MoneyPalooza Monstrosity: State and Local Governments Should Pay Down Pension Debt

Link: https://marypatcampbell.substack.com/p/moneypalooza-monstrosity-state-and

Graphic:

Excerpt:

If a state or local government’s public pension funds have large unfunded liabilities, those liabilities accrue at the assumed rate of return on the assets that should have been there to cover that liability.

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The point is this: if it makes sense to pay down the pension unfunded liability with muni bonds, thus creating new liabilities and thus new leverage, it makes even more sense to take a “windfall” of cash and pay down the pension debt, which creates no new state/local government liabilities

Author(s): Mary Pat Campbell

Publication Date: 26 March 2021

Publication Site: STUMP on Substack

How to Make the Florida Retirement System Investment Plan an Effective Retirement Plan

Excerpt:

The biggest shortcoming of the FRS IP is the contribution rate. With a total contribution rate of just 6.3 percent (3 percent employee; 3.3 percent employer), the rate is, at best, no more than half of what is generally recognized to be an adequate contribution rate in a defined contribution retirement plan.

A total contribution rate of between 12 percent and 15 percent is accepted as necessary to reasonably meet lifetime income replacement goals when combined with Social Security and personal savings. Any retirement plan with a total contribution rate of just 6.3 percent will fail in achieving its primary goal— to provide a sufficient post-employment benefit.

Author(s): Richard Hiller

Publication Date: 26 March 2021

Publication Site: Reason

NJ Local Pension Bills

Excerpt:

Annual pension contributions from local employers in New Jersey come due next week based on the June 30, 2019 actuarial valuations. The state website only has the breakdown in pdf format but it was easy enough to export the numbers into excel for the PERS and PFRS plans.

Many local employers are also drafting their 2021 budgets so it was interesting to see what one of them (Union County) allocated as pensions costs for 2021.

Author(s): John Bury

Publication Date: 25 March 2021

Publication Site: Burypensions

Voice of the people: Pension problem will have to be addressed at some point

Link: https://www.daily-journal.com/opinion/voice-of-the-people-pension-problem-will-have-to-be-addressed-at-some-point/article_5fc77b16-8e44-11eb-a527-bf430c87768c.html

Excerpt:

I am not personally involved with the success or failure of these pension funds because I am not, nor do I have any family members enrolled, in either of the pensions.

The last report I saw (from 2019?) stated the City of Kankakee taxpayers’ annual funding of the pensions was at or close to $3 million. It would be nice if the “windfall” the city’s representatives receive would take some of the burden off the backs of the taxpayers of the city. Since it wasn’t included in the several ideas of the distribution of this “windfall,” I would hope that it could be. It would be wonderful to have this albatross removed from the necks of the city’s taxpayers.

If all pension providers would have been included in the Employee Retirement Income Security Act of 1974 (ERISA), this problem would probably not exist. However, US Congress in its usual passing of legislation exempted all governments (federal, state, county and local). The federal law sets minimum standards for most voluntarily established retirement and health plans in private industry to provide protection for individuals in these plans.

Author(s): David Cox

Publication Date: 27 March 2021

Publication Site: Daily Journal of Kankakee, Illinois

Local Control of NJ PERS?

Excerpt:

S3522, which could mean unions will need to expand their corral of bought politicians to those who would control the local part of the New Jersey Public Employee Retirement System (PERS), was introduced yesterday in the legislature apparently to the surprise of a Senate committee that rejected it, according to Politico.

Author(s): John Bury

Publication Date: 23 March 2021

Publication Site: Burypensions

Pa.’s largest pension plan hires lawyers to probe its mistake

Link: https://www.mcall.com/news/pennsylvania/mc-nws-pa-pension-plan-mistake-20210320-stmldhnvkzhrblhdy5wizltiay-htmlstory.html

Excerpt:

The board of the $62 billion Pennsylvania public school pension system on Friday hired a pair of law firms to look into what the fund is now calling a “misstatement” in its profit reporting.

The Anglo-American law firm Womble Bond Dickinson will investigate what the board had previously called an “error,” while Philadelphia-based Morgan Lewis will check the math and tax issues.

