Pension360

Rhode Island’s pension settlement proposal, worked out earlier this year by retirees and the state, is expected to clear one of its final hurdles this week.

The proposal will be at the center of a “mini-trial”, where objectors can air their concerns and the state can re-argue their key positions.

From the Providence Journal:

Superior Court Judge Sarah Taft-Carter last month granted preliminary approval of the deal, which could affect some 60,000 public-sector workers and retirees.

Before she can decide whether to grant final approval, she will hear lawyers for the state and the plaintiff groups essentially argue their cases on whether the retirement cuts enacted in 2011 were legal. They will also outline what the ramifications would have been for each side had they prevailed — or lost — at trial.

Afterward, she will hear from 45 objectors. They are part of a group of 265 state workers and retirees who expressed objections in writing to Taft-Carter before last week’s deadline.

In a joint memorandum filed Friday with the court, lawyers for both sides said the relatively small number of people responding to the 60,000 mailed summaries of the settlement “weighs in favor of settlement.”

The settlement relaxes some of the retirement requirements set in the 2011 pension overhaul law and provides for some small additional cost-of-living increases.

Once the judge approves the settlement, the state General Assembly will need to approve it, as well.

 

Photo credit: “Flag-map of Rhode Island” by Darwinek – self-made using Image:Flag of Rhode Island.svg and Image:USA Rhode Island location map.svg. Licensed under CC BY-SA 3.0 via Wikimedia Commons

An overhaul of the U.S. military’s retirement system is gaining momentum and seems likely to eventually clear the House and Senate.

The details of the overhaul can be read here; but the proposal centers around a shift to a 401(k)-style system.

But if the overhaul passes, it could force career troops to make some tough decisions.

From the Military Times:

Some critics question the commission’s analysis that everyone would do better under its proposal — that young troops would get a retirement benefit for the first time, career troops would get a better long-term benefit and the whole package still would save the government billions of dollars each year.

[…]

Everyone in today’s force would soon face a choice: Opt into the new system and start accruing money in their own retirement savings account, or exercise a “grandfather clause” that would allow them to remain under the traditional retirement system and its promise of a more robust pension.

[…]

“I have not seen figures that make me comfortable to say that this new system will be the equivalent or better for what a service member who serves 20 or more years gets under the current benefit,” said Deirdre Holleman, the executive director of the Retired Enlisted Association.

“As of now, it looks like the new benefit for people who serve less than 20 is being paid for by cuts in the benefit for those who have served 20 or more.”

Read the Military Times’ detailed analysis here.

 

Photo by Brian Schlumbohm/Fort Wainwright PAO

Moody’s has released a “FAQ”-style report addressing common questions regarding Chicago’s credit rating.

The report addressed the ways in which Chicago can climb out of its “junk” status and improve its credit rating.

It indicates that, no matter how you slice it, there’s only one sure-fire way for the city to pay down its pension debt and improve its credit rating: make its pension contributions, on time and in full.

From Moody’s:

Our future rating actions on Chicago will largely reflect city officials’ actions on pension contributions and, ultimately, the growth of debt and pension leverage on the city’s balance sheet. Chicago’s pension funding requirements are governed by PA 98-0641 (the statute that applies to the Municipal and Laborer plans) and PA 96-1495 (the statute that applies to the Police and Fire plans). Whether or not either statute ultimately stands, we believe that Chicago’s administration will eventually have to increase pension contributions through some combination of operating revenue growth and operating expenditure reduction. The magnitude of those expected budget adjustments will be significant and will force city officials to make difficult decisions for years to come.

[…]

Chicago officials could respond to an adverse ruling on PA 98-0641 by pursuing new state legislation that authorizes the city to increase contributions to the plans. If Chicago’s administration increases pension contributions in the context of balanced operating budgets that do not rely on non-recurring revenue sources, we could move the rating up or revise our rating outlook to stable.

Keeping up with contributions is easier said than done. Annual payments will skyrocket in coming years, as Pension360 has covered.

 

h/t CapitolFax

Photo credit: bitsorf via Flickr CC License

After breezing through the state House and Senate (by vote counts of 102-0 and 49-0), Illinois Gov. Bruce Rauner says he will sign a bill that prohibits Illinois and its pension funds from investing in companies that participate in the Boycott, Divestment and Sanctions (BDS) movement against Israel.

More from the State-Journal Register:

Senate Bill 1761 creates the Illinois Investment Policy Board, which will manage a list of companies with controversial positions on foreign relations for Illinois to divest funds from, including those that boycott Israel.

The legislation is the first of its kind at the state level.

