Pension360

The World Bank for years has strongly advocated for socially responsible investing and has publicly crusaded against investing in the coal and tobacco industries.

But the Bank’s pension fund indirectly invests in those very same industries, according to a report from Reuters, and has been opaque about disclosing those investments.

From Reuters:

The World Bank indirectly invests part of its $18.8 billion staff pension fund in companies in industries such as coal and tobacco, holdings that clash with the development institution’s own calls for ethical and low-carbon investing.

[…]

Two World Bank sources, who asked not to be identified, showed Reuters discussions between staff and managers on an internal site and a research note produced by employees. The note expressed concern about the pension and gave details of the holdings, questioning why the bank does not use socially responsible alternatives.

While the pension fund is required to prioritize financial gains for staff, investment analysts said it could be directed into pre-screened or tailored funds that exclude companies that fail to follow sound environmental, social and governance (ESG) principles.

[…]

Some of the pension’s holdings are invested in the Russell 3000 index, which tracks 3,000 companies including coal producers Peabody Coal and Arch Coal and tobacco giant Philip Morris, according to the employees’ research note.

Others are invested in funds tied to Morgan Stanley’s MSCI index, which includes major fossil fuel companies like ExxonMobil, according to that note.

Some Bank officials have responded in defense of the pension fund’s investment practices. From Reuters:

The World Bank has a responsibility to manage the money “in the best interest of plan beneficiaries,” the bank said in a statement to Reuters.

The bank said it does not comment on specific pension investments, adding that it opts for a “principled yet pragmatic approach” within the fund’s overall requirements that considers ESG risks and opportunities “where material and relevant.”

That is guided by federal law that requires a plan’s investment policy to have the “exclusive purpose” of providing benefits to participants, though pension providers have flexibility on which investment principles to pursue.

[…]

Kenneth Lay, the vice president of the World Bank alumni group – the 1818 Society – said the fund should focus on maximizing returns.

While there is some evidence ESG investment can improve “risk adjusted performance,” he said, “there is also extensive literature reaching the opposite conclusion.”

The Bank’s pension fund argues that it has a fiduciary duty to maximize returns – and thus, retirement savings – for its members.

The issue with divestment is that it often runs counter to that goal, even if the divestor’s sentiment is in the right place.

 

Photo by  Horia Varlan via Flickr CC License

Pension360 has closely covered Chicago’s ballooning pension payments; 2015 is the first year the city will begin making much bigger contributions than in years past.

But even as Chicago doubles its payments between 2014 and 2015, the city can expect pension contributions to continue swelling, according to a new report from Moody’s.

The city paid $476 million into its pension systems in 2014, but that total will more than triple over the next ten years, according to the report.

From the Chicago Tribune:

Chicago’s pension payments not only will grow by 135 percent to $1.1 billion next year, but also will continue swelling at a significant pace until 2026, when they will reach $1.9 billion — or four times what the city is paying into those funds this year, according to the report by Moody’s Investors Service.

Though the city will put more money into its retirement systems, the total pension debt, now estimated at about $20 billion, will continue to grow until 2027, when the city would finally begin to whittle away at that liability, the report states. But the payments still would continue to increase by up to 3 percent a year until 90 percent of the debt is covered, the report adds.

The police and fire pension funds, which account for most of the payment increases, are not expected to reach 90 percent funding until 2040. That’s the schedule set under a state law that also requires that the city pay $550 million more into those two funds next year.

Moody’s didn’t downgrade the city’s debt rating or make any recommendations; the purpose of the report was simply to highlight Chicago’s financial outlook in the midst of rising pension costs.

Photo by bitsorf via Flickr CC License

Leo Kolivakis is a blogger, trader and independent senior pension and investment analyst. This post was originally published at Pension Pulse.

