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Pennsylvania Lawmaker Pushes For Pension Reform Action Before New Governor Takes Office

Pennsylvania Gov-elect Tom Wolf, in stark contrast to his predecessor Tom Corbett, has been adamant that he is not on board with any sweeping changes to the state’s pension system.

But Wolf doesn’t take office until Jan. 20 – and some Republican lawmakers are still pushing for a quick passage of reform legislation before Wolf takes his seat.

Senator John H. Eichelberger Jr. [R] wrote in PennLive recently:

Gov.-Elect Tom Wolf has not yet set forth any legislative priorities, nor have his public statements provided any proposals to address the major concerns facing our state, including our greatest fiscal challenge — the pension crisis.

Given the magnitude of these problems, I urge the House and Senate leadership to reconvene both bodies immediately after the installation of new members and aggressively advance a pro-growth/good government agenda for the citizens of Pennsylvania.

The problems facing Pennsylvania are so pressing that waiting weeks more to address them is a disservice to the taxpayers.

The Legislature’s commitment eight years ago to not return for Sine Die session in the fall has been important for all the right reasons.

Sine Die sessions have been outlawed in many states because of their lack of accountability since outgoing members do not have to answer to the voters. An interregnum session in January poses no such concern.

The governor has no formal role in the legislative process and has no authority to act until after a bill, passed by a legislature representing the people, is sent to his desk for signature.

Waiting for Gov.-elect Wolf to take office before addressing the pressing needs of our state would be unnecessary and, some might argue, irresponsible.

Rep. Mike Tobash, R-Schuylkill introduced a bill in the previous session that would shift some employees into a 401(k)-style system.

But any sweeping pension reform proposals are unlikely to go anywhere under Tom Wolf, who says the state’s previous reforms need time to work.

Top Police Union Official Says Christie Used “Bait and Switch” on Pensions

The New Jersey Police Benevolent Association is one of the dozen unions that filed a lawsuit against the state when Chris Christie opted to cut the state’s pension contributions by over $2 billion in 2014 and 2015.

And while lawyers are arguing the case in the courtroom, NJPBA president Patrick Culligan made his case in a letter to members this week, where he accused Christie of using a “bait and switch” to feign pension reform.

From the letter:

We are expecting that the Governor will propose significant further pension and healthcare reductions. We believe that the formal report of the Governor’s Pension Commission will be released very soon to support the Governor’s expected message today.

[…]

In the 2012 State of the State, Governor Christie proudly proclaimed ‘we saved their pensions’. He added; ‘Our pension system, which was on a path to insolvency, is now on much more sound footing. With your help, we tackled the problem head on.’ It was a success he shouted on the national stage for years after. He has repeatedly called Chapter 78 his crowning bipartisan achievement.

But his reflections on Chapter 78 mask his own deliberate acts to destroy pensions as we know them. I would like to remind everybody that in 2014 the Governor declared parts of his reforms ‘illegal’ in the State’s own legal briefs responding to our pension lawsuit. The former Federal Prosecutor, the attorney, the Governor who signed that law declared his obligation to make a pension payment to be ‘illegal’ and unenforceable. He also vetoed bipartisan legislation that would have required our additional contributions required by Chapter 78 to actually go back into PFRS where they belong. He has proven time and time again that he wants our system to fail.

This unfortunately is the kind of bait and switch we have come to expect from Governor Christie’s ‘promises’.

Read the full letter here.

Photo By Walter Burns [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

Cincinnati Councilman Proposes Changes to Pension Investment Strategy

Cincinnati City Councilman Christopher Smitherman has proposed a series of changes to how the city’s pension money is managed.

The proposals stem from concerns about transparency and high money management costs. Smitherman also wants to change the makeup of the investment board.

The fund returned 16 percent in 2013.

From the Cincinnati Enquirer:

Specifically he is proposing:

* Adding an elected official to the 11-member board that oversees the pension. Up until 2011, an elected official was part of the board, but the previous city council changed the make-up. Of the 11 members: six are chosen by the mayor with approval from City Council; four members are chosen by current employees and one member is chosen by retirees. Smitherman, whose day job is financial planning, is seeking guidance from his broker about whether he can serve on the pension board.

* Changing how the money is invested to take advantage of the market

“I do not share the general consensus that the assets are being managed properly,” Smitherman wrote in a Jan. 13 letter to current employees and retirees. “The mind set ‘everyone else experienced a downturn’ allows a pathology that mediocre investment returns are decisions that are acceptable.”

