New Jersey Gov. Chris Christie gave an extended interview this week, during which he talked about his decision to cut the state’s pension contribution and paying off pension debt by increasing the tax on millionaires.
The pension conversation starts just past the 18:00 mark.
Feature photo by Walter Burns [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons
Earlier this month, Kansas Gov. Sam Brownback announced his plan to cut the state’s annual pension payment by around $60 million and use the money to plug budget shortfalls elsewhere.
Several prominent lawmakers have now given their reactions to the proposal. From Salina.com:
[Steven] Johnson, R-Assaria, who is chairman of the House Pensions and Benefits Committee, was “not happy” with Tuesday’s proposal by Gov. Sam Brownback to cut the state’s pension contribution this year by $40 million as part of a plan to close a $280 million shortfall in the state budget.
And he’s not alone, even among Republicans.
“There’s no easy solution,” Johnson said Wednesday, “but I’m not happy with what they’re doing with KPERS.”
[…]
Late Wednesday afternoon, Kansas Treasurer Ron Estes, who campaigned with Brownback across the state just before the November election, released a statement critical of the planned KPERS cuts.
“While I understand the need to re-balance the budget in light of unexpected shortfalls, the decision to delay state contributions to our underfunded pension system is disappointing,” Estes wrote in the statement. “By delaying action now, we run the risk of KPERS consuming an even larger amount of our state’s budget at the expense of other vital state services to Kansans in the future.”
Senate Vice President Jeff King, R-Independence, who led KPERS reform in the Senate, said, “Over the last four years, Kansas has become the model for responsible pension reform. We inherited a pension system that was going broke and returned it to fiscal health. By raiding the KPERS fund instead of continuing prudent reform, Gov. Brownback is threatening to undo all of the hard-fought gains that we have made.”
The state’s Senate Minority Leader also weighed in. From the Topeka Capital-Journal:
Senate Minority Leader Anthony Hensley, D-Topeka, rejected the idea Brownback is protecting education funding by cutting KPERS instead. The governor has previously counted KPERS contributions when touting a high level of education spending under his administration. During the campaign, Brownback highlighted an overall increase of $270 million in education funding since 2011, a figure that included KPERS contributions.
“I would argue then, using his logic, that he’s actually cutting education,” Hensley said. “It’s so inconsistent, or downright contradictory, to make that kind of argument.”
Kansas PERS manages over $14 billion in assets.
Photo credit: “Seal of Kansas” by [[User:Sagredo| – http://www.governor.ks.gov/Facts/kansasseal.htm. Licensed under Public Domain via Wikimedia Commons
Dominick Marino, the president of the Professional Firefighters Association of New Jersey, penned an op-ed in Wednesday’s Times of Trenton calling on New Jersey Gov. Chris Christie to take responsibility for the state’s pension problems – and to fix them.
Marino writes:
Gov. Chris Christie continues to blame everyone for the state’s pension problems – previous governors, lawmakers, firefighters and police officers – but he refuses to take responsibility for his own actions on the issue.
Apparently, he wants the public to believe that when it comes to pensions, the buck stops elsewhere. That’s wrong and he knows it. It was Christie who, in 2011, signed a law dramatically overhauling New Jersey’s public pension system, increasing the out-of-pocket contributions from workers and mandating a seven-year schedule of state payments to get the system back in the black.
Since the 2011 signing, everyone has been doing their part to follow the law except Christie. He has decided the state simply cannot afford to live up to the terms of the law he signed and has cut $1.6 billion from the state’s obligation of $2.25 billion for the current fiscal year.
[…]
The governor can point fingers all he wants, but it will likely be up to the courts to sort through Christie’s smoke-and-mirrors approach to pensions. Three of the state’s largest pension funds are suing Christie and his administration for failing to make the legally required payments.
According to Standard and Poor’s, the problem with the pension fund is not public employees and not the economy. It’s Christie not paying his bill. This from the ratings agency: “The long-term impact of continuation of a funding policy that allows the State to contribute less than the actuarially recommended contribution could impact, at some point, the Pension Plans’ ability to meet their obligations absent significant additional contributions by the State, increased investment returns, or actions or events resulting in reductions to liabilities of the Pension Plans.”
Read the entire piece here.
Photo by Bob Jagendorf from Manalapan, NJ, USA (NJ Governor Chris Christie) [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons
A new chairman has been appointed to the board of trustees for one of the largest pension funds in the world, the Dutch pension fund ABP.
The move follows the appointment earlier this year of a new chief investment officer.
From ai-cio.com:
The largest Dutch pension fund has appointed influential European politician Corien Wortmann-Kool as its new chair of trustees, capping off a year of staff changes.
Wortmann-Kool replaces Henk Brouwer who stepped down as chairman of ABP in May. She has been a member of the European Parliament since 2004, and was vice-chair of the European People’s Party from 2009 until stepping down as a politician in June this year.
Jose Meijer, vice-chairman of ABP’s board of trustees, said the appointment was “an ideal combination of knowledge and experience”, adding that Wortmann-Kool had “a great deal of knowledge about the financial sector, is an experienced and strong administrator, and also has an extensive network in Brussels and The Hague”.
“Confidence in pension funds has declined over the years,” Wortmann-Kool said. “There are many changes in store in the coming years, which means that uncertainty among participants in relation to pensions could increase. I want to contribute to good and honest communication with our participants about certainties and uncertainties