The mistake may have wrongly spared teachers a potential hike in their pension payments while simultaneously passing that burden onto taxpayers.

Author(s): JOSEPH N. DISTEFANO

Publication Date: 20 March 2021

Publication Site: The Morning Call

Emilie Krasnow: My mother dedicated her life to teaching. Fund her pension.

Excerpt:

This year, teachers have faced more adversity than ever before. I have heard from many educators, union members and parents how scared they are. They are not vaccinated. They are working more hours than ever. They are worried about their students. This is not the time to take away the promise of their retirement stability. 

I am calling on our state legislators and our governor to find alternative revenue sources to fund the retirement plans for teachers and state employees. I am grateful for the hard work of the legislators, union leaders and educators who are collaborating and strategizing to address this issue.

Just a year ago, we were lauding our teachers as “heroes” and “essential workers.” It’s time to put our money where our mouth is and fund their pension program. 

Author(s): Emilie Krasnow

Publication Date: 15 March 2021

Publication Site: VT Digger

Murphy’s promise of full public-worker pension payment breaks 25 years of underfunding

Excerpt:

In addition to helping improve the long-term health of the pension system, Treasury officials are also projecting some significant budget savings can be generated by getting to full funding a year ahead of schedule.

Those savings, which will total an estimated $860 million over the next three decades, are based on the way the state’s unfunded liability accrues over the long term, the officials said.

Murphy’s administration should also be in a good position to manage the initial step up to full pension funding, thanks to a combination of factors, including money the state borrowed last year when it was expecting significant revenue losses would be triggered by the pandemic.

Author(s): John Reitmeyer

Publication Date: 15 March 2021

Publication Site: NJ Spotlight News

Pennsylvania’s largest pension system investigates possible $25 million error

Link: https://www.pennlive.com/news/2021/03/pennsylvanias-largest-pension-system-investigates-possible-25-million-error.html

Excerpt:

In December, PSERS consulting actuary Buck reported that the system’s investments had netted a 6.38 percent average annual rate of return over the nine previous fiscal years between 2011 and 2020. That meant employees were spared a contribution rate increase by slimmest of margins. The investment benchmark was a 6.36 percent rate of return.

The risk mandate, of course, was a response to the system’s chronic underfunding. According to the most recent estimates, which themselves are fungible, the system reported an unfunded pension liability of at least $44 billion. That means it has just over 59 percent of the money necessary to meet current pension obligations.

On Friday night, the system’s board of trustees announced an audit, including the possible hiring of an outside firm to investigate, after it was “made aware of an error regarding the reporting of investment performance numbers.”

Author(s): Wallace McKelvey

Publication Date: 13 March 2021

Publication Site: PennLive

TRUST? ILLINOIS STILL REFUSES TO PAY ITS PENSION BILL.

Excerpt:

Only the statutory contribution is not what the state owes to meet its obligation and prevent more debt. “Statutory” should be translated as the legislature made up a number and blew it out their collective butts.

The actuarial amount owed, the amount actually needed to keep from growing the liability is several billion more that the statutory amount.

They short the pension system every year, after year, after year, after year. And this year again.

Not exactly a trust-building thing, right?

Author(s): Fred Klonsky

Publication Date: 28 February 2021

Publication Site: Fred Klonsky

Advisory committee says North Carolina should put more toward pensions

Link: https://www.montgomeryherald.com/news/article_ac128a46-7b94-11eb-b480-230aa039ee18.html

Excerpt:

North Carolina’s Debt Affordability Advisory Committee says the state should set aside $100 million a year to help the state pension systems remain solvent.

A draft released Wednesday, Feb. 24, of the committee’s 2021 debt affordability study also calls for North Carolina to maintain its 4% borrowing cap.

The committee said more money is needed to support post-employment benefits, including pensions and health care. Officials said the state’s pension systems show a $12.1 billion shortfall, while the State Health Plan is underfunded by $27.7 billion.

The committee said the state should put $100 million annually into the Unfunded Liability Solvency Reserve through fiscal 2025 to help lower that number.

Author(s): Johnny Kampis

Publication Date: 3 March 2021

Publication Site: Montgomery Herald