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Kansas Gov. Proposes Issuing $1.5 Billion in Bonds for Pension Funding

Kansas Gov. Sam Brownback, looking for ways to improve state pension funding after he cut $60 million from Kansas’ annual contribution, is now proposing issuing $1.5 billion of bonds to help cover the pension shortfall.

From Chron.com:

Gov. Sam Brownback is proposing that Kansas issue $1.5 billion in bonds and lengthen its schedule for closing a long-term funding gap to lower annual costs tied to pensions for teachers and government workers.

The Republican governor outlined the measures Friday. Brownback described escalating annual public pension costs as a long-term concern.

The state has committed to additional spending to bolster the long-term financial health of the Kansas Public Employees Retirement System. Benefits are only 60 percent funded through 2033, but the commitments would help close the $9.8 billion shortfall by then.

Brownback proposed extending the payoff period to 2043.

The bond funding would go to the Kansas Public Employees Retirement System (PERS).

The success of the plan depends on pension investment returns exceeding annual bond payments.

The state’s Budget Director, Shawn Sullivan, says he’s confident that will happen.

Photo credit: “Seal of Kansas” by [[User:Sagredo|Sagredo]][[User talk:Sagredo|⊙☿♀♁♂♃♄]] – http://www.governor.ks.gov/Facts/kansasseal.htm. Licensed under Public Domain via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:Seal_of_Kansas.svg#mediaviewer/File:Seal_of_Kansas.svg

India Invites Foreign Pensions to Invest in Railroad System

India’s Union Railway Minister said last week that investments in railroads were needed to avoid a “deterioration of services”.

On Monday, Minister Suresh Prabhu said the foreign pension funds would be an ideal investment partner.

From The Hindu Business Line:

The Union Railway Minister Suresh Prabhu on Monday called for tapping overseas pension funds to raise financial resources for the Railways.

Apart from the domestic pension fund, foreign pension funds could be tapped to get cheaper loans for infrastructure and network expansion, Prabhu said.

“We will invite foreign pension funds to invest in the Indian Railways as loans. We have to bring in investments from both within and outside the country,” he said at the 15th National seminar on ‘PPP and FDI in Indian Railways’ here.

Countries such as Australia and Canada have utilised the pension fund route to develop their economies.

The Minister said private investors were willing to invest in railway projects, expecting “some returns, not large returns”. “Investors must benefit reasonably (while investing in railway projects), but should not expect a windfall,” he added.

The Canada Pension Plan Investment Board has already shown interest in Indian infrastructure.

Photo by sandeepachetan.com travel photography via Flickr CC License

Chart: Reasons For Lack of Retirement Confidence Among Public Workers

Public workers aren’t confident about having enough income and savings to last through retirement. Why? The number one reason is inadequate savings. A significant portion of people (15 percent) are also worried that state and local-level pension reforms will cut into their pension benefits.

Chart credit: Retirement Confidence Survey 2014

Quebec Pension Buys Manhattan Office Tower for $2.2 Billion; Second Most Expensive Office Sale in U.S. History

Canadian pension fund Caisse de dépôt et placement du Québec said on Friday it had completed the second most expensive office sale in U.S. history by buying a Manhattan office tower for $2.2 billion.

The fund partnered with Callahan Capital Properties to buy the building, located at Three Bryant Park.

New Jersey Lawyers: 2011 Pension Reforms Invalid, State Doesn’t Have to Contribute to Pension System

New Jersey’s lawyers argued in court yesterday that Chris Christie was acting legally when he cut the state’s pension contribution last year by over $1 billion.

They argued that it didn’t matter that the state’s 2011 pension law – signed by Christie – mandated full pension payments from the state, because that law is unconstitutional.

Appointments Made to New Hampshire Pension Reform Panel

On Wednesday, New Hampshire House Speaker Shawn Jasper announced the formation of a 14-person panel to study the state’s retirement system and potential reforms.

Rep. Jasper has now also revealed who will populate the panel, called the Special Committee on Public Employee Pension Plans.

From Patch:

Veteran lawmaker state Rep. David Hess, R-Hooksett, will lead the Special Committee on Public Employee Pension Plans.

State Rep. John Sytek, R-Salem, will assist Hess as the vice chairman.

Also named to the new pension committee were state Rep. Neal Kurk, R-Weare; state Rep. William Infantine, R-Manchester; state Rep. Gary Azarian, R-Salem; state Rep. William Ohm, R-Nashua; Rep. Frank Byron, R-Litchfield; state Rep. Mark Proulx, R-Manchester; state Rep. Jeffrey Goley, D-Manchester; state Rep. Daniel Sullivan, D-Manchester; state Rep. Patricia Lovejoy, D-Stratham; state Rep. Dianne Schuett, D-Pembroke; state Rep. Len DiSesa, D-Dover; and state Rep. Frank Edelblut, R-Wilton.

