Nevada’s Pension Debt Soars to $18B, Teachers Pay Nation’s Highest Retirement Costs

Link: https://www.npri.org/pension-debt-soars-nv-teachers-now-pay-highest-rates-in-us/

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PERS consists of two separate plans: one for police and fire members (the safety plan); and one for everyone else (the regular plan).

The annual contribution rates for safety plan members will rise to 50 percent in July — which means taxpayers must send PERS an additional 50 cents for every $1 in salary paid to police officers and firefighters. The contribution rate for regular plan members, which includes teachers, will rise to 33.5 percent of salary.

PERS costs are split evenly between taxpayers and the employee, with the employee typically paying their half through an equivalent salary reduction. This means that regular plan members, which include teachers, will see their paychecks reduced by nearly 17 percent annually starting this July — a rate that is higher than what any other group of comparable public employees nationwide pays for their respective PERS plan.

Unfortunately, these record-high contributions will not be enough to stop PERS’s debt from continuing to grow, according to the system’s just-released actuarial report.

Indeed, PERS’s actuary had determined that much larger rate increases are needed (37.5 percent for regular plan members and 57.5 percent for safety members), but the PERS Board directed the actuary to “phase-in” the necessary cost increase incrementally over four years, rather than all at once. But there is a cost to delaying the implementation of the necessary contribution rate increases — more debt, and thus a greater likelihood of future rate hikes.

Author(s): Robert Fellner

Publication Date: 9 Jan 2023

Publication Site: Nevada Policy Research Institute

Nine States Began the Pandemic With Long-Term Deficits

Link: https://www.pewtrusts.org/en/research-and-analysis/articles/2022/12/16/nine-states-began-the-pandemic-with-long-term-deficits

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Twenty states recorded annual shortfalls in fiscal year 2020, when the coronavirus pandemic triggered a public health crisis, a two-month recession, and substantial volatility in states’ balance sheets. States can withstand periodic deficits, but long-running imbalances—such as those carried by nine states—can create an unsustainable fiscal situation by pushing off some past costs for operating government and providing services onto future taxpayers.

States are expected to balance their budgets every year. But that’s only part of the picture of how well revenue—composed predominantly of tax dollars and federal funds—matches spending across all state activities. A look beyond states’ budgets at their own financial reports provides a more comprehensive view of how public dollars are managed. In fiscal 2020, a historic plunge in tax revenue collections and a spike in spending demands were met with an initial influx of federal aid to combat the pandemic. The typical state’s total expenses and revenues grew faster than at any time since at least fiscal 2002, largely thanks to the unprecedented federal aid. But spending growth outpaced revenue growth in all but five states (Idaho, Maryland, Missouri, South Dakota, and Virginia). And 20 states recorded annual shortfalls—the most since 2010 and four times more than in fiscal 2019.

Despite the sudden increase in annual deficits, most states collected more than enough aggregate revenue to cover aggregate expenses over the long-term. But the nine states that had a 15-year deficit (New Jersey, Illinois, Connecticut, Hawaii, Massachusetts, Maryland, Kentucky, New York, and Delaware) —or a negative fiscal balance—carried forward deferred costs of past services, including debt and unfunded public employee retirement liabilities. Between 2006 and 2020, New Jersey accumulated the largest gap between its revenue and annual bills, taking in enough to cover just 91.9% of its expenses—the smallest percentage of any state. Meanwhile, Alaska collected 130.5%, yielding the largest surplus. The typical state’s revenue totaled 102.7% of its annual bills over the past 15 years.

Zooming out from a narrow focus on annual or biennial budgets—which may mask deficits as they allow for shifting the timing of when states receive cash or pay off bills to reach a balance—offers a big-picture look at whether state governments have lived within their means, or whether higher revenue or lower expenses may be necessary to bring a state into fiscal balance.

Author(s): Joanna Biernacka-Lievestro, Alexandre Fall

Publication Date: 16 Dec 2022

Publication Site: Pew

LACERA Pension Spending Boosts L.A. County Economy by More Than $2 Billion

Link: https://www.yahoo.com/now/lacera-pension-spending-boosts-l-204600576.html

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The Los Angeles County Employee Retirement Association (LACERA) provides pension benefits to 73,385 pensioners nationwide, with more than 60,000 residing in California and more than 42,000 residing in Los Angeles County. The benefits those pensioners receive ripple throughout the economy, affecting various industries and job sectors. In 2021, these pensioners generated a total economic output of $2.7 billion and supported thousands of jobs in Los Angeles County, according to a report just released by Beacon Economics titled “Economic, Fiscal and Social Impacts of LACERA Pensioners.”

