Tag: reform

Honest budgeting practices? Loans are not revenues

Mary Pat Campbell

Link: http://hawaiifreepress.com/Articles-Main/ID/28237/Honestbudgeting-practices-Loans-are-not-revenues

Excerpt:

In a Feb. 10, 2021, letter to David R. Bean, GASB director of research and technical activities, Institute Executive Vice President Joe Kent urged that Bean and his colleagues dismiss the proposals, “so government officials will have to deal honestly with public interest groups such as ours that seek sound budgeting practices and accountability.”

As explained by Kent, the proposed new accounting standard and accounting concept would require general and other state budgeted funds to have a “short-term” focus,[3] such as recognizing long-term transactions only “when payments are due.” That would allow lawmakers to continue sweeping long-term liabilities off the books.

“For example,” said Kent, “Hawaii’s latest general fund budget proposal listed $750 million of borrowing as proceeds under ‘other revenues’ being used to balance the budget.[4] We would expect the state Comprehensive Annual Financial Report to highlight this fact, but instead the CAFR’s governmental funds statements support the false claim that the budget has been balanced.” 

Author(s): Grassroot Institute

Publication Date: 15 February 2021

Publication Site: Hawaii Free Press

GASB proposals would stretch meaning of accrual accounting

Mary Pat Campbell

Link: https://www.accountingtoday.com/opinion/gasb-proposals-would-stretch-meaning-of-accrual-accounting

Excerpt:

Every taxpayer and beneficiary of government services and benefits should care about good government accounting. Accountants and other financial professionals should take special note because GASB is attempting to change one of the basic tenets of accounting. This is a rare opportunity to convince GASB to reverse course and move toward true accrual accounting in budgeted funds statements.

GASB currently has two exposure drafts out for public comment: Project 3-20, “Recognition of Elements of Financial Statements,” and Project 3-25, “Financial Reporting Model Improvements.” Together, these proposals assert a foundation in something called the “short term financial resources measurement focus and accrual basis of accounting.”

The proposals, most importantly, do not relate to government-wide financial statements such as the Statement of Net Position (a balance sheet) and Statement of Activities (an income statement), both of which have significantly firmed up their accrual accounting foundations in the last decade. GASB’s proposals relate instead to governmental funds statements, such as those for general funds, which are widely used for budgeting purposes.

Author(s): Bill Bergman

Publication Date: 11 February 2021

Publication Site: Accounting Today

Commentary: America’s Public Pension System Remains Mired in Crisis

Mary Pat Campbell
Commentary: America’s Public Pension System Remains Mired in Crisis

Excerpt:

The public pension system lost $1 trillion, a 21 percent loss for the fiscal year, following the COVID-19 lockdowns in March. In turn, these losses have added an overwhelming amount of stress on our public pension systems, as state and local pensions were already facing a $4.1 trillion shortfall. Public pension liabilities are on track to increase to $1.62 trillion this year, up from $1.35 trillion in 2019. These numbers are alarming as many governments now have less capacity to defer cost hikes or take mitigating actions because their non-asset cash flow has greatly declined.

Two of America’s most dire pension plan systems are in California and Illinois, two of the country’s largest states with large numbers of workers in defined contribution plans. In California, the economic effects of the virus are evident on the already strained public pension system. At the end of the first quarter, the California Public Employees’ Retirement System, reported that their asset value had dropped 10.5 percent since June 2019 — a loss of $35 billion. Matters have only gotten worse in Illinois and could soon hit a level of catastrophe if aid does not come forth. Moody’s estimates that Illinois’ pension liability will rise from $230 billion in 2019 to $261 billion in 2020.

Author(s): Kevin O’Connor

Publication Date: 28 January 2021

Publication Site: Institute for Pension Fund Integrity

Vermont Treasurer Calls for Pension Cuts for State Employees, Teachers

Mary Pat Campbell

Link: https://www.ai-cio.com/news/vermont-treasurer-calls-pension-cuts-state-employees-teachers/

Excerpt:

Vermont Treasurer Beth Pearce released a report containing recommendations that she said could reduce pension UAAL for the Vermont State Employees’ Retirement System (VSERS) and the Vermont State Teachers’ Retirement System (VSTRS) by $474 million and reduce the actuarial determined employer contribution (ADEC) by $85 million.

