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Jacksonville Pension Reform Hits Another Snag As JEA Says: “Take It Or Leave It”

Jacksonville’s pension reform proposal – if and when it passes – would require the city and public utility company JEA to borrow a combined $240 million.

But that aspect of the plan has hit a road bump, and now JEA is telling the city to accept the plan as-is or count JEA out entirely.

From the Florida Times-Union:

JEA finance and audit committee members learned Tuesday that city officials have been trying to claw back a key concession that enticed the utility to become a partner in financing Mayor Alvin Brown’s major pension-reform legislation.

That concession — which in essence would amount to a reduction in JEA’s annual contribution to the city’s general fund over 20 years — is non-negotiable for JEA and could be a tricky sticking point for city officials going forward.

“It is a take it or leave it,” committee Chairman Peter Bower said.

[…]

JEA’s annual general fund contribution currently increases by $2.5 million each year, maxing out at a total $114.2 million in 2016. That contribution formula — which expires next year — means that even as JEA’s revenues have declined in recent years, its contribution to the city has ballooned. That gulf has become a concern for JEA officials.

In exchange for borrowing $120 million for pension reform, however, the city had agreed to, in broad terms, reduce those contributions by $2.5 million for the next several years and ultimately revert to a formula linked to JEA revenues.

Those changes were to be locked down for 20 years beginning next year.

But JEA CEO Paul McElroy told audit and finance committee members Tuesday the city now wants to be able to revisit, and potentially change, the new contribution formula in as soon as five years.

That didn’t sit well with JEA board members, who said they conceptually agreed to help the city pay its pension debt only on specific terms, including the new 20-year contribution formula.

The committee will meet again in 10 days to see if staff has been able to address the issue.

The city’s pension reform measure aims to improve the funding and sustainability of the city’s Police and Fire system. JEA is a key part of that plan, because the city cannot afford by itself to shoulder the cost of the proposal.

Photo by pshab via Flickr CC License

Nevada Newspaper: State Pension Needs Disability Reform

The editorial board of the Las Vegas Review-Journal called on lawmakers Tuesday to deal with the “outrageous abuses” it says are plaguing the state’s disability pension system.

From the Review-Journal:

We know the Public Employees Retirement System of Nevada provides retirement benefits to people who aren’t retired. But did you know the taxpayer-funded pension plan also provides disability benefits to former government workers who aren’t disabled?

[…]

The Review-Journal exposed the PERS disability giveaways last year in an investigation of the termination of Las Vegas police officer Jesus Arevalo. On Oct. 15, 2013, Mr. Arevalo became the first Metropolitan Police Department officer to be fired over an improper use of deadly force. In 2011, he killed Stanley Gibson, an unarmed, mentally ill Gulf War veteran who became lost while driving around an apartment complex parking lot. That tragedy, which followed a Review-Journal investigative series on police use of deadly force, led to major changes in department training, policies and oversight — and a $1.5 million settlement for Mr. Gibson’s widow.

Mr. Arevalo was on paid suspension for almost two years while termination proceedings played out. But weeks before his firing was finalized, Mr. Arevalo submitted disability retirement paperwork — for stress related to his firing and the shooting that prompted his firing. The “retirement” was approved by his immediate supervisor, a personal physician, the PERS board and the pension agency’s doctor.

Mr. Arevalo, who was 36 at the time of his firing, will collect about $2,500 per month for the rest of his life, plus cost of living increases. Over 35 years, he could collect more than $1 million.

Anyone who receives federal disability benefits or long-term disability benefits through a private insurer isn’t supposed to work. But Mr. Arevalo’s disability claim applies only to police work. He can collect his PERS disability benefits and work in another field.

Read the entire editorial here.

Photo by TaxRebate.org.uk

Judge in New Jersey Pension Trial Calls State Pension Contributions a “False Promise”

The judge presiding over the legal battle between New Jersey and its public workers said last week that the state’s 2011 pension reform law was a “false promise”.

The law required the state to contribute a set amount of money annually to the pension system. But Christie slashed those payments last year.

The judge, Mary Jacobson, wondered why New Jersey included in the reforms the “false promise” of guaranteed pension payments if the state knew it was unconstitutional.

From App.com:

Superior Court Judge Mary Jacobson repeatedly made the point that the Legislature specifically made the pension contributions a contractual right in a law signed by Christie, though the administration’s lawyer said it’s not allowable because lawmakers decide each year what to fund.

“You’re saying that it was known at that time, should have been known at that time, that that was a false promise,” Jacobson said.

“It’s unprecedented because it’s unconstitutional if enforced,” said deputy attorney general Jean Reilly. “It’s not an accident that it’s not in there before. It’s not in there before because it’s not constitutionally permissible to do. … For all future legislatures, it’s merely an exhortation for payment.”

