Tag: Pennsylvania

Many Pennsylvania state retirees say they can’t afford inflation on their stagnant pensions

Mary Pat Campbell

Link: https://www.spotlightpa.org/news/2023/07/pennsylvania-pension-public-school-state-worker-sers-psers-inflation-retirement/

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Enrollees in Pennsylvania’s two public sector pension funds — the State Employees’ Retirement System (SERS) and the Public School Employees’ Retirement System (PSERS) — haven’t seen a cost of living adjustment, or COLA, since 2004. Nearly 40 other states grant some sort of COLA to retirees.

Particularly hard hit by this lack of a COLA are the almost 69,000 former public school teachers, state government workers, and other public sector employees who retired before 2001, like McVay. On average, these retirees are in their early 80s.

They retired before the legislature increased pension benefits by 25%. The average pension for a SERS enrollee who retired before 2001 is under $15,000 annually, according to the system. That number for a 2022 retiree is more than $30,000, thanks to the increase as well as a rise in average salaries for workers.

There’s a similar gap for PSERS enrollees. A person who worked for 30 years and ended with a $30,000 salary would have a pension of $18,000 if they retired pre-2001, according to Chris Lilienthal, a spokesperson for the Pennsylvania State Education Association. Under the same circumstances, a person who retired post-2001 would have a pension of $22,500.

Author(s): DaniRae Renno

Publication Date: 27 July 2023

Publication Site: Spotlight PA

When States Take Over Financially Troubled Local Governments

Mary Pat Campbell

Link: https://www.route-fifty.com/finance/2023/02/state-takeover-city-government-chester-pennsylvania-bankruptcy/382677/

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A number of states have programs in which they actively monitor municipal finances and roughly 20 have emergency manager laws allowing for direct intervention. People have long debated how effective these oversight programs are at generating a real recovery and what the right level of intervention even is. Duly elected city officials don’t like being told what to do by state overseers. States on the other hand, typically want troubled cities to just buckle down and take their advice—even if it’s tough medicine.

So while the whole point of these programs is to avoid or mitigate extreme distress, they can also create or exacerbate tension between cities and states along the way. 

By all accounts, Chester’s approach to being placed in Pennsylvania’s municipal distress program in 1995 was to just ignore the state’s advice. Fred Reddig, a retired state official who has coordinated recovery plans for a number of distressed municipalities, worked on Chester’s case from 1995 to the early 2000s. He recalls that during that time, it was difficult to compel local officials to follow any of the state’s recommendations and that relations were tense. 

….

Rob DiAdamo, a lecturer at Boston University’s law school who teaches a class on state and local governance, noted many communities that end up under some form of state oversight had structural economic problems long before the state intervened.

“It may be more effective for the state to be looking at how to bring opportunities back to these communities than wait for the crisis and have people argue about the best way to address it,” he said. “It’s like waiting for the patient to have a heart attack and discussing treatment options when the crisis could have potentially been avoided by first encouraging healthier eating habits and exercise.”

Author(s): Liz Farmer

Publication Date: 7 Feb 2023

Publication Site: Route Fifty

How a Bankrupt City’s Pension System Hit a Breaking Point

Mary Pat Campbell

Link: https://www.route-fifty.com/finance/2023/01/chester-pennsylvania-municipal-chapter-9-bankruptcy/382142/

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A key driver of the conflict is around fiscal management and disclosure. Amid its budget troubles, the city has racked up $750,000 in Internal Revenue Service penalties related to unpaid payroll taxes, fell victim to a $400,000 phishing scam that wasn’t publicly disclosed for months, cycled through two chief financial officers in as many years and has failed to produce an audited financial report since 2018. But perhaps the most striking example of the problems surrounding the city’s bankruptcy is the discord—and conflicting information—around Chester’s underfunded police pension. 

Like other distressed cities, Chester has an outsized pension liability and annual pension bills that would take up a substantial portion of its budget if paid in full. But also like other cities, Chester hadn’t been paying its entire bill—called the Minimum Municipal Obligation (MMO) in Pennsylvania. In 2021, the city paid its full MMO for the first time since 2013 and it was a significant lift. The total it spent on pension and retiree health care costs that year—$14.6 million—took up 28% of its entire general fund.