Smitherman is concerned about the overall market, but said there are natural head winds that a prudent investment adviser should be able to recognize.

“I am unconvinced that the current investment team is being preventative with their asset allocation for a short or long term down turn in the overall market,” he added in the letter. “The bottom line is I am concerned that City Council will turn over $238 million and get the same investment result.”

Smitherman has also proposed keeping more pension assets in cash form, as well as investing in securities directly instead of through hedge funds.

The proposal was shot down on Wednesday, but Smitherman said he will re-introduce the measure with some key changes.

Photo by Andreas Poike via Flickr CC License

Louisiana Approves Probe Into Teacher Pension Debt

Louisiana school board officials on Tuesday signed off on a study that will probe the state’s Teachers Retirement System and the associated costs.

The study will be conducted by Louisiana State University and headed by LSU official Jim Richardson.

Video: Canadian Plans Push Back Against Proposed Regulations

Three of Ontario’s pension plans — the Healthcare of Ontario Pension Plan (HOOPP), the Ontario Municipal Employees Retirement System (OMERS) and the Ontario Teachers’ Pension Plan — are protesting a section of a new Act that would place pension plans under the regulatory power of a newly-created securities regulator.

Pension plans are calling the proposal “unbelievable”. Watch the video for more.

Video credit: Daily Globe and Mail

Feature 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

Judge Hears More Arguments Thursday In Fight Over New Jersey Pension Payment Cuts

A Superior Court judge on Thursday will hear the latest round of arguments in the battle between New Jersey and public-employee unions.

The unions are suing the state after Chris Christie cut the state’s pension contribution by nearly $1.5 billion and used the money to over shortfalls in the general budget.

From NorthJersey.com:

If Judge Mary Jacobson rules against the Christie administration and orders the larger payment to be made, it could force the governor and lawmakers to come up with more than $1.5 billion in revenue midway through the state fiscal year or make new cuts.

The pension system is worth $80 billion and covers roughly 770,000 current and retired employees. But for years, governors, including Christie, have skipped or made only partial contributions into the system, leaving it funded at only 33 percent.

Unions that represent teachers, firefighters, state police and other public employees are arguing that a state law signed by Christie in 2011, which overhauled the pension system, also included a contractual obligation that the larger payment would be made.

Hetty Rosenstein, state director of the Communications Workers of America, one of the unions in the lawsuit, said the language in the 2011 legislation was framed specifically in response to prior court rulings on the pension funding issue.

“I think we’ve made a compelling case,” she said.

Administration attorneys have countered that the governor is required by the state constitution to maintain a balanced budget, giving him the authority to effectively ignore the law that calls for the larger payments if he needs the money to fulfill his constitutional responsibilities.

The pension reform law signed in 2011 mandated that New Jersey contribute a certain amount of money to the pension system each year.

But when the state faced a revenue shortfall of $1 billion in 2014, Christie made the decision to cut the state’s pension payment and use the money to fill the budget shortfall.

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

Pennsylvania’s Municipal Pension Debt Rising, Says Top State Auditor

Since 2012, the unfunded liabilities of Pennsylvania’s worst-funded municipal pension systems have increased by $1 billion, according to the state’s top auditor.

The increase in liabilities comes despite years of rising stock market values.

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.

From the Associated Press:

A continued failure by state lawmakers to act is allowing a growing problem of municipal pension debt in Pennsylvania to get worse, state Auditor General Eugene DePasquale said Wednesday.

DePasquale renewed the warning he gave a year ago, saying that municipal pension debt in the billions of dollars is putting municipalities and retiree benefits on shaky ground.

DePasquale said that municipal governments with the weakest pension plans were underfunding them by $7.7 billion through 2012, an increase of $1 billion after DePasquale’s office analyzed two years of new data.

That increase took place during a time when the economy was growing and stock market values were rising, DePasquale noted. Historically, the pension plans of police and firefighters have been responsible for most of the debt.

Nearly 70 percent of that $7.7 billion debt, or $5.3 billion, belonged to Philadelphia, according to DePasquale’s office. Pittsburgh was second with $485 million. Among Pennsylvania’s cities, Scranton had the worst funding ratio at 23 percent.

DePasquale warned that, unless changes are made, rising pension debt that forces a municipality into bankruptcy could mean benefit reductions for retirees. Some municipalities will have to raise taxes or lay off police and firefighters, he said.

