Category: Public Pensions

State Pensioners Can Learn Lots From Rhode Island And Ohio Teachers

Mary Pat Campbell

Link: https://pensionwarriorsdwardsiedle.substack.com/p/state-pensioners-can-learn-lots-from

Excerpt:

Finally, and most important, this month there is an election for one active, or contributing member seat on the STRS board—the outcome of which will be determined in early May. If the reform coalition candidate wins this seat, it’s likely control of the board will shift. Then the concerns of the state auditor and reform-minded members will be addressed regarding the need to restore transparency, lower investment fees paid to Wall Street, improve investment performance and move toward restoring benefits previously promised. If so, STRS Ohio’s participant-driven reforms may serve as a template for all of the nation’s public pensions. (On the other hand, if our request for public records is granted by the Ohio Supreme Court later this year—and court-ordered transparency ensues—there may be little need for board action because any mismanagement or wrongdoing will have been exposed to the public.)

But here’s the big picture: Since all public pensions in America have moved like a herd, pouring over $1 trillion into many of the same high-cost, high-risk secretive alternative investments, if any single state pension—such as Rhode Island, or Ohio STRS—restores full transparency and releases alternative investment information to the public revealing widespread industry abuses and violations of law, all participants in public pensions which have also invested in these funds, as well as taxpayers, will benefit. One obscure pension fund board vote in Ohio could ultimately force the transparency and accountability Wall Street has successfully resisted for decades.

Author(s): Edward Siedle

Publication Date: 11 April 2023

Publication Site: Pension Warriors on substack

The Sustainability of State & Local Pensions: A Public Finance Approach

Mary Pat Campbell

Link: https://crr.bc.edu/briefs-state-local-pensions/the-sustainability-of-state-local-pensions-a-public-finance-approach/

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Key findings:

  • Many experts favor full prefunding of state and local pensions to maintain fiscal sustainability, which means big contribution hikes.
  • This analysis explores an alternative: stabilizing pension debt as a share of GDP.
  • Under current contribution rates, baseline projections show no sign of a major crisis in the next two decades even if asset returns are low.
  • Yet, many plans will be at risk over the long term of exhausting their assets, so action will be needed.
  • Plans can reach a sustainable footing by stabilizing their debt-to-GDP ratio, with much smaller contribution hikes than under full funding.

Author(s): Louise Sheiner

Publication Date: 11 April 2023

Publication Site: Center for Retirement Research at Boston College

Can France Escape Its Pension Overhang?

Mary Pat Campbell

Link: https://www.city-journal.org/can-france-escape-its-pension-overhang

Excerpt:

In 2021, government spending accounted for 59 percent of GDP in France, compared with 45 percent in the United States. Spending on public pensions accounts for much of that gap: it’s 15 percent of GDP in France, but only 7 percent in the U.S. This greatly inflates associated payroll taxes, which alone took 28 percent of workers’ incomes in France, compared with just 11 percent in the U.S.

President Macron argues that the cost of financing pensions is dragging down the whole economy, and that reform is necessary to make France an attractive venue for investment and employment. Whereas workers’ incomes in 1975 were 46 percent higher than those of retirees, by 2016 they were 2 percent lower. Many economists see it as senseless to redistribute so much from the young to the elderly, who seldom have childrearing expenses and whose mortgages are often paid off.

Pension reform is seen as necessary by 61 percent of French voters, but only 32 percent support raising the retirement age. Macron argues that the only alternatives to his reforms would involve cutting benefit levels, hiking taxes, or cutting public spending on other items such as education, health care, or defense. France already has close to the highest taxes in the developed world.

Median incomes for French residents aged 65 and over ($20,116) are little different than those for Americans ($19,704). The main effects of France’s extra pension spending are to crowd out private savings for retirement (which amount to 12 percent of GDP versus 170 percent in the U.S), and to cause French citizens to retire much earlier (at an average age of 60.4, vs 64.9 in the states).