But there’s a bigger problem: Due to accounting practices that inflated the plan’s assets and a dispute over what the city’s police pension formula actually is, no one really knows what Chester’s true unfunded liabilities are.

Author(s): Liz Farmer

Publication Date: 24 Jan 2023

Publication Site: Route Fifty

As Pension Goes Broke, Bankruptcy Haunts City Near Philadelphia

Mary Pat Campbell

Link: https://news.bloomberglaw.com/bankruptcy-law/as-pension-goes-broke-bankruptcy-haunts-city-near-philadelphia

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Decade after decade, Chester, Pennsylvania, has fallen deeper and deeper into a downward financial spiral.

As the city’s population dwindled to half its mid-century peak, shuttered factories near the banks of the Delaware River were replaced by a prison and one of the nation’s largest trash incinerators. A Major League Soccer stadium and casino did little to turn around the predominantly Black city just outside Philadelphia, where 30% of its 33,000 residents live below the poverty line. Debt piled up. The government struggled to balance the books.

Now, with its police pension set to run out of cash in months, a state-appointed receiver is considering a last resort that cities rarely take: filing for bankruptcy.

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In the years after the housing-market crash, three California cities, Detroit and Puerto Rico all went bankrupt, in large part because of retirement-fund debts. Such pensions are now being tested again, with the S&P 500 Index tumbling over 20% this year and bonds pummeled by the worst losses in decades.

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Michael Doweary, who was appointed receiver of the city in 2020, is exploring options such as eliminating retiree health care, cutting the city’s costs for active employees’ medical benefits and reducing the city’s pension and debt-service costs. 

But that’s virtually certain to draw resistance from employees, who would need to approve such changes. In February, Pennsylvania’s Department of Community and Economic Development gave Doweary the power to seek bankruptcy protection for Chester if such steps fall through. 

“The answer is not to go to people and say we promised you if you work here for 25 years we’re going to give you post-retirement medical benefits, and then take it back,” said Les Neri, a former president of the Pennsylvania Fraternal Order of Police who is currently working with Chester’s officers. “At least current officers can make a decision to accept it and stay, or reject it and leave.”

Author(s): Hadriana Lowenkron

Publication Date: 17 Oct 2022

Publication Site: Bloomberg Law

Pa. pension fund down over $3 billion in tough market, and braces for losses ahead

Mary Pat Campbell

Link: https://www.inquirer.com/business/sers-pension-drop-investments-retirement-20220923.html

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The drop in global stock and bond values has shaved about $3 billion off the Pennsylvania State Employees’ Retirement System (SERS) during the second quarter, staff and consultants warned trustees in Thursday’s investment meeting.

The fund was worth $34.5 billion at midyear, down from $38 billion three months before, after counting an 8.5% investment loss for the quarter, along with payouts to 130,000 pensioners, and ongoing contributions from taxpayers and 100,000 state workers — lawmakers, judges, college staff, corrections officers, troopers, social workers — who hope to retire someday with pensions from the system.

The fund posted the decline as legislators have been weighing how to cope with pressure to boost pensions for more than 70,000 older state and public school retirees, whose last “cost of living allowance” increases took effect in 2004. Their pension checks, unchanged since that time, are losing pricing power after food, fuel, and other prices rose earlier this year at the fastest rate since the early 1980s.

Author(s): Joseph DiStefano

Publication Date: 23 Sept 2022

Publication Site: Philadelphia Enquirer

Pa. elections official blames spreadsheet for state’s mistake in certifying a county’s election results

Mary Pat Campbell

Link: https://www.inquirer.com/news/pennsylvania-certification-lawsuit-primary-election-results-20220808.html

Excerpt:

But in a court filing Monday, Jonathan Marks, the deputy elections secretary, acknowledged that a fourth county, Butler, had also refused to count those ballots — and that the county had notified the department three weeks before the lawsuit was filed.

Marks apologized to the court for what he described as an oversight resulting from “a manual process” — a spreadsheet — the department had used to track which counties were counting undated ballots. Butler County was misclassified in the spreadsheet, he said, and from that point forward was left out of the state’s campaign to push counties that hadn’t included them.