[…]

The committee will also look at the funding of public employee pension plans and programs; eligibility for participation in and benefits under public employee pension plans and programs; and alternative public employee pension plans and programs.

The New Hampshire Retirement System was 66 percent funded at the end of fiscal year 2013-14. The system manages $7.41 billion in assets.

Canadian Newspaper: Quebec Pension Infrastructure Plan in Novel, But Won’t Lead to “Optimal Returns”

Canada’s second largest pension fund struck a deal with Quebec this week to take over the province’s new public transit projects.

Under an agreement reached between the Caisse de dépôt et placement du Québec and the Quebec government, the pension fund will finance and own the province’s new public transit projects.

The editorial board of the National Post, a Canadian newspaper, weighed in on the arrangement on Thursday.

The Post thought that the idea was a novel one, and good for the province – but it may not produce optimal returns, and that might be bad news for pensioners.

The Post writes:

The structure of the deal is certainly novel.

But who is kidding whom? Handing off responsibility for funding and managing public infrastructure projects to a truly arms-length body, with genuine autonomy to decide which projects to accept and which to reject, would indeed be a promising development, with the potential to depoliticize public works, traditionally a cesspool of patronage and pork even outside Quebec. By the same token, were the Caisse truly an independent pension plan, focused solely on its beneficiaries’ welfare, there might well be projects in the government’s portfolio it might wish to invest in.

[…]

Uniquely among public pension plans, the Caisse labours under a dual mandate — to “achieve an optimal return” for pensioners while also “contributing to Québec’s economic development.” It has long been seen as an informal arm of the government, contributing to the “nation-building” aspirations of past administrations. Which is to say, the “optimal return” to pensioners has often taken a back seat to politicians’ grandiose fantasies.

[…]

This might be highly advantageous to the government. The advantage is not so clear for the pensioner. Actively managed investment funds tend to underperform the market average as it is, without being force-fed a diet of public works projects. Workers dragooned into financing the public plan might well earn more were they permitted to invest the funds themselves.

The details of the Ontario plan are still being finalized. Given the financial straits the Liberals find themselves in, its putative beneficiaries should keep a close watch on the process. Public pension plans are meant to benefit those who paid for them, not the governments that created them.

The Caisse de dépôt et placement du Québec manages $214 billion in assets and is Canada’s second largest pension fund.

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

Chart: Investment Preferences of Pension Funds – Public vs. Private

Do public pension funds prefer to invest in different types of funds than their private counterparts?

The above graph details the percentage of public and private pensions that are currently invested in — or have a preference toward — various types of funds.

The graph is based on a survey conducted by Preqin. Read the full results here.

Chart credit: Chief Investment Officer and Preqin.

Video: More Voices Join Call For State Investigation into Jacksonville Public Safety Fund

Several Jacksonville city council members and a state representative have called on Florida Gov. Rick Scott to launch an investigation into the DROP fund administered by the Jacksonville Police and Fire Pension fund.

This week, another voice joined the calls for an investigation. Watch the video for more.

Photo by pshab via Flickr CC License

562 of Pennsylvania’s Municipal Pension Funds Classified as “Distressed”

Pennsylvania Auditor General Eugene DePasquale released figures Wednesday on the debt and funding status of the state’s municipal pension systems.

The majority of the state’s 1,200 municipal pension plans were funded at 90 percent or higher, according to the Auditor General’s office.

But 562 of the plans were classified as “distressed”.

From TribLive:

Pittsburgh is one of 562 Pennsylvania municipalities with distressed pension funds, according to figures Auditor General Eugene DePasquale released Wednesday.

About 1,200 municipalities in Pennsylvania administer their own pension plans. Collectively, they were $7.7 billion underfunded through 2012, up from $6.7 billion the year before.

“It’s gone up by $1 billion with no sight of action yet by the Legislature,” DePasquale said. “There’s no way around it; we need a statewide solution.”

Most of the shortfall was in Philadelphia, where the city’s unfunded liabilities surpass $5.3 billion, according to July 2013 figures. Pittsburgh was the second-highest as of January 2013 at about $484 million.

[…]

DePasquale recommends some short-term fixes. Governments should prohibit employees from “spiking” their pensions by working extra overtime, increase age and service requirements in accordance with increased life expectancies, and ensure all plans require members to contribute.

Long term, DePasquale wants local plans consolidated into a state system with job-specific classes: police officers, firefighters and non-uniformed employees.

The state’s auditor general says he will “continue to beat this drum” until lawmakers come up with a way to make municipal pension systems more sustainable.

Photo by Paul Weaver via Flickr CC License

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