Author(s): Chris Pope

Publication Date: 28 Mar 2023

Publication Site: City Journal

A new wave of pension protest breaks out in France as police brace for violence

Mary Pat Campbell

Link: https://www.npr.org/2023/03/28/1166436439/france-protest-strike-pension-retirement

Excerpt:

Protests and strikes against unpopular pension reforms gripped France again Tuesday, with many thousands marching and the Eiffel Tower closed and police ramping up security amid government warnings that radical demonstrators intended “to destroy, to injure and to kill.”

Concerns that violence could mar the demonstrations prompted what Interior Minister Gérald Darmanin described as an unprecedented deployment of 13,000 officers, nearly half of them concentrated in the French capital.

After months of upheaval, an exit from the firestorm of protest triggered by President Emmanuel Macron ‘s changes to France’s retirement system looked as far away as ever. Despite fresh union pleas hat the government pause its hotly contested push to raise France’s legal retirement age from 62 to 64, Macron seemingly remained wedded to it.

Author(s): Associated Press

Publication Date: 28 Mar 2023

Publication Site: NPR

What You Can Do To Force Your State Pension To Be Transparent About Its Investments

Mary Pat Campbell

Link: https://pensionwarriorsdwardsiedle.substack.com/p/what-you-can-do-to-force-your-state

Excerpt:

So what can you do to force your state or local government pension to be more transparent? That’s a question I asked Marc Dann, an attorney in private practice in Ohio and the former Attorney General of Ohio. (Dann is currently litigating a public records request on my behalf against the State Teachers Retirement System of Ohio.)

Say attorney Dann: “Refer to your state’s public records laws in making a request. Be as detailed and specific in the request as you can possibly be. Remember public records are only those records that may actually exist. For example, instead of asking for a list of all hedge, private equity or venture capital fund investments, ask for a prospectus, offering documents or reports provided to the pension by each investment fund (and name the investment funds—which are generally named on the state or local pension’s website).  Most states allow legal fee-shifting in public records lawsuits. So if the pension or fund resists, you may wish to consider bringing in a lawyer who agrees to be paid his fee from any recovery from the pension. Don’t forget to reach out to allied members of your state legislature or city council who can put pressure on the pensions to properly respond to the requests.”

Author(s): Edward Siedle

Publication Date: 22 Mar 2023

Publication Site: Pension Warriors on substack

Illinois Bill Would Give State Treasurer Voting Control On Pension Assets – Wirepoints

Mary Pat Campbell

Link: https://wirepoints.org/illinois-bill-would-give-state-treasurer-voting-control-on-pension-assets-wirepoints/

Excerpt:

Count on the Illinois legislature to find a way to further maim its crippled pension system.

Senate Bill 2152 would strip pension trustees of control over how to vote shareholder matters and vest the power in the state treasurer, currently, Michael Frerichs.

Still worse, the treasurer would then be bound to comply with the Illinois Sustainable Investing Act on how he votes on behalf of stocks owned by the pensions. That law requires officials like the treasurer to include “sustainability” considerations in how public money is invested. It’s basically a progressive policy agenda also known as ESG (Environmental, Social, Governance). It’s often ridiculed as “woke capitalism,” and includes the goals of zero fossil fuels, “equity,” gender and identity politics, and pretty much any other social justice fad in vogue.

….

Shareholders, including pensions, usually have the right to vote on key corporate issues such as board of director elections, rights offerings, mergers and acquisitions. For interests in private investment partnerships, which pensions also hold, voting powers include other major matters. If the bill becomes law, Frerichs, or whoever is treasurer, would hold a proxy for all those votes and execute ballots, voting as he alone decides — a huge concentration of power in one individual.

The bill would eliminate any fiduciary obligation to vote shares in a way that maximizes their value, diluting that goal with progressive’s political agenda. Today, pension managers are fiduciaries for pensioners – a strict, legal standard — but the treasurer would not be if the bill becomes law.