Arlene Jacobius of Pensions & Investments reports, Ontario Teachers CEO calls alternative investments ‘too expensive’:

Ontario Teachers’ Pension Plan, Toronto, is starting to step back from investing in alternative investments such as real estate and infrastructure because they are “too expensive,” said Ron Mock, president and CEO of the C$154.4 billion ($126.4 billion) pension fund, while speaking on a panel at the Milken Institute Global Conference in Beverly Hills, Calif., on Wednesday.

“There’s a lot of money crowded into the broadly defined alternatives space,” Mr. Mock said. “We find it too expensive. It’s time for us to step back.”

Instead, Ontario Teachers executives are investing “between the asset classes where we found the most interesting deals today,” he said.

For example, Ontario Teachers is an investor in the U.K. and Irish lotteries for their stable cash flows and high rate of return, which can be improved with technological upgrades, Mr. Mock said.

“(The lottery investment) is almost like an infrastructure asset,” he said.

Even though Ontario Teachers is being more cautious in its infrastructure investments, Canada’s eight pension funds are “dying to come into the U.S. to fund (the country’s) infrastructure needs” using direct investments, Mr. Mock said. “We are working with the government because there are impediments.”

But Mr. Mock said sovereign wealth funds and pension plans are untapped capital pools for global infrastructure.

Hiromichi Mizuno, executive managing director and chief investment officer of Japan’s ¥137 trillion ($1.15 trillion) Government Pension Investment Fund, Tokyo, also said on the panel that the pension fund has a 5% cap rather than a target allocation for alternative investments. This means Japan’s pension fund executives can invest in alternative investments opportunistically rather than try to meet a target allocation.

In order to better appreciate the context of Ron Mock’s remarks, I highly recommend you read my overview of Teachers’ 2014 results where he shared a lot of insights on their asset-liability approach to investing.

I’ve known Ron long enough to tell you he doesn’t make big proclamations to get his name in the papers. He’s been thinking long and hard of what increased competition from global pensions and sovereign wealth funds means for Ontario Teachers and other big investors.

And Ron is always thinking about risks that lurk ahead — like 18 to 24 months ahead! I remember a time when he came over to the Caisse and talked about his investment approach in front of Henri-Paul Rousseau, Gordon Fyfe and others. On the plane ride over to Montreal, he had jotted some notes on a napkin which would form the basis of his strategy and he had forgotten the napkin in the conference room on the 11th floor. Gordon called me to go pick it up from the conference room and bring it to him outside as they shared a ride after the meeting (I didn’t peek, I swear!).

So why is Ron Mock sounding the alarm on alternatives? Maybe he’s worried that we are about to experience a significant shift in Fed policy which will undermine America’s risky recovery and hurt real estate and infrastructure assets. Or maybe he’s worried of global deflation which will be even more devastating to risk assets, especially illiquid alternatives. Or maybe he just thinks things are getting out of whack and this huge influx of sovereign wealth and pension money chasing yield at all cost is bidding up prices of private market investments to ridiculous levels.

I don’t know exactly what he’s thinking but he reads my blog regularly and he knows my thoughts as I’ve personally expressed them to him. I love what Tom Barrack, the king of real estate who cashed out before the crisis said at the time: “There’s too much money chasing too few good deals, with too much debt and too few brains.”

In January 2013, I openly questioned whether pensions are taking on too much illiquidity risk, and used insights from Jim Keohane, president and CEO of the Healthcare of Ontario Pension Plan (HOOPP) to make some points. Jim shared the following back then:

I find this whole discussion quite interesting. I agree with the commentary of the former pension fund manager. Private assets are just as volatile as public assets. When private assets are sold the main valuation methodology for determining the appropriate price is public market comparables, so you would be kidding yourself if you thought that private market valuations are materially different than their public market comparables. Just because you don’t mark private assets to market every day doesn’t make them less volatile, it just gives you the illusion of lack of volatility.

Another important element which seems to get missed in these discussions is the value of liquidity. At different points in time having liquidity in your portfolio can be extremely valuable. One only needs to look back to 2008 to see the benefits of having liquidity. If you had the liquidity to position yourself on the buy side of some of the distressed selling which happened in 2008 and early 2009, you were able to pick up some unbelievable bargains.