“Some of them may be forced to do both,” DePasquale said.

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 some plans are so underfunded that they threaten to bankrupt the municipalities with their unfunded liabilities.

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

Chart: Public Workers More Confident in Pensions, 401(k)s Than Social Security, Medicare

A recent survey found that, among all streams of retirement income and benefits, public employees were most confident in their pension and 401(k) benefits; both in terms of being there for them when they retire and being sufficient enough to get them through retirement.

People were least confident in Social Security and Medicare. Only a small portion of people were “very confident” they had enough savings to get them through retirement.

Chart credit: Retirement Confidence Survey 2014

Top New Hampshire Lawmaker Forms Pension Reform Study Committee

New Hampshire House Speaker Shawn Jasper is forming a 14-person panel to study the state’s retirement system and potential reforms.

The committee was announced Wednesday. More from the Associated Press:

House Speaker Shawn Jasper is making pension reform a priority of the new legislative session by creating a 14-member committee to study the system that provides retirement benefits for public employees.

New Hampshire’s public pension system faces a $4.5 billion unfunded liability and Republicans want to reform the system. Jasper announced the committee Wednesday and appointed Rep. David Hess, a Hooksett Republican, as chairman.

The committee is made up of nine Republicans and five Democrats. The committee is tasked with studying how the program is funded, eligibility and ways to modify the system.

The state Supreme Court recently upheld changes made several years ago that increase the contribution rates for state employees.

The public pension system covers about 50,000 active and 30,000 retired workers.

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.

Photo credit: “Flag map of New Hampshire” by LGBT_flag_map_of_New_Hampshire.svg. This file was derived from:LGBT_flag_map_of_New_Hampshire.svgFlag_of_New_Hampshire.svg. Licensed under CC BY-SA 3.0 via Wikimedia Commons

Wisconsin Pension To Hand Out “Modest” Benefit Boosts After Investments Outperform Benchmarks

The State of Wisconsin Investment Board announced Wednesday that the state’s retirees will receive a “modest” boost in pension benefits this year.

The benefit increase will kick in around May, said a board spokeswoman.

Meanwhile, employee contribution rates will likely decline.

The boost was triggered by double-digit returns on pension investments in 2014.

From the Wisconsin State Journal:

The trust funds for state employees and retirees saw returns in 2014 that will result in “modest” pension and interest rate increases, the State of Wisconsin Investment Board said Wednesday.

[…]

The changes in retirement checks will occur in May, [said Vicki Hearing, board spokesperson] and the final rate has not yet been set by Department of Employee Trust Funds.

The board has earned positive returns each year since 2009 for the Core Fund and in five of the last six years for the Variable Fund.

Robert Conlin, secretary of the Department of Employee Trust Funds, said in the statement that the returns “mean that the positive momentum will continue in 2015, as we’ll be able to provide retirees another increase in their annuities and contribution rates for active employees and employers should continue their trend lower.”

A breakdown of the investment returns that allowed the benefit increase to happen, from the Wisconsin State Journal:

The $88.7 billion Core Fund, with a diverse portfolio, yielded a preliminary return of 5.7 percent, putting its five-year return at 9.3 percent. The Variable Fund, a stock fund, ended the year with a preliminary return of 7.3 percent and a market value of $7.3 billion.

Both funds ended near the one-year benchmark returns set by the board. The Core Fund is 5.6 percent and the Variable fund is 7.5 percent. For the three-, five- and 10-year periods, both funds are ahead of their benchmarks, according to Vicki Hearing, board spokesperson.

The Core Fund returned 13.6 percent and 13.7 percent in 2013 and 2012, she said. The Variable Fund returned 29 percent and 16.9 percent in those years.

The State of Wisconsin Investment Board manages $96 billion in pension assets for the Wisconsin Retirement System.

Photo credit: “Flag map of Wisconsin” by LGBT_flag_map_of_Wisconsin.svg: *File:Map of Wisconsin highlighting Bayfield County.svg:Gay_flag.svg:derivative work: Fry1989 eh? 02:44, 12 January 2012 (UTC)Flag_of_Wisconsin.svg:derivative work: Fry1989 eh? 04:51, 14 January 2012 (UTC) – This file was derived from:LGBT_flag_map_of_Wisconsin.svgFlag_of_Wisconsin.svg. Licensed under Public Domain via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:Flag_map_of_Wisconsin.svg#mediaviewer/File:Flag_map_of_Wisconsin.svg

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