Author(s): Mark Glennon

Publication Date: 17 Mar 2023

Publication Site: Wirepoints

Ohio State Teachers Retirement System Had Massive Investment in Failed Bank

Mary Pat Campbell

Link: https://news.yahoo.com/ohio-state-teachers-retirement-system-200100935.html

Excerpt:

Already under fire for high pay despite big investment losses, the pension system for Ohio’s retired teachers lost between $27 million and $40 million when Silicon Valley Bank failed last weekend. That appears to be by far the biggest investment by a public pension system in the United States.

The losses follow a nearly $10 million loss last year when cryptocurrency platform FTX failed, according to the Ohio Retired Teachers Association, a group that represents pension system members.

The exact losses aren’t immediately known because Anthony Randazzo, executive director of pension watchdog Equable, said they were $39.3 million in a tweet. But pension system spokesman Dan Minnich said in an email, “As of last Wednesday, STRS Ohio held shares of Silicon Valley Bank (SVB) worth $27.2 million.”

Author(s): Marty Schladen

Publication Date: 16 Mar 2023

Publication Site: Yahoo News

Public Pension Funding Status Rose in 2022, NCPERS Says

Mary Pat Campbell

Link: https://www.ai-cio.com/news/public-pension-funding-status-rose-in-2022-ncpers-says/

Graphic:

Excerpt:

Capital markets had a tough time in 2022, but public pension funds managed to increase their funded status, according to a report from the National Conference on Public Employee Retirement Systems

The funded ratio at public pension funds increased to 77.8% last year, compared with 74.7% in 2021, per a survey of almost 200 funds conducted by NCPERS, the largest trade association for public funds in the U.S. and Canada, in partnership with Cobalt Community Research.

The vast majority of survey respondents, 92%, represent defined benefit plans, 8% defined contribution plans, 10% combination plans and 5% cash balance plans. The total exceeds 100% because of multiple responses, according to NCPERS.

Public pension programs scored an average one-year return of around 11.4%. By contrast, the S&P 500 was down around 19% and the Bloomberg US Agg, which tracks bonds, was off 13% in 2022. Heavy concentration in real estate and private equity were the key to the funds’ outperformance, the report says.

The study’s findings highlight public pensions’ “resiliency in the face of volatile markets, rising interest rates, and disruption in the workforce during the COVID-19 pandemic,” said Hank Kim, NCPERS executive director and general counsel, in a statement. “It’s clear that public pensions remain dedicated to maximizing returns while managing risks in order to efficiently deliver retirement benefits to public servants all over the country.”

Higher contribution income helped. Investment returns were the largest component of the gains, accounting for slightly more than two-thirds of them, but the stronger average member and employer contributions also played a role. Each rose by one percentage point, to 9% and 24%, respectively.

Author(s): Larry Light

Publication Date: 6 Feb 2023

Publication Site: ai-CIO

Appeals panel agrees IL police and firefighter pension consolidation doesn’t violate state constitution

Mary Pat Campbell

Link: https://cookcountyrecord.com/stories/639342824-appeals-panel-agrees-il-police-and-firefighter-pension-consolidation-doesn-t-violate-state-constitution?utm_source=Wirepoints+Newsletter&utm_campaign=55b5f7633f-RSS_EMAIL_CAMPAIGN&utm_medium=email&utm_term=0_895ee9abf9-55b5f7633f-30506353#new_tab

Graphic:

Excerpt:

A state appeals panel has affirmed a ruling that the Illinois state constitution holds no barrier to a law consolidating hundreds of local police and firefighter pension boards into two statewide funds.

In December 2019, Gov. JB Pritzker signed Senate Bill 1000, which amended the Illinois Pension Code to create the Police Officers’ Pension Investment Fund and the Firefighters’ Pension Investment Fund, built through the consolidation of more than 650 otherwise independent downstate and suburban funds.

….