Moving into illiquid assets increases the risk of the portfolio and causes you to forgo opportunities that arise from time to time when distressed selling occurs – in fact it may cause you to be the distressed seller! Liquidity is a very valuable part of your portfolio both from a risk management point of view and from a return seeking point of view. You should not give up liquidity unless you are being well compensated to do so. Current private market valuations do not compensate you for accepting illiquidity, so in my view there is not a very compelling case to move out of public markets and into private markets at this time.

Interestingly, nothing has changed since Jim shared those comments. If anything, things have gotten much worse from a valuation perspective and risks are higher than ever now that the Fed is hinting it’s ready to start raising rates if economic data improves.

But even if the Fed doesn’t raise rates anytime soon, the advent of global deflation should give big investors enough worries to pause and think about their entire strategy toward alternatives. Is it time to stick a fork in private equity? Are hedge fund fees ridiculously high? Is real estate the mother of all alternatives bubble, ready to burst and wreak havoc on public pensions and sovereign wealth funds?

On that last question, Tom Barrack (yup, the same guy from above), came out at the Milken conference to warn of amateurs investing in riskier assets:

Too many investors have moved outside their areas of expertise as they seek higher returns, posing dangers for riskier assets, according to Colony Capital Inc. Executive Chairman Thomas Barrack Jr.

“Everybody is outside of their own asset class,” Barrack said in a Bloomberg Television interview Tuesday with Erik Schatzker and Stephanie Ruhle at the Milken Institute Global Conference in Beverly Hills, California. “When amateurs enter the marketplace for all of this, you are going to get an abundance of something and it is usually not good.”

Central banks globally have pushed investors into higher-yielding assets by reducing interest rates and purchasing bonds. The Standard & Poor’s 500 Index reached an all-time high on Friday and sovereign debt in Europe is trading at negative yields.

“Institutional investors that are in this endless search for yield are ignoring the risk peril of all the consequences of those things,” he said.

Investors with an abundance of liquidity have used real estate as a safe haven, Barrack, 68, said. Apartments in New York City and London are serving as a “safe deposit box” for foreign investors, he said. The influx of money, particularly from international players seeking less risk, has pushed up property values.

“Real estate has become the last bastion,” he said. “The liquidity in the world has created this flurry for solidity. If you do not think there is a bubble at that level, you are going to be mistaken.”

Little Experience

Capitalization rates, a measure of real estate investment yield that falls as prices rise, are being driven down by buyers with less experience in property investing, Sam Zell, the billionaire chairman of Equity Group Investments, said during a Global Conference panel discussion about real estate.

“Capital investment in the last 10 to 20 years is all about allocation,” said Zell, 73. “It’s not a whole bunch of amateurs, but a bunch of people that may not have a lot of experience in real estate, but with a whole lot of money.”

To protect themselves from possible future losses, real estate investors should look for “equity-type returns” in the capital stack, Barrack said during the panel discussion.

“Floating debt can choke and kill you quickly,” he said.

Stagnant Rents

While commercial-property prices have risen, office rents in most urban downtowns, with the exception of New York City, are effectively at the same levels as 20 years ago, Barrack said.

Including such expenses as leasing commissions, tenant improvements and property taxes, “if you effectuate down in current dollars, true office rents are about the same as in 1995,” he said in the television interview.

Colony Capital oversaw about $24 billion of equity before Barrack combined it with Colony Financial Inc. this year. His firm in recent years has owned Michael Jackson’s Neverland Ranch, invested in single-family rental homes and distressed mortgages.

“When the masses start entering the water and thinking they can navigate the waves, I get out,” said Barrack.

Got to love Tom Barrack, he just says it like it is. Real estate, which has long been touted as the best asset class, might have seen its best days ever as the future looks increasingly gloomy for a lot of reasons, especially if America’s risky recovery falters next year.