Once the bill becomes law, the policy board will maintain a list of companies that the pension systems and Illinois State Board of Investment could not invest in.

Illinois already has laws banning investment with companies friendly with Sudan and Iran. Illinois had a similar policy with South Africa during apartheid.

The board will consist of seven unpaid members who meet quarterly to update the list. Rauner will appoint four of the members, while the pension systems will appoint three.

[…]

Rep. Sarah Feigenholtz, a Democrat from Chicago and the House sponsor, said the bill reinforces Illinois’ commitment to Israel.

“We ultimately have a great relationship with this country – perhaps the only democracy in the Middle East – and we intend to stand tall with them and continue a strong economic relationship,” she said.

Read the full text of SB1761 here.

 

Photo credit: “Emblem of Israel” by Original design by Max and Gabriel Shamir; Tonyjeff, based on national symbol. – symbol created in 1948.. Licensed under Public Domain via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:Emblem_of_Israel.svg#mediaviewer/File:Emblem_of_Israel.svg

Pension360 covered the protests last month that stemmed from CalSTRS’ indirect investment in a firearms manufacturer whose gun was used in a Connecticut school shooting.

CalSTRS is invested in the gun manufacturer through a fund run by Cerberus Capital Management. Investors with money in such vehicles, for numerous reasons, aren’t able to withdraw their money at any time.

But now, Cerberus has found a way to accommodate CalSTRS, by shifting the gun manufacturer to a different fund and letting investors cash out of that specific holding.

From the Sacramento Bee:

Cerberus Capital Management has agreed to let investors such as the California State Teachers’ Retirement System unload their investment in Freedom Group, maker of the assault rifle blamed for the 2012 massacre in Connecticut, according to a report by The New York Times.

A New York private equity firm, Cerberus made the offer to CalSTRS and other investors in a letter obtained by The Times. The newspaper reported that the gun holdings will be placed in a separate investment vehicle.

“CalSTRS is carefully reviewing the letter to ensure it meets our requirements,” said Ricardo Duran, a spokesman for CalSTRS, in an email. “We are hopeful that a liquidation vehicle has been fashioned that allows us to cash out of our economic exposure, which is what we’ve been seeking all along.”

Investors have 30 days to decide whether they will take Cerberus’ offer. It’s extremely likely CalSTRS will.

 

Photo by Stephen Curtin via Flickr CC License 

A new analysis from the Chicago Sun-Times and the Better Government Association reveals that some retired Illinois public workers earn hefty pensions – but most don’t.

And when it comes to pinning blame on the state’s (and Chicago’s) pension underfunding, the blame should be placed on governments for falling short on annual contributions.

From the Sun-Times:

Though some public employees have taken advantage of numerous pension “sweeteners” over the years to boost their benefits, the root of the problem is that government officials kept promising lifetime benefits to workers — and, in many cases, to their surviving spouses should they die — while failing to apportion the taxpayer dollars necessary to keep those pension funds solvent long-term.

Nearly 55 percent — about 167,000 people — get pensions of less than $40,000 a year, though many of them are spouses of deceased retirees getting survivors’ benefits, and others’ pensions are small because they worked in government for only a few years.

State government, City Hall and CPS might have been able to avoid their pension problems had government officials steadily deposited taxpayer money into the pension funds over the past several decades.

But not only did politicians keep skipping or shorting the pension funds on those payments — driving them closer to potential insolvency — they also kept borrowing to balance their budgets.

The Chicago Board of Education didn’t contribute any money at all to the pension fund for administrators, teachers and other CPS employees for a full 10 years between 1995 and 2005.

In state government, the situation grew so dire that the federal Securities and Exchange Commission in 2013 charged Illinois with securities fraud, accusing the state in the mid-1990s of enacting a pension-funding plan that “structurally underfunded the state’s pension obligations and backloaded the majority of pension contributions far into the future.”

It’s worth reading the full analysis, which can be found here.

 

Photo credit: “Gfp-illinois-springfield-capitol-and-sky” by Yinan Chen – www.goodfreephotos.com (gallery, image). Via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:Gfp-illinois-springfield-capitol-and-sky.jpg#mediaviewer/File:Gfp-illinois-springfield-capitol-and-sky.jpg

Norway’s pension funds – collectively one of the largest asset managers in the world – has been weighing for months whether to divest from coal companies, and to what extent.

But the country’s lawmakers might force the funds’ hand. Norway’s parliament on June 5 will decide whether to pass a mandate for the fund to divest from all coal holdings.

A recent report from the Institute for Energy Economics and Financial Analysis (IEEFA) argues for the merits of the idea.