Lawyers for the Communications Workers of America union said Christie and lawmakers locked the obligation into law because pension payments are always the first thing to be cut if money gets tight. They said Christie was required to find the funding to pay for pensions, not skip the obligation.

“It was a political decision not to do that,” said attorney Kenneth Nowak. “Now, the governor may have some agenda as to how he feels about taxes. But he also has a constitutional obligation.”

Christie cut the state’s pension payments in 2014 and 2015 by around $2.5 billion.

Photo credit: “New Jersey State House” by Marion Touvel – http://en.wikipedia.org/wiki/Image:New_Jersey_State_House.jpg. Licensed under Public domain via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:New_Jersey_State_House.jpg#mediaviewer/File:New_Jersey_State_House.jpg

New Hampshire Supreme Court Upholds Benefit Changes

The New Hampshire Supreme Court has upheld several changes key to the state’s pension reforms passed since 2011.

At issue were the definitions of a cost-of-living adjustment and “earned compensation”.

State lawmakers altered the definitions of those terms as part of pension reforms, and the court has now upheld the new definitions.

The court ruling, coupled with a related ruling by the court last month, has big implications for New Hampshire pensions.

The biggest is that public worker pensions aren’t contractually protected from being altered – regardless of whether that alteration comes from raising employee contributions or outright benefit changes.

Kentucky Pension Audit Would Cost at Least $150k, Says State Auditor

Kentucky’s Chamber of Commerce last month called for an audit into the Kentucky Retirement Systems.

This week, Kentucky’s top auditor revealed that such an endeavor would cost at least $150,000 and require the expertise of outside investment experts, which could raise the cost further.

The audit would focus on the investment polices at KRS and its reliance on outside money managers.

Video: New Pennsylvania Gov. Tom Wolf Talks About His Plans for Pension Funding, Reform

Pennsylvania Gov. Elect Tom Wolf will take office on January 20, and sooner than later he’ll be inundated with pushes from lawmakers to re-design the state pension plan.

What should the city’s public sector workers expect under Wolf’s watch?

In this video, he talks in-depth about his plans for the pension system.

Videos of Wolf’s plans for education funding and other major policy issues can be viewed here.

Video credit: LancasterOnline

Pennsylvania Gov. Wolf Open to Issuing Pension Obligation Bonds

New Pennsylvania Gov. Tom Wolf has already said he’ll be taking a hands-off, wait-and-see approach to pension reform.

He acknowledges that the system needs to improve its funding, but said he doesn’t think a switch to a 401(k)-type system is the correct way to approach reform.

A Wolf spokesperson, however, revealed this week that the Governor may be open to issuing pension obligation bonds to help pay down the state’s pension debt.

From the Daily Item:

As Gov.-elect Tom Wolf gets ready to wrestle a $2 billion budget deficit, some at the Capitol say the state should borrow money to relieve one of its biggest financial burdens — cash-strapped pensions.

Lawmakers on both sides of aisle have proposed using bonds to shore up the state’s retirement plans. Wolf is open to the idea, as well, said spokesman Jeff Sheridan, but is also willing to listen to alternatives.

It’s a concept that comes with risks — and controversy. Even advocates for the idea seem to embrace it only because no one has come up with a better one.

Annual costs tied to the state’s public employee pensions are expected to increase by more than $500 million in the coming fiscal year.

At least one lawmaker – Republican Rep. Glen Grell has proposed a plan for issuing bonds to fund the pension system.

But many other Republican lawmakers likely won’t be on board with the bond idea. A switch to a 401(k)-type system is still on the mind of many of those legislators.

Photo credit: “Flag-map of Pennsylvania” by Niagara – Own work from File:Flag of Pennsylvania.svg and File:USA Pennsylvania location map.svgThis vector image was created with Inkscape. Licensed under CC BY-SA 3.0 via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:Flag-map_of_Pennsylvania.svg#mediaviewer/File:Flag-map_of_Pennsylvania.svg

New Congress Likely to Attempt Federal Pension Reform

The New Congress has already proved it has its eye on retirement benefits.

But even with lawmakers’ eyes locked on Social Security, there may be federal pension changes coming down the pipeline.

Many lawmakers are weighing changes to the federal pension system, and new legislation on that front could surface this year, according to two key committee chairmen.

The two lawmakers leading the push for federal pension reform are:

* Rep. Jason Chaffetz, R-Utah, the new chairman of the House Oversight and Government Reform Committee

* Rep. Mark Meadows R-N.C., chairman of a subcommittee of the Committee on Oversight and Government Reform that focuses on the federal workforce.

More on their plans from the Federal Times:

As the new Congress kicks into gear, lawmakers want to take another crack at reforming the civil service.