Barbara Corcoran, founder at The Corcoran Group, talked about New York City real estate on Bloomberg, the lack of affordable housing in the city and why the market may be in a new bubble. She thinks things are fine but she’s so blatantly talking up her business.

And it’s not just New York. The same nutty thing is going on in London and other real estate hot spots around the world as the world’s elite fight with global pensions and sovereign wealth funds for prime real estate assets. What a joke, this is definitely going to end badly and a bunch of amateurs are going to get their heads handed to them.

Below, Ron Mock, the president of Ontario Teachers’ Pension Plan, talks about hedge funds, private equity, the eurozone crisis and the Canadian economy with CNBC (January 2015). I also embedded an Economist interview with Ron from the Canada Summit (December, 2014). Listen to his comments on how “going global introduces a whole other layer of complexity.”

Update: An astute private equity manager sent me this after reading my comment above:

These sweeping asset class statements are perhaps too broad, although no doubt like every asset class, valuations are high by historical standard. But whether this means an asset class issue or reflects an OTPP specific portfolio view deserves further thought. There are many ways to construct PE exposure, and not all portfolios share common attributes. That’s why institutional PE performance is all over the map at any point in time.

As to whether there is more or less volatility in PE verses public markets, that’s also more portfolio specific than the commentators note. There are huge variations in structures and types of underlying investments that make for many choices that are part of active portfolio management. Some portfolios are in fact less volatile and/or cyclical by design, others not.

In such a non-homogenous and flexibly defined area like PE, overall and average asset class attributes are not instructive as to merit or lack thereof of this style of investing. At the heart is whether one gets paid for illiquidity. At an average asset class level, this has probably not been the case for many years, it just takes a long time for this outcome to both surface and be understood.

The solution is that PE should be viewed as an execution business, not an allocation business. Through this lens, the opportunity for playing a role in a larger organization’s portfolio context is cultural. Those with long term beliefs aligned with the reality of the activity will, as usual, do fine.

I thank this person for sharing these insights and agree with many of the points he raises. Still, when you are the size of OTPP, you can’t help but making broad asset class observations and I think many big institutions should heed Ron Mock’s warning and keep it in mind as they pile into alternatives.

 

Photo by debsilver via Flickr CC License

Kansas lawmakers are considering an overhaul of the rules governing public employees who retire and then come back to work after beginning to draw a pension.

The current rules expire this summer, opening the door for changes.

The overhaul would make it less financially beneficial for public workers to retire early before eventually returning to the workforce.

An explanation of the current rules versus the proposed rules, from the Topeka Capital-Journal:

A person retiring at 55 years of age and working after retirement until 62 could expect to receive $296,000 in pension benefits under KPERS. If that individual served full-time until retiring at age 62, benefits under KPERS would be $251,000.

“Working after retirement encourages them to retire sooner,” [KPERS executive director Alan] Conroy said.

In this example, he said, KPERS absorbed a financial hit because required contributions to the pension system fell $25,000 short of meeting anticipated benefits provided the early retiree.

The reform plan before the Senate committee, for the first time, would mandate retirees receiving KPERS benefits who accept a position with a KPERS-affiliated employer — city or county government, for example — must abide by an annual earning limitation of $25,000.

That post-retirement cap, which now only applies to certified public school educators, stands at $20,000. A person reaching the maximum could unretire, temporarily stop working or suspend pension benefits.

In addition, the proposal would establish special rules for certified educators participating in the state pension system. Retired teachers would be eligible to collect KPERS benefits and work in a public school as long as earnings didn’t exceed $25,000 yearly.

Senators will debate the rule changes next week.

 

Photo credit: “Seal of Kansas” by [[User:Sagredo. Licensed under Public Domain via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:Seal_of_Kansas.svg#mediaviewer/File:Seal_of_Kansas.svg

The words “retirement crisis” have been appearing in print more and more in recent years.

But is the phenomena real, or imagined?

In this video, Professor Teresa Ghilarducci discusses why she thinks the retirement crisis is very real – and how the dream of retirement can be restored for Americans.