From RTCC:

[Norway’s] parliament will decide on 5 June whether to give the fund a mandate to shed its coal holdings.

The move would improve the fund’s financial performance as well as addressing environmental concerns, according to the Institute for Energy Economics and Financial Analysis (IEEFA).

“Norway’s leadership is to be applauded for its efforts to rid itself of a losing financial proposition and the threat coal poses to the environment and climate,” author Tom Sanzillo told RTCC.

“They are willing to expand the dialogue and are serving as a model of openness and transparency.”

The [pension] fund sold its stakes in 49 companies last year, mainly in coal and gold mining, on sustainability grounds.

Coal is the worst performing sector in the world’s economy, the IEEFA report argued, and best avoided altogether.

In mining, he noted the Stowe Global Coal Index lost 71% of its value over the past five years.

IEEFA recommended dropping any company that mines more than 50 million tonnes of coal a year or gets 20% of power generation from the polluting fuel.

Norway’s pension fund manages $900 billion in assets.

https://youtu.be/RwYgMbhA2Uo

In this video, the Manhattan Institute’s Steve Malanga and Chicago radio talk show host Dan Proft discuss the Illinois pension ruling, and how the state can move forward financially.

Disclosure: Both panelists lean to the right, politically speaking.

For more on Illinois, read Pension360’s coverage of a new analysis suggesting that the lack of government payments — not benefits — are the cause of the state’s pension woes.

 

Video credit: Fox Business

h/t Pension Pulse

Last month, it seemed there was little hope for a provision floating around the Texas legislature that would strip pensions from lawmakers convicted of crimes related to their public office.

But in a turn of events, the Texas House on Thursday unanimously passed a similar measure.

From the Texas Tribune:

The bill, which advanced with a 142-0 vote, would cut off pensions for legislators and statewide elected officials who are convicted of a variety of felonies — such as bribery and theft of public money — that are connected to their service as public servants.

“If you violate the public trust, you shouldn’t be able to get a pension off of it,” said Rep. Kenneth Sheets, R-Dallas, the author of House Bill 681.

As currently written, the legislation would not apply to former Gov. Rick Perry, who was indicted last year in Travis County on charges he abused his power and coerced a public servant. HB 681 would not apply to politicians facing charges for crimes allegedly committed before the effective date of the legislation, which is set at Sept. 1, 2015.

[…]

State Rep. Roland Gutierrez, D-San Antonio, said he plans to offer another amendment Friday that would apply the legislation to anyone convicted after the effective date of the bill. If he is able to get that amendment tacked on the bill before the House gives final approval and sends HB 681 to the Senate, it would apply to politicians who had been charged but not convicted as of September of this year.

The measure – officially titled House Bill 681 – can be read here.

 

Photo credit: “Flag-map of Texas” by Darwinek – self-made using Image:Flag of Texas.svg and Image:USA Texas location map.svg. Licensed under CC BY-SA 3.0 via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:Flag-map_of_Texas.svg#/media/File:Flag-map_of_Texas.svg

CalPERS is looking to sell off about 300,000 acres of forestry, which equates to about 20 percent of the pension fund’s timber holdings.

The move is presumably part of CalPERS’ ongoing plan to reduce the cost and complexity of its portfolio. The pension fund exited hedge funds entirely last September, and more recently consolidated its private equity portfolio by slashing managers.

More from the Wall Street Journal:

The California Public Employees’ Retirement System, or Calpers, is seeking buyers for roughly 300,000 acres of forestry largely in Louisiana amid a broader review of its timber holdings, according to people familiar with the matter. The woodland represents about one-fifth of roughly 1.3 million U.S. acres controlled by the Sacramento-based fund.

“We continue to look through the entire portfolio to make sure that all programs fit with our current strategic priorities and our efforts to reduce costs and complexity,” a Calpers spokesman said. He added “no decisions have been made,” and there is no deadline for completion of the pension fund’s internal review of forestry holdings.

Any move Calpers makes away from the timber industry will likely influence other investors because of its size and history as an early adopter of alternatives to stocks and bonds.

[…]

The value of timber assets doesn’t always correspond with the movements of the global markets because investors can sit out tough economic times by simply letting the trees grow larger, said consultants and industry analysts. When conditions improve, timber is a guard against inflation because wood prices move closely with real estate and local economies, the consultants and analysts said.

A source told the Wall Street Journal that CalPERS may consider putting an additional one million acres on the market – this time located in Texas – if the Louisiana sale is successful.

 

Photo by Rick Payette via Flickr CC License