Rep. Jason Chaffetz, R-Utah, the new chairman of the House Oversight and Government Reform Committee, said he will look at reforming all aspects of the federal workforce, from hiring and firing authorities to pensions and pay.

“We have jurisdiction on the federal workforce and there is no doubt we are going to bring that up,” Chaffetz. “From soup to nuts: Everything from how we hire them on the back end to how we pay them out in the retirement system.”

[…]

As Congress kicks into gear, Meadows believes the committee will be working on legislation for at least some parts of civil service reform.

“I would be very surprised if there were not a number of legislative initiatives and certainly, as a subcommittee chairman, I am prepared to be very proactive,” Meadows said.

What might the reforms look like? A likely bet is legislation that would shift new federal hires into a 401(k)-type plan, as opposed to the current defined-benefit system.

The reforms might be rolled out slowly at first, and could be focused on a particular government agency to study the effects before implementing the reforms across all agencies.

The outgoing Postmaster General has even suggested that any pension reforms be “tested” out on the Post Office first.

The Postmaster said:

Outgoing Postmaster General Patrick Donahoe has called for an end to the defined-benefit pension system and instead shift to a 401(k)-style retirement policy. He said Postal Service reform could also serve as a precursor to governmentwide civil service reform.

“I would encourage Congress to view the Postal Service as a test bed or laboratory of change that might be applied to the rest of the federal government,” Donahoe said.

He said agencies need to be be able to control costs and plan for the future while getting the flexibility to experiment without rigid workforce rules and he said the Postal Service could be at the forefront of that change.

“In today’s world, does it really make sense to offer the promise of a government pension to a 22-year-old who is just entering the workforce? And how reliable is that promise?” Donahoe asked. “I’d like to see the Congress encourage much more experimentation at the federal level. “

No legislation has yet been proposed.

Photo by Bob Jagendorf via FLickr CC License

Fired CIO of San Diego Pension May Retain Role Until Nearly 2016

Trustees of the San Diego County Employees Retirement Association (SDCERA) voted in November to fire the firm acting as its outsourced CIO, Salient Partners, and hire an in-house official.

The pension fund could make that hire by March. But trustees learned this week that Salient Partners could retain its asset management duties until November 2015.

The reason for the delay: a consultant told the board that it would be best if Salient continued its duties while a new CIO adjusted to the job and developed and investment strategy.

From U-T San Diego:

Salient Partners, the embattled outside investment strategist for San Diego County’s pension fund, may continue managing much of the $10.3 billion fund through November.

The timeline, which was presented at a meeting Thursday by the pension system’s independent consultant, surprised some trustees who’ve been pressing to fire Salient since late summer.

[…]

“I also thought I understood, at the end of the year (2014), it was stated that we would be terminating the Salient contract after we hired the CIO,” said trustee and county supervisor Dianne Jacob, who moved in September to terminate the contract and begin a transition. The board rejected the motion.

[The fund’s consultant] Scott Whalen advised the board to let Salient continue managing its portions of the portfolio until a new CIO was in place and trustees had settled on a new strategy.

He said the board could fire the firm and shift the investments into index funds, but that would amount to two major portfolio transitions in a brief period.

The SDCERA board voted 8-1 in November to move CIO duties in-house and thus cut ties with Salient Partners.

LACERA Raises Private Equity Target, But Fulfilling It Will Be Challenge

The Los Angeles County Employees Retirement Association in 2014 increased the amount of money it plans to invest in private equity this year, from $1.8 billion to $2 billion.

Over the next few years, the fund plans to bring its target PE allocation up to 11 percent of its portfolio, up from 8.7 percent in 2014.

But raising the target allocation is easy. Fulfilling it will be more challenging, as many pension funds, including LACERA, found out in 2014.

From the Wall Street Journal:

[LACERA] fell short of its private equity pacing target in a year when a record number of funds reached their hard caps and investors were forced to scale back commitments or were turned away at the door.

“Certain realities exist in the current private equity environment that challenge staff’s ability to effectively deploy $1.8 billion to $2.0 billion of capital annually,” a memo penned this month from investment staff to trustees and reviewed by Dow Jones stated.

That’s how much Lacera projects is needed in private equity commitments each year for it to grow its private equity allocation to a targeted 11% of its portfolio mix in the next four to five years. The pension system had 8.7% of its portfolio in private equity holdings as of Sept. 30. The pension fund has in the past stressed that it does not want to “dilute the quality of general partner relationships nor the thoroughness of the due diligence process just to hit the target.”

Lacera’s combined commitments in 2014 fell short of its projected pacing figure, but reflects the pension fund’s goal “to not dilute the quality of general partner relationships nor the thoroughness of the due diligence process just to hit the target.”

LACERA manages $47 billion in assets.

Photo jjMustang_79 via Flickr CC License

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