From the video description:

 

Leo Kolivakis is a blogger, trader and independent senior pension and investment analyst. This post was originally published at Pension Pulse.

BNN reports, Federal budget promises to review pension investment rules:

The government says it will review a rule that prohibits federal pension funds from holding more than 30 percent of the voting shares of a company.

The Federal Budget said Canadian pension funds are among the most experienced private sector infrastructure investors in the world, but currently face limits on their investment activities.

The government plans to launch a public consultation “on the usefulness” of the current prohibition.

But Ian Russell, President of the Investment Association of Canada, tells BNN rolling back investment limits for pension funds will have big consequences.

“Those pension funds do not pay tax. So the dividends that flow from those investments would not be non-taxable,” said Russell. “Secondly, there is scope for a significant concentration of corporate Canada and voting control among these large tax-exempt pension funds.”

The rule covers large federal government pension plans, so amendments would not affect Canada’s major provincial pension plans such as the Caisse de dépôt et placement du Québec or the Ontario Teachers’ Pension Plan.

“Lifting the 30-percent rule is certainly something we would welcome and we will be participating in the public consultations,” said Mark Boutet, vice-president of communications and government relations for the Public Sector Pension Investment Board (PSP Investments), which invests on behalf of federal government employees.

I’m curious to see how these consultations will go but lifting the 30-percent rule would help Canada’s large federal government pensions, which includes PSP Investments and CPPIB, to invest more of their assets funding private Canadian infrastructure projects.

Of course, if you’re going to implement such a change, why limit it to big federal pensions? Why not allow all of Canada’s large public and private pensions to enjoy the same investment opportunities as their federal counterparts? This would be the fair thing to do.

As far as reaction to the federal budget, CUPE’s analysis blasted the Conservatives stating it was a dead giveaway to the rich and had this to say on retirement security and pensions:

The measures in this budget on retirement security will overwhelmingly benefit the wealthy with their private savings, while other changes they are considering will put the retirement savings of working Canadians at risk, with the introduction of ‘target benefit plans.’

• Reduces the minimum amounts seniors must withdraw from their RRIFs after they reach age 71.
• Increases the annual contribution limit for TFSAs to $10,000.
• Considering changes to pension laws to allow federally regulated employers to establish target-benefit pension plans and to income tax laws to enable provinces to also establish target benefit plans.

While the change to RRIFs will help some seniors and is supported by seniors’ organizations, only half of all seniors have RRSPs or RRIFs, so this measure will largely benefit the few who are better off, while reducing tax revenues.

The real pension crisis is that 6 in 10 workers don’t have any workplace pension plan. Much better would be to improve the Canada Pension Plan (CPP) and Guaranteed Income Supplement (GIS) so all Canadians could depend on decent incomes in retirement. Labour has a fully-costed proposal to double CCP benefits, which is supported by provinces, pension experts, the NDP, and the Canadian public.

CUPE also called for the government to cancel its plan to increase the retirement age for Old Age Security (OAS) and the GIS to 67. These cuts will mean middle-class Canadians will lose about $13,000 in retirement income and nearly a quarter million future seniors per year could face poverty, all the while Conservatives provide huge tax cuts to the wealthy through TFSAs. The NDP has also committed to reversing this change and restoring the age of retirement to 65.

The Conservative government is intending to give the green light to federal jurisdiction employers to establish target benefit plans that will allow them to walk away from the pension promises they have already made. Workers and all those affected should also vigorously oppose this.

The budget also announced that Conservatives are considering changes to allow pension funds to own more than 30 per cent of the shares of a company. This is intended to facilitate further privatization of infrastructure investments through P3s and could increase the volatility of pension fund investments.

I agree with CUPE on some points, but totally disagree with it on others. Increasing the TFSA limit will predominantly help rich Canadians with high disposable incomes as they will tuck away more or their income into tax free savings but it will also help people with RRIFs shift assets into TFSAs.