“While shy of the total target of $604 million in the UAAL and $96.6 million for the ADEC, it is a significant reduction to the existing liabilities and costs to the taxpayer,” said the report, which added that the net other post-employment liabilities could be reduced by $1.68 billion by directing a “minimal amount” of funds for prefunding. “All in, these recommendations will reduce the state’s post-employment liabilities by $2.2 billion.”

Author(s): Michael Katz

Publication Date: 21 January 2021

Publication Site: ai-CIO

House panel to weigh multiemployer pension reform bill

Mary Pat Campbell

Link: https://www.pionline.com/legislation/house-panel-weigh-multiemployer-pension-reform-bill

Excerpt:

Legislation to help struggling multiemployer pension funds is to be considered this week by a key House panel as part of a COVID-19 relief measure.

The House Ways and Means Committee is expected to start marking up a package of pandemic relief measures Wednesday, including one aimed at stabilizing pensions for more than 1 million participants in multiemployer plans approaching insolvency.

The pension section of the proposed Emergency Pension Plan Relief Act of 2021 is cited as the “Butch Lewis 4 Emergency Pension Plan Relief Act of 2021.”

It is based on a previously proposed multiemployer pension relief bill named for retiree Butch Lewis that called for a federal loan program for struggling plans and more resources for the Pension Benefit Guaranty Corp. to help troubled plans through partitions.

Author(s): Hazel Bradford

Publication Date: 9 February 2021

Publication Site: Pensions & Investments

Lawmakers vote to revamp Kentucky Teachers pension plan

Mary Pat Campbell

Link: https://www.pionline.com/pension-funds/lawmakers-vote-revamp-kentucky-teachers-pension-plan

Excerpt:

The Kentucky House of Representatives voted to approve a bill that would move participants in the Kentucky Teachers’ Retirement System, Frankfort, to a hybrid plan.

The House voted 68-28 in favor of the bill, which creates a tier for teachers hired after Jan. 1, 2022.

Rep. C. Ed Massey sponsored the bill because the $21.6 billion pension fund “has a huge unfunded legacy,” he said in a telephone interview.

Author(s): ROB KOZLOWSKI

Publication Date: 8 February 2021

Publication Site: Pensions & Investments

How the Police Bank Millions Through Their Union Contracts

Mary Pat Campbell

Link: https://www.propublica.org/article/new-jersey-police-contracts

Graphic:

Excerpt:

Despite attempts to rein in police union contracts in New Jersey, costly provisions remain common, an unprecedented analysis by the Asbury Park Press and ProPublica found. The news outlets identified contract clauses throughout the state that protect officer payouts that cost the public hundreds of millions of dollars.

In 2010, state lawmakers passed a law to stop huge retirement payouts for unused sick days, but taxpayers are still funding the largesse. North Bergen approved generous payments to four retiring officers in 2019, including a sergeant who got $75,330.32 for unused sick time. Some retirement payouts can be even higher. In 2017, a chief in Jersey City collected more than half a million dollars.

The debt for unused sick time and vacation time, which is largely dictated by the contracts, totaled at least $492.9 million for municipal police alone in 2019, according to a review of town budget records. The liability is primarily due to officers who were hired before the 2010 law passed.

Author(s): Andrew Ford, Asbury Park Press, and Agnes Chang, Jeff Kao and Agnel Philip

Publication Date: 8 February 2021

Publication Site: ProPublica

Vesting Requirements and Key Benefit-Formula Features of State and Local Government Pension Plans

Mary Pat Campbell

Link: https://www.ssa.gov/policy/docs/ssb/v81n1/v81n1p1.html

Excerpt:

This article provides a quantitative analysis of some key features of state and local pensions, including vesting requirements, the FAS period, and the benefit formula multiplier. This analysis focuses on public pensions in states that account for large numbers of noncovered public-sector workers. Among its unique contributions is the weighting of the summary statistics by population—in this instance, by the active membership in each benefit tier. This weighting mechanism is of special importance for occupation groups such as teachers, whose number of benefit tiers are underrepresented relative to active members, and public safety workers, whose tiers are overrepresented relative to active membership.

The findings in this article provide supporting evidence of a benefit retrenchment across state and local pensions, at least in states where noncovered employment is most common. Benefit tiers that are not open to new hires tend to have shorter vesting periods, shorter FAS periods (resulting in higher FASs), and higher benefit multipliers. As states have sought to reduce pension expenses, they have tightened eligibility requirements by increasing vesting periods, and have lowered benefits by increasing the FAS period and reducing the benefit formula’s multiplier.