Although some union leaders supported the move, dozens of police and firefighter pension boards and individual members sued the state and the new funds to stop the consolidation. Kane County Circuit Court Judge Robert Villa granted summary judgement to the state, prompting an appeal to the Illinois Second District Appellate Court.

…..

Although the panel agreed the protection clause covers more than just the payment of pension money, it said past Illinois Supreme Court rulings invoking the clause involved benefits that “directly impacted the participants’ eventual pension benefit,” McLaren wrote. But being able to vote for board members, or have a local board control investments, he added, “is not of the same nature and essentiality as the ability to participate in the fund, accumulate credited time, or receive health care, disability and life insurance coverage.”

“Voting for the local board is, at best, ancillary to a participant’s receipt of the pension payment and other assets,” McLaren continued. “The local boards were entrusted with investing the contributions so that payments could be made to participants. However, choosing who invests funds does not guarantee a particular outcome for benefit payments. The local boards also did not have any say in the actual method of funding; contribution requirements were set in the Pension Code.”

Author(s): Scott Holland

Publication Date: 7 Feb 2023

Publication Site: Cook County Record

Chicago Municipal pension fund posts net -11.7% return for 2022

Mary Pat Campbell

Link: https://www.pionline.com/pension-funds/chicago-municipal-pension-fund-posts-net-117-return-2022?utm_source=Wirepoints+Newsletter&utm_campaign=55b5f7633f-RSS_EMAIL_CAMPAIGN&utm_medium=email&utm_term=0_895ee9abf9-55b5f7633f-30506353#new_tab

Excerpt:

Chicago Municipal Employees’ Annuity & Benefit Fund returned a net -11.7% for the fiscal year ended Dec. 31.

The $3.2 billion pension fund’s return equaled its policy benchmark return of -11.7% for the period, according to an investment report on its website.

For the three, five and 10 years ended Dec. 31, the pension fund returned an annualized net 3.5%, 4.1% and 6.5%, respectively, compared to the respective benchmarks of 3.8%, 4.8% and 6.5%.

Author(s): Rob Kozlowski

Publication Date: 8 Feb 2023

Publication Site: P&I

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/

Graphic:

Excerpt:

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

France Won’t Accept Emmanuel Macron’s Attack on Pensions

Mary Pat Campbell

Link: https://jacobin.com/2023/02/france-emmanuel-macron-pension-reform-protest-strike-welfare

Excerpt:

According to police figures, Tuesday’s nationwide protests marked the largest single-day union-backed demonstration in France in thirty years. Some 1.272 million turned out to the streets. That’s more than the already-impressive January 19 turnout, it’s more than any of the single-day peaks of the 2010 and 2003 movements over retirement reforms — it even topped the height of the legendary 1995 protests.

And there’s more to come. The united union coalition has called for two further days of strikes and protest: Tuesday, February 7, and Saturday, February 11. “Until then,” the coalition has also called on the public to “multiply actions, initiatives, meetings, and general assemblies across the country, in workplaces [and] at places of study, including through strikes.”

After two successful national mobilizations, the movement seems to be entering a new phase. Public opinion is clearly on its side — and yet, the government isn’t budging on the proposed hike in the retirement eligibility age from sixty-two to sixty-four. Clearly, it’s going to take more for organized labor to win this battle.

….

Clearly, the strike calls over pension reform have resonated beyond organized labor’s traditional bastions of support in the public sector: namely, schools, health services, and transit networks (the national SNCF rail company and the Paris metro network). Workers in all these sectors have walked off the jobs, but so have others in the private sector. The General Confederation of Labour (CGT) has shared a list of strikes on January 31 that illustrates this point: five thousand strikers at Airbus; a walkout from 90 percent of the staff at a FNAC department store outside of Toulouse; a strike from 80 percent of the workers at a LU Mondelēz factory in Normandy, etc.

Author(s): Cole Stangler

Publication Date: 2 Feb 2023

Publication Site: Jacobin