With retirement security becoming a pressing national issue, the report that LACERA commissioned found that defined benefit plans, such as those offered by LACERA, are more efficient, secure, and provide more value than defined contribution plans like 401(k)s in delivering sustainable retirement benefits. The pooled assets of a defined benefit plan offer superior financial protection compared to defined contribution plans, as they remove longevity risk, offer inflation protection, and provide death benefits while delivering a secure and steady income to the beneficiaries. The United States Census Bureau found that the nation’s rapidly aging population has seen a 31 percent increase in those aged 65 and older from 2011 to 2021.

Author(s): LACERA

Publication Date: 12 Dec 2022

Publication Site: Global newswire press release

BIDEN PROMISES NEARLY $36 BILLION FOR NATIONAL PENSION BAILOUTS

Link: https://www.illinoispolicy.org/biden-promises-nearly-36-billion-for-national-pension-bailouts/

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The Biden administration promised nearly $36 billion to stabilize pension plans for Teamsters nationwide after forecasts predicted the system’s default by 2026. Union members would have seen their retirement benefits slashed by 60% if the system defaulted.

President Joe Biden announced Dec. 8 the federal government will use nearly $36 billion to stabilize failing Teamsters union pension plans nationwide, preventing severe benefits cuts for more than 350,000 union workers.

….

Illinois is home to more than 20 Teamster’s chapters and the nation’s worst pension debt, estimated at nearly $140 billion by state authorities in 2022. Private investor services projected that debt as high as $313 billion, using more realistic assumptions on returns.

In September these state pension funds had just 47 cents for every dollar in promised pension benefits.

Springfield lawmakers cannot routinely rely on federal authorities to bail out overly generous and underfunded state and local pensions. Illinois public servants deserve to receive the retirements they’ve been promised in full – not the 40% that would remain after default.

Author(s): Patrick Andriesen

Publication Date: 12 Dec 2022

Publication Site: Illinois Policy Institute

Market Rout Sends State and City Pension Funds to Worst Year Since 2009

Link: https://www.wsj.com/articles/market-rout-sends-state-and-city-pension-funds-to-worst-year-since-2009-11660009928?st=sooa4lma1xq9ff4&reflink=desktopwebshare_permalink&fbclid=IwAR0CC7k-F2J_IblLDjSODS1iDZuRxzuGk1-4Bgwtc_AQ0d4AajP00toEQH8

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Public pension plans lost a median 7.9% in the year ended June 30, according to Wilshire Trust Universe Comparison Service data released Tuesday, their worst annual performance since 2009 and a fresh sign of the chronic financial stress facing governments and retirement savers. 

Much of the damage occurred in April, May and June, when global markets came under intense pressure driven by concerns about inflationhigh stock valuations and a broad retreat from speculative investments including cryptocurrencies. Funds that manage the retirement savings of teachers, firefighters and police officers returned a median minus 8.9% for that three-month period, their worst quarterly performance since the early months of the global pandemic.

Author(s): Heather Gillers

Publication Date: 9 Aug 2022

Publication Site: WSJ

ILLINOIS PUBLIC PENSION DEBT GROWS TO $140B

Link: https://www.illinoispolicy.org/illinois-public-pension-debt-grows-to-140b/

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Illinois’ five statewide pensions system saw their debt increase by nearly $10 billion to a grand total of $140 billion in fiscal year 2022. Pensions will cost the state nearly $11 billion next year, but that’s still $4.4 billion too little.

Illinois’ state pension debt now stands at $139.7 billion, according to a new report from the Illinois General Assembly’s Commission on Government Forecasting and Accountability.

That is up $9.8 billion from 2021, when state pensions were benefitting from healthy investment returns. After markets cooled substantially, state pension debt in the fiscal year that ended July 1 continued to grow, increasing for the 11th time in 15 years.

Author(s): Bryce Hill

Publication Date: 14 Dec 2022

Publication Site: Illinois Policy Institute

Arizona divesting funds from BlackRock over ESG push

Link: https://www.foxbusiness.com/markets/arizona-divesting-funds-from-blackrock-over-esg-push

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Arizona is forging ahead with its plan to pull the state’s funds from BlackRock due to concerns over the massive investment firm’s push for environmental, social, and governance (ESG) policies that have led other states to take similar actions.

Arizona Treasurer Kimberly Yee said in a statement released Thursday that the state treasury’s Investment Risk Management Committee (IRMC) began to assess the relationship between the state’s trust fund and BlackRock in late 2021. 