Author(s): Jonathan Lai, Jeremy Roebuck

Publication Date: 8 Aug 2022

Publication Site: The Philadelphia Inquirer

Justice Department Ends Investigation of Pennsylvania PSERS

Mary Pat Campbell

Link: https://www.ai-cio.com/news/justice-department-ends-investigation-of-pennsylvania-psers/

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The Department of Justice has dropped its investigation into the Pennsylvania Public School Employees’ Retirement System, said Chris Santa Maria, chairman of the $75.9 billion pension fund’s board of trustees, in a statement. PSERS made no further comment on the matter.

The pension fund had been under investigation by the Justice Department since at least May of last year, when subpoenas indicated that the FBI and prosecutors were seeking evidence of kickbacks and bribes at PSERS.

The subpoenas were reportedly looking for information from the pension fund, its executive director, chief financial officer, chief auditing officer and deputy CIO. The court orders reportedly showed that the FBI and prosecutors were probing possible “honest services fraud” and wire fraud.

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According to a report released earlier this year following an internal investigation, PSERS investment consultant Aon took responsibility for the accounting error. The report includes a letter from Aon to Grossman that said the firm had become aware of data corruption in some sub-composite market values, cashflows and returns for April 2015.

Aon attributed the data corruption to an error by an analyst in uploading net asset value and cashflow data into the performance system it uses. The company said the data corruption impacted “a few asset class composites” in the public markets.

Author(s): Michael Katz

Publication Date: 3 Aug 2022

Publication Site: ai-CIO

Wall Street Is Fleecing a Bunch of Teachers

Mary Pat Campbell

Link: https://jacobin.com/2022/04/katie-muth-pennpsers-pensions-retirement-fund-teachers-sec-pennsylvania

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A new era in the decade-long battle by retirees and whistleblowers to halt massive transfers of wealth out of retirement funds and into Wall Street firms could be at hand, thanks to the case of Katie Muth.

Muth, a Democratic Pennsylvania state senator, is one of fifteen trustees who oversees Pennsylvania’s largest public pension fund, the Pennsylvania Public School Employees’ Retirement System (PennPSERS). Not long after her February 2021 appointment to the board, Muth began questioning the fund’s investments in areas like private equity, hedge funds, and real estate.

Over the past thirty years, public pension funds have moved $1.4 trillion of retiree savings into such high-risk, high-fee “alternative investments,” enriching finance industry moguls like Stephen Schwarzman of the Blackstone Group and Robert Mercer of Renaissance Technologies while often shortchanging retired public employees and teachers.

But Muth says that when she asked the fund’s investment staff for more information about its high-risk investments, she was rebuffed — so in June 2021, she sued the fund for basic information about its investments.

Author(s):MATTHEW CUNNINGHAM-COOK

Publication Date: 6 April 2022

Publication Site: Jacobin

Suggested reforms for Pennsylvania’s Public School Employees’ Retirement System

Mary Pat Campbell

Link:https://reason.org/commentary/suggested-reforms-for-the-pennsylvania-teacher-pension-system/?utm_medium=email

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Despite realizing excellent investment returns in 2021, industry capital market forecasts continue to suggest persistently volatile near-term investment returns that stand to only add to over $1 trillion in current pension funding shortfalls. Most near-term investment outlooks we’ve seen from pension boards across the country predict anywhere from a 6.0 percent-6.3 percent return over the next 10 years. PSERS’ assumed rate of return was recently lowered and currently sits at 7 percent.*

PSERS’s investment outlook is similar to these broad projections. Figures 1 and 2 present the results of the Monte Carlo simulation analysis developed by the Pension Integrity Project. This iterative analysis uses 10,000 simulations of PSERS’s asset performance over 20 years, considering expected returns and volatilities of plan assets, to generate both probabilities of hitting certain returns and expected return distributions.

These findings suggest that PSERS is not likely to achieve even a 6 percent average return over the next 10-15 years—much less its current assumed return of 7 percent. This suggests there is a high probability that the public pension plan’s unfunded liabilities could get worse, not better, in the near-to-mid term. This underperformance—relative to the plan’s own return rate assumptions—will make the system’s long-term solvency challenges even larger.