This is not particularly surprising, given the recent economic conditions and plan funding levels that have led to pension reforms. However, the analysis shows that those changes have not affected all types of state and local workers equally. Changes in the FAS period, for example, affect public safety workers and local-level general government employees more than they affect teachers.

Author: Glenn R. Springstead

Publication Date: February 2021

Publication Site: Social Security Administration, Social Security Bulletin

2021 STATE OF THE STATE: ILLINOIS ECONOMY WEAK BEFORE COVID-19

Mary Pat Campbell

Link: https://www.illinoispolicy.org/2021-state-of-the-state-illinois-economy-weak-before-covid-19/

Graph:

Excerpt:

State lawmakers should pursue the following:

Increase the public pensions funding target to 100% from 90% in accordance with actuarial best practices. The goal year for 100% funding would remain 2045.

Gradually increase retirement ages for current workers under age 45 by a maximum of five years.

Apply a pensionable salary cap of $100,000 that grows with inflation. Government workers could still earn more than $100,000, but their pensions could not be based on more than the cap. The cap would only apply to employees not currently receiving a retirement check.

Replace Tier 1 retirees’ 3% compounding benefit increase with true cost-of-living adjustments tied to inflation. Annual increases would be simple, not compounding, and rise with the consumer price index for urban consumers, as reported by the U.S. Bureau of Labor Statistics.

Increase Tier 2 COLAs from half of inflation to full inflation. This would end the unfair subsidization of older workers by younger workers and could prevent a potential lawsuit.

Implement COLA holidays to allow inflation to catch up to past benefit increases. If a worker has been retired for eight years or more, they would skip every other year for 16 years for a total of eight adjustment periods at 0%. If a retiree has been receiving benefits for seven years, they would skip one payment every other year for 14 years, and so on.

Enroll all newly hired employees in a defined contribution personal retirement account with a 4% guaranteed employer match. This would ensure the state never gets into pension trouble again. This would also provide state workers with a portable retirement benefit they could take with them from employer to employer, rather than being forced to stay with the state in order to maximize retirement benefits.

Authors: Orphe Divounguy and Bryce Hill

Publication Date: 31 January 2021

Publication Site: Illinois Policy Institute

Even if underfunded lawmaker pension system ends, taxpayers still on the hook for $320 million

Mary Pat Campbell

Link: https://www.thecentersquare.com/illinois/even-if-underfunded-lawmaker-pension-system-ends-taxpayers-still-on-the-hook-for-320-million/article_274a2a54-6261-11eb-9fc3-177599b837c0.html#new_tab

Excerpt:

The Illinois General Assembly Retirement System, or GARS, is only 16 percent funded. 

This could be the year lawmakers end it, but that will come with a cost to taxpayers.

Some incoming state lawmakers are opting out of the underfunded pension system for Illinois legislators.

Author: Greg Bishop

Publication Date: 29 January 2021

Publication Site: The Center Square

Don Turner: 5 steps to fix the pension mess

Mary Pat Campbell

Link: https://www.benningtonbanner.com/opinion/columnists/don-turner-5-steps-to-fix-the-pension-mess/article_40469846-6197-11eb-a065-17b12b65db5b.html

Excerpt:

2021 marks 25-years since then-Treasurer Jim Douglas recommended that the state change its trajectory from costly “defined benefit” retirement plans for state employees and teachers to “defined contribution” plans. Eleven years ago, in 2009, a special commission suggested a consideration of this same idea. I have previously written about our pressing need to consider a defined contribution option, as well as the “sleeping giant” of our unfunded liabilities.

Unfortunately, since the time I wrote my opeds in 2019, Vermont’s unfunded liabilities have ballooned from $4.5 billion to more than $5 billion.

Author: Don Turner

Publication Date: 28 January 2021

Publication Site: Bennington Banner

Biden has promised to reform Social Security — some changes could come as soon as this year

Mary Pat Campbell

Link: https://www.cnbc.com/2021/01/23/president-biden-could-make-big-social-security-changes-this-year.html

Excerpt:

KEY POINTS
As President Joe Biden takes office, helping the nation through Covid-19 is a top priority.
Social Security will take a back burner for now, yet some experts say that may not be for long.
If successful, big changes to fix the program could secure his presidential legacy, one expert says.

Author: Lorie Konish

Publication Date: 23 January 2021

Publication Site: CNBC