Tag: Steven Gassenberger

Examining the Teachers Retirement System of Texas after the pension reforms of 2019

Mary Pat Campbell

Link: https://reason.org/backgrounder/reason-review-trs-after-sb12/

Graphic:

Excerpt:

TRS currently uses a 7.25% assumed rate of return, which is on the higher end of investment return assumptions among major public systems.

The national average expected rate of return has fallen to 7.0% over the years, with major plans like CalPERS now lowering assumptions into the 6-7% range.

Despite SB12 (2019), with investment returns expected to underperform over the next decade relative to expectations, capping contribution rates in statute creates the perfect conditions for unfunded liabilities to keep accruing just as they have since 2001.

Author(s): Leonard Gilroy, Steven Gassenberger

Publication Date: 3 June 2022

Publication Site: Reason

These States Lead the Way on Pension Reform

Mary Pat Campbell

Link: https://www.wsj.com/articles/these-states-lead-the-way-on-pension-reform-11624038916

Excerpt:

Arizona and Michigan have enacted more than a dozen substantive pension reform bills over the past five years. Credit-rating agencies and national retirement experts have cited Arizona’s public-safety pension reforms. Moody’s Investors Service gave Michigan’s teacher retirement reform a “credit positive” review because the state and participating local governments “will no longer carry the entire burden of investment performance risk for new employee pensions.”

Pension reform need not be partisan. After gaining input and buy-in from unions for police officers, firefighters and other public employees, New Mexico Gov. Michelle Lujan Grisham, a Democrat, overhauled her state’s public-employee pension plan for workers who aren’t teachers. “We must make changes now—the alternative is to saddle New Mexicans with unacceptable risk,” Ms. Grisham said, urging fellow Democrats to pass reforms. In 2018, Colorado legislators bridged their differences in a divided government to pass comprehensive reforms that increased employee and employer contributions, reduced cost-of-living adjustments, raised the retirement age, and expanded the use of defined-contribution plans for future employees to address the chronic structural underfunding of the state’s main public pension system.

Author(s): Leonard Gilroy, Steven Gassenberger

Publication Date: 18 June 2021

Publication Site: WSJ

Montana Teacher Retirement System Pension Solvency Analysis

Mary Pat Campbell
Montana Teacher Retirement System Pension Solvency Analysis

Graphic:

Excerpt:

The latest analysis by the Pension Integrity Project at Reason Foundation, updated this month (February 2021), shows that deviations from the plan’s investment return assumptions have been the largest contributor to the unfunded liability, adding $897 million since 2002. The analysis also shows that failing to meet investment targets will likely be a problem for TRS going forward, as projections reveal the pension plan has roughly a 50 percent chance of meeting their 7.5 percent assumed rate of investment return in both the short and long term.

In recent years TRS has also made necessary adjustments to various actuarial assumptions, exposing over $400 million in previously unrecognized unfunded liabilities. The overall growth in unfunded liabilities has driven Montana’s pension benefit costs higher while crowding out other education spending priorities in the state, like classroom programming and teacher pay raises.

The chart below, from the full solvency analysis, shows the increase in the Montana Teacher Retirement System’s debt since 2002:

Author(s): Jen Sidorova, Swaroop Bhagavatula, Steven Gassenberger, Leonard Gilroy

Publication Date: 1 March 2021

Publication Site: Reason