Author(s): Jordan Campbell, Ryan Frost

Publication Date: 11 Oct 2021

Publication Site: Reason

PSERS Internal Investigation Into Miscalculated Returns Released

Mary Pat Campbell

Link:https://www.ai-cio.com/news/psers-internal-investigation-into-miscalculated-returns-released/

Excerpt:

This Monday, the Pennsylvania Public School Employees’ Retirement System (PSERS) finally released its long-awaited internal investigation into the pension fund’s misreporting of December 2020 investment return results and allegations that staff accepted gifts that would have been considered conflicts of interest. While the investigation was completed more than two months ago, the publication of the findings had been delayed multiple times.

The report was released after a series of closed-door board meetings that took place that same day. During those meetings, representatives from the law firm Womble Bond Dickinson, which had conducted the investigation, briefed the board on the findings.  

Claire Rauscher, a lawyer from Womble, told the board that, as of now, there was no evidence of criminal conduct, but some important pieces of evidence remain missing. Aon Consulting, a Chicago company that helped PSERS calculate its inaccurate return results, refused to cooperate in the investigation. Because Womble Bond Dickinson is a private law firm, it has no subpoena power to force Aon to comply.

Author(s): Anna Gordon

Publication Date: 2 Feb 2022

Publication Site: ai-CIO

Colin McNickle: Are Pittsburgh’s pension changes prudent?

Mary Pat Campbell

Link:https://triblive.com/opinion/colin-mcnickle-are-pittsburghs-pension-changes-prudent/

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The City of Pittsburgh has revised its employee pension program. But whether the moves were prudent remains an open question, concludes an analysis by the Allegheny Institute for Public Policy.

It was in December that outgoing Mayor Bill Peduto signed ordinances that eliminated a pension reduction for some city employees, modified the employee contribution rate and extended the number of years that the city will dedicate parking taxes to those pensions.

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All this said, new ordinances return and/or add more city employees to the pension plans’ liabilities, increasing them from $87.9 million to $96.9 million, based on an actuarial analysis. And they assume a robust recovery in post-pandemic parking tax revenue to meet the pledged contribution to the pension plans.

But do remember that the 2010 ordinance states that the city’s full faith and credit are pledged to meet the parking tax obligation. “That means other sources of tax or non-tax revenue may be called upon if needed,” Montarti says.

“If the city can reach an 80% funding ratio without the inclusion of the parking tax pledge, then it is possible that the dedication of the revenue to the pensions may end earlier than 2051, based on language in the new ordinances,” he says.

….

“Why not wait until the pension funding ratio was further into that range or, even better, actually met the level of ‘no distress’ (of 90 percent or above)?” Montarti asks. “What if the stock market underperforms and the city’s pensions lose ground?”

Author(s): Colin McNickle

Publication Date: 3 Feb 2022

Publication Site: Trib Live

Pennsylvania pension fund says it won’t require board to sign secrecy oaths to hear key report

Mary Pat Campbell

Link:https://www.post-gazette.com/news/state/2022/01/27/psers-pennsylvania-school-pension-fund-ndas-nondisclosure-agreements-board-members-investigation-womble-bond-dickinson/stories/202201270116

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Members of the board of Pennsylvania’s $73 billion school pension fund won’t be required to sign nondisclosure agreements before hearing on Monday the long-awaited findings of an internal investigation into the mammoth plan.

The Public School Employees’ Retirement System is still asking the board to sign the secrecy pacts but is not insisting upon it, the plan’s spokesperson says. Her statement clarified a previous controversial email from the board’s chairman, who asked members to sign NDAs without saying they had the option to refuse.

A law firm is to unveil the results of its investigation at a closed-door session for the PSERS board Monday morning. But the board has yet to decide whether, how soon and how completely those findings will be made public after the meeting.

Author(s): ANGELA COULOUMBIS, JOSEPH N. DISTEFANO AND CRAIG R. MCCOY

Publication Date: 27 Jan 2022

Publication Site: Pittsburgh Post-Gazette