Link: https://www.plansponsor.com/public-pension-plans-thirsty-liquidity/

Excerpt:

Chicago’s municipal pension plan recently redeemed $50 million from a large-cap equity fund. Seems like a non-event. Happens all the time. But the reason the pension plan did so is chilling: It was done specifically in order to make pension benefit payments. This should be a cautionary flag to underfunded pensions and to the state and municipal governments that sponsor them.

….

First, when pensions are underfunded they have a tendency (or need) to take on more risk in order to try to generate higher returns.

For example, underfunded pension plans are increasing their allocations to private equity. Nothing wrong with that. But that means more of the portfolio is illiquid. It would be very unlikely that private equity positions would be sold to “make payroll,” specifically because they are so illiquid. But this leaves fewer assets that are liquid enough to be sold, and that increases the pressure on those liquid assets to be sold at a decent price. Moreover, if the plan has significant assets in liquid securities, such as large-cap equities or Treasurys, those assets can easily be sold, but then the portfolio will be out of balance and will require additional trading and rebalancing anyway.

Secondly, the pension plan must keep more cash on hand than it otherwise would. If your policy portfolio calls for a 3% allocation to cash, that is designed for diversification and dry powder. But a pension plan sponsor should be providing significant amounts of cash into the pension each year. If the sponsor is not making its contributions, then the pension plan has to carry more cash than it otherwise would.

Author(s): Charles Millard

Publication Date: 7 April 2021

Publication Site: Plansponsor

Red Jahncke: A study’s error distorts debate on state pensions

Mary Pat Campbell

Link: https://www.journalinquirer.com/opinion/other_commentary/red-jahncke-a-study-s-error-distorts-debate-on-state-pensions/article_498958aa-9872-11eb-bc83-837e67f2c17c.html

Excerpt:

Because Connecticut employees contributed so little to their own pensions, the cost to the state was actually higher than the average cost of pension benefits in the 50 states,  Here are the numbers from the center’s study (page 17). In 2014, Connecticut contributed 8.0% to SERS, while the 50-state average contribution was 7.0%. These percentages are pension cost as a percent of payroll cost.

The higher level in Connecticut was necessary because state employees contributed only 2.2% to their own pensions, while the 50-state average employee contribution was triple that amount, or 6.6%.

The differential between Connecticut’s 8% and the national average of 7% amounted to a 14.3% higher level in Connecticut. Either way you look at the extra 14.3% – as a higher state cost or as a larger employee benefit – it was overly generous. So how did the center make its mistake? Instead of recognizing the impact of the level of employee contributions, the center glossed over them and only looked at the gross unallocated cost of pension benefits, namely 10.2% in Connecticut versus an average of 13.6% in the 50 states. This creates an illusion opposite to reality. The fair and accurate measure is net cost for the state and net benefit for employees, which, in Connecticut, was 8%. The gross cost of the benefit of 10.2% was offset by the employee contributions of 2.2%, leaving both the state’s net cost and the employee’s net benefit at 8%. Nationally, a gross cost of 13.6% was offset by employee contributions of 6.6%, leaving a lower net cost/benefit of 7%.

Author(s): Red Jahncke

Publication Date: 8 April 2021

Publication Site: Journal Inquirer

San Diego’s pension payment spiking $50M, worsening budget crisis during pandemic

Mary Pat Campbell

Link: https://www.sandiegouniontribune.com/news/politics/story/2021-01-17/san-diegos-pension-payment-spiking-50m-worsening-budget-crisis-during-pandemic

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San Diego’s annual pension payment will rise by nearly $50 million this June, making it much harder for the tourism-reliant city to balance its budget while tax revenues continue their sharp slide due to the COVID-19 pandemic.

The city’s pension board is requiring a $49.3 million spike in the annual pension payment — from $365.6 million a year to $414.9 million — because estimates of long-term pension debt rose this year from just over $3 billion to $3.34 billion.

Author(s): David Garrick

Publication Date: 17 January 2021

Publication Site: San Diego Union-Tribune

NJ Pension Palaver

Mary Pat Campbell
NJ Pension Palaver

Excerpt:

Public employees and their unions are certainly to blame for allowing promises made to not be fully funded,

Those contributions that public employees make are negotiated at levels they have input into (nothing to do with funding benefits honestly); and

What worthwhile programs for New Jerseyans did those tens of billions of dollars in missed payments fund and, if that money was invested wisely, shouldn’t New Jerseyans be reaping some benefits around now? If the money was not invested wisely then why begrudge not having more of it to waste?

Author(s): John Bury

Publication Date: 11 April 2021

Publication Site: Burypensions

The sustainability of state and local government pensions: A public finance approach

Mary Pat Campbell
The sustainability of state and local government pensions: A public finance approach

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Their findings, however, imply that many state and local governments may be able to spend more than assumed on improving their educational systems and economically important infrastructure.

“Given other demands, fully funding their pension plans might not be the right thing for state and local governments,” Sheiner said in an interview with The Brookings Institution. “They should compare the benefits of upping their pension investments with the benefits of investing in their people.”

Author(s): Jamie Lenney, Byron Lutz, Finn Schüle, Louise Sheiner

Publication Date: 24 March 2021

Publication Site: Brookings

Vermont lawmakers seek pension reforms to stem funding shortfalls

Mary Pat Campbell

Link: https://www.pionline.com/pension-funds/vermont-lawmakers-seek-pension-reforms-stem-funding-shortfalls

Excerpt:

Vermont lawmakers are pushing a plan to reduce a widening shortfall in the state’s retirement systems by asking teachers and state employees to pay more into their pension plans and work more years.

During a March 24 meeting, the Vermont House Government Operations Committee proposed teachers base contribution rates be raised by 1.25% to 2.25% and that most state employees be increased by 1.1%, according to a proposal posted on the Vermont General Assembly website.

The proposal also bumps up the age at which most workers can qualify for retirement benefits, requiring them to reach full Social Security retirement age, which is currently 66 or 67. Some groups of teachers and state employees can now retire as early as 62 or with 30 years of service.

Author(s): Margarida Correia

Publication Date: 29 March 2021

Publication Site: Pensions & Investments