Still, the net effect of this policy is to boost assets at Canadian banks, mutual fund companies and insurance companies. In other words, it’s another dead giveaway to the financial services industry. It will boost the profits of the ultra wealthy Desmarais family, which owns mutual fund and insurance companies, but will do nothing to help average Canadians retire in dignity and security (only enhancing the CPP for all Canadians will achieve this goal).

Where I disagree with unions is their insistence on maintaining the retirement age at 65 when Canadians are living longer and working longer and their myopic and Marxist position that privatizing infrastructure is a terrible thing and will increase the volatility at Canada’s large pensions.

This is utter nonsense and shows you unions don’t want to share the risk of their plans or are clueless when it comes to longevity risk, managing assets and liabilities, and the important role Canada’s large pensions play in terms of investing in infrastructure projects around the world. These private market investments have risks but because of their long investment horizon and steady cash flows, they offer important characteristics to pensions from a liability-hedging perspective.

There are many advantages of investing in Canadian infrastructure through P3s. It just makes sense as the risk of the projects will be shared by the private sector, but since these are Canadian projects, there is far less regulatory or legal risks than investing abroad and no currency risk, which is good for pensions hedging for Canadian dollar liabilities.

If you look around the developed world, you will see many cash strapped governments that have no funds to invest in much needed infrastructure projects. Canada is no different. Our large pension funds can play a key role here but only if the federal government allows them to invest more in domestic private infrastructure projects.

Are there tax implications to lifting the 30 percent rule? Sure there are but there are also big benefits. I find it abhorrent that a relatively rich and vast country like Canada has no high speed trains to connect our cities, not to mention our roads, bridges, ports and airports are a total disgrace and need major investments. Where is the money to fund such projects going to come from?

The Caisse’s deal with the provincial government to handle some infrastructure projects offers a blueprint but the federal and provincial governments need to do a lot more to allow Canada’s large pensions to invest in domestic infrastructure projects.

Of course, lifting the 30 percent rule will be met by vigorous opposition in corporate Canada because it’s weary of giving our large public pensions more power to vote against their senor executives’ excessive compensation packages. I happen to think this is a good thing and hope to see our large pensions torpedo any excessive compensation packages that aren’t based on measurable long-term performance objectives.

Those of you who want to read more on the federal budget can read Mackenzie Investments’ 2015 Federal Budget Bulletin. It covers the main points well and provides a good overview for individual investors.

As always, if you have anything to add on lifting the 30 percent rule, please email me at LKolivakis@gmail.com. I got to get back to trading these schizoid markets dominated by computer algorithms. Short sellers are ripping into biotech shares this week, similar to last year’s big unwind. Just remember this, where there’s blood, there’s big opportunity. Below, a list of small biotech shares I’m tracking that are getting killed so far this week (click on image):

As I’ve repeatedly warned in the past, trading small cap biotechs isn’t for the faint of heart. You can lose 30% on any given week, and sometimes a ton more in a single day (check out the 70% haircut Aerie Pharmaceuticals experienced after it announced phase III results that didn’t meet expectations).

Public markets are volatile by their very nature but some segments are frighteningly volatile. This is another reason why Canada’s large public pensions are increasingly shifting assets into infrastructure, real estate and other private markets. Why should they play a rigged game where they’re destined to lose against big banks and big trading outfits? It makes more sense for them to invest in low volatility assets that provide stable cash flows over a very long investment horizon and where they have more control over their investments.

 

Photo credit: “Canada blank map” by Lokal_Profil image cut to remove USA by Paul Robinson – Vector map BlankMap-USA-states-Canada-provinces.svg.Modified by Lokal_Profil. Licensed under CC BY-SA 2.5 via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:Canada_blank_map.svg#mediaviewer/File:Canada_blank_map.svg

Editor’s note: A full analysis on this issue and Ron Mock’s statement can be read here.