“Part of the review by IRMC involved reading the annual letters by CEO Larry Fink, which in recent years, began dictating to businesses in the United States to follow his personal political beliefs,” Yee wrote. “In short, BlackRock moved from a traditional asset manager to a political action committee. Our internal investment team believed this moved the firm away from its fiduciary duty in general as an asset manager.”

In response to those findings, Yee noted that Arizona began to divest over $543 million from BlackRock money market funds in February 2022 and “reduced our direct exposure to BlackRock by 97%” over the course of the year. Yee added that Arizona “will continue to reduce our remaining exposure in BlackRock over time in a phased in approach that takes into consideration safe and prudent investment strategy that protects the taxpayers.”

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Florida’s chief financial officer announced recently that the state’s treasury is taking action to remove about $2 billion in assets from BlackRock’s stewardship before the end of this year. In October, Louisiana and Missouri announced they would reallocate state pension funds away from BlackRock, which amounted to roughly $1.3 billion in combined assets. Taken together with Arizona’s divestment, roughly $3.8 billion in state funds have been divested from BlackRock by those four states alone.

Additionally, North Carolina’s state treasurer has called for BlackRock CEO Larry Fink’s resignation and the Texas legislature has subpoenaed BlackRock for financial documents.

The investment firm has also taken heat from activists who argue BlackRock isn’t doing enough to follow through with its ESG commitments. New York City Comptroller Brad Lander wrote to Fink in September citing an “alarming” contradiction between the company’s words and its deeds. Lander wrote, “BlackRock cannot simultaneously declare that climate risk is a systemic financial risk and argue that BlackRock has no role in mitigating the risks that climate change poses to its investments by supporting decarbonization in the real economy.”

Author(s): Eric Revell

Publication Date: 11 Dec 2022

Publication Site: Fox Business

Municipal Employees’ Annuity and Benefit Fund of Chicago Dives into Private Debt

Link: https://www.marketsgroup.org/news/Chicago-MEABF-Private-Debt

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The Municipal Employees’ Annuity and Benefit Fund of Chicago (MEABF) has added private debt to its portfolio.


The MEABF board voted to work with three managers in the sector, allocating up to $100 million. It approved up to $40 million to both Partners Group Credit Strategy and Angelo Gordon Direct Lending Fund and up to $20 million to Brightwood Capital Fund, Stephen Wolff, MEABF’s investment officer, tells Markets Group.

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Wolff said that the MEABF board approved a dedicated allocation to private debt of 4% in early 2021 and that this search fulfilled the allocation. MEABF had $3.4 billion in assets as of July 31. He said MEABF has in the past had mezzanine investments but has not had a dedicated allocation to private debt.

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As of Dec. 31, MEABF had a fixed income target allocation of 25% and an actual asset allocation of 21%. Its real estate target was 10%, just above its actual asset allocation of 9%. Domestic equities are its largest segment with a 26% target and a 26% allocation. International equities were at 18%, just above its 17% target. Hedged equities, meanwhile, were at 12%, above its 10% target, while private equity was at 3%, below its 5% target.

Author(s): David G. Barry

Publication Date: 21 August 2022

Publication Site: Markets Group

Reality check: New actuarial report says Illinois’ biggest pension, TRS, sunk $6 billion further into the hole in FY 2022 – Wirepoints Quickpoint

Link: https://wirepoints.org/reality-check-new-actuarial-report-says-illinois-biggest-pension-trs-sunk-6-billion-further-into-the-hole-in-fy-2022-wirepoints-quickpoint/

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The first actuarial report is out for an Illinois pension for fiscal year 2022, which ended on June 30. It’s for the TRS, the Teachers Retirement System, which accounts for well over half of Illinois state-level pension debt.

Unfunded liabilities grew about $6 billion from $74.7 billion to $80.7 billion on a fair asset value basis. Its funded ratio worsened from 46.2% to 43.8%. The drop occurred despite a one-time, special contribution by taxpayers to the fund of $173 million that was in addition to their annual, scheduled contributions.

Expect Illinois’ other pensions to suffer similarly dismal results as their 2022 reports are published.

Author(s): Mark Glennon

Publication Date: 7 Dec 2022

Publication Site: Wirepoints

(Updated) New Hong Kong Watch report finds that MSCI investors are at risk of passively funding crimes against humanity in Xinjiang

Link: https://www.hongkongwatch.org/all-posts/2022/12/5/updated-new-hkw-report-finds-that-msci-investors-are-at-risk-of-passively-funding-crimes-against-humanity-in-xinjiang

Report PDF: https://static1.squarespace.com/static/58ecfa82e3df284d3a13dd41/t/638e318e6697c029da8e5c38/1670263209080/EDITED+REPORT+5+DEC.pdf

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A new report by Hong Kong Watch have found that a number of pension funds may be passively invested in at least 13 China based companies where there is credible evidence of involvement in Uyghur forced labour programs and construction of internment camps in Xinjiang.