Speaking at the Milken Institute Global Conference, Ontario Teachers Pension Plan (OTPP) CEO Ron Mock said Wednesday that his fund may “step back” from “expensive” alternative asset classes.

Pensions & Investments first reported the statement. More details from P&I:

“There’s a lot of money crowded into the broadly defined alternatives space,” Mr. Mock said. “We find it too expensive. It’s time for us to step back.”

Instead, Ontario Teachers executives are investing “between the asset classes where we found the most interesting deals today,” he said.

For example, Ontario Teachers is an investor in the U.K. and Irish lotteries for their stable cash flows and high rate of return, which can be improved with technological upgrades, Mr. Mock said.

“(The lottery investment) is almost like an infrastructure asset,” he said.

Even though Ontario Teachers is being more cautious in its infrastructure investments, Canada’s eight pension funds are “dying to come into the U.S. to fund (the country’s) infrastructure needs” using direct investments, Mr. Mock said. “We are working with the government because there are impediments.”

OTPP manages $126.4 billion in assets for the province’s teachers.

 

Photo by  Dirk Knight via Flickr CC License

Chicago Mayor Rahm Emanuel on Wednesday laid out a series of fiscal reforms that are designed to dig the city out of its budget hole and bring “fiscal sanity” to the city’s financial practices.

But much of Chicago’s fiscal fate depends on the legality of the pension reforms the city levied on its Laborers and Municipal pension funds in 2014.

Emanuel said he was confident in the legality of the changes.

From the Sun-Times:

Emanuel argued again Wednesday that the city is standing on more solid legal ground.

“Unlike the state, we negotiated with our labor partners. That’s a big deal. We negotiated with our unions. Big difference. Second, we’re not making cuts. By preserving and protecting the pension, it will continue to be a pension,” the mayor said.

“We believe that ‘preserve and protect’ of the actions we’re taking is consistent with the direction and words of the Constitution, which we think we’re fundamentally different than what the state did.”

[…]

The mayor acknowledged Wednesday that those reforms he’s in the process of negotiating with police and fire unions will not produce nearly as much savings as there were in the other two city pension fund deals.

“As it relates to public safety, they do not have the same type of COLA [cost-of-living adjustment] that the Laborers and Municipal have. So, the type of savings that you would see there don’t exist,” the mayor said.

Emanuel seemed to indicate the even if the Supreme Court overturns the state-wide reform measure passed in 2013, the city’s own set of reforms would still be safe.

That’s because the city negotiated with unions before implementing the reforms, and the cuts are less drastic.

Regardless of the court decision, Chicago is on the hook for a $550 million lump-sum payment to its public safety pension funds. That bill comes due in December.

 

Photo by Pete Souza via Flickr CC License

Despite numerous vetoes from New Jersey Gov. Chris Christie, some state lawmakers – including the Senate President – are again pushing a bill that would levy an extra tax on income above $1 million.

Revenue generated from the “millionaire tax” would go toward paying the state’s required pension contributions in full.

From the Asbury Park Press:

Senate President Stephen Sweeney, D-Gloucester, said at a Statehouse news conference Tuesday that it’s unacceptable to balance the state budget by slashing payments into public workers’ pension funds, as the governor has. He said in the absence of sufficient economic growth to fuel an increase in state revenues, the Senate will vote on a plan to raise taxes on income over $1 million.

“We’re going to have to do a millionaires tax,” Sweeney said. “Listen, before when we talked about a millionaires tax, we talked about [if] we could sunset it. We could even put it on a scale as the economy was coming back, you could reduce the money. You could reduce the percentage. There’s a lot of things you can do. We really don’t want to do that. We’re doing it for one reason: We need the revenue, and it’s because of the lack of focus on the economy of this state.”

Christie vetoed similar tax increases in 2010, 2011, 2012 and 2014, and he said in his State of the State address in January and his February budget address that he would veto it again if lawmakers approved it this year.

Pending a new court decision, the state is on the hook for about $1.5 billion in unpaid pension contributions – but the payments haven’t been budgeted for.