 As part of the report, Hong Kong Watch found that major asset managers are exposed passively to these companies as a result of their inclusion on Morgan Stanley Capital International’s Emerging Markets Index, China Index and All World Index ex-USA.  

….

Commenting on the release of the report, Johnny Pattersonco-founder and a research fellow at Hong Kong Watch, said:

“13 companies on MSCI’s emerging markets index are either known to have directly used forced labour through China’s forcible transfer of Uyghurs, or been involved in the construction of camps. Given this Index is the most widely tracked Emerging Markets index in the world, it raises serious questions about how seriously international financial institutions take their international human rights obligations or the ‘S’ in ESG.

Our view is that firms known to use modern slavery or known to be complicit in crimes against humanity should be classed alongside tobacco as ‘sin stocks’, or stocks which investors do not touch. Governments have a duty to signal which firms are unacceptable, but international financial institutions must also be doing their full due diligence. It is unacceptable that enormous amounts of the money of ordinary pensioners and retail investors is being passively channelled into firms that are known to use forced labour.” 

Publication Date: 5 Dec 2022

Publication Site: Hong Kong Watch

BlackRock’s Red-State Woes Continue as Florida Divests

Link: https://www.ai-cio.com/news/blackrocks-red-state-woes-continue-as-florida-divests/

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State Chief Financial Officer Jimmy Patronis announced Thursday that the Florida Treasury will begin divesting $2 billion worth of assets currently under management by BlackRock.

BlackRock managed $1.43 billion of Florida’s long duration portfolio, which includes investments such as corporate bonds, asset-backed securities and municipal bonds. Additionally, BlackRock managed $600 million of Florida funds in a short-term treasury fund, which invests in short-term and overnight investments.

Patronis cited efforts by BlackRock and its CEO, Larry Fink, to embrace environmental, social and governance investment principles as the reason Florida will pull the funds from the manager.. In the wake of the announcement, the state will freeze the $1.43 billion in long-term securities at its custodial bank.

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“It’s my responsibility to get the best returns possible for taxpayers,” Patronis said in the statement. “The more effective we are in investing dollars to generate a return, the more effective we’ll be in funding priorities like schools, hospitals and roads. As major banking institutions and economists predict a recession in the coming year, and as the Fed increases interest rates to combat the inflation crisis, I need partners within the financial services industry who are as committed to the bottom line as we are – and I don’t trust BlackRock’s ability to deliver. As Larry Fink stated to CEOs, ‘Access to capital is not a right. It is a privilege.’ As Florida’s CFO, I agree wholeheartedly, so we’ll be taking Larry up on his offer.”

Author(s): Dusty Hagedorn

Publication Date: 2 December 2022

Publication Site: ai-CIO

Hong Kong Watch gives evidence to the Canada-China Relationship Committee on ESG investment & country risk analysis

Link: https://www.hongkongwatch.org/all-posts/2022/12/1/hong-kong-watch-gives-evidence-to-the-canada-china-relationship-committee-on-esg-investment-amp-country-risk-analysis

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On Tuesday, Hong Kong Watch’s co-founder and trustee, Aileen Calverley, and Director of Policy and Advocacy, Sam Goodman, gave evidence to the Special Committee on the Canada–People’s Republic of China Relationship on the exposure of Canadian pension funds to Chinese stocks and bonds.

Hong Kong Watch has previously written extensively on the question of ESG, business, human rights, and Canadian pension funds exposure to Chinese companies linked to gross human rights violations, including the internment camps in Xinjiang.

In his remarks, Sam Goodman, discussed why China should be considered an ESG investment risk, recommending that:

  • Lawmakers consider sensible regulations to define ESG, label China as an ESG risk, and introduce a blacklist like the USA to restrict investment in Chinese firms with questionable human rights, environmental, and governance credentials.

In her remarks, Aileen Calverley discussed the risk of pension fund investments in China in the event of sanctions, recommending that the Government:

  • Include a China Country Risk Analysis in the Indo-Pacific Strategy.
  • Encourage publicly controlled pension funds to avoid exposure in China.

The full committee hearing can be watched here.

Publication Date: 1 Dec 2022

Publication Site: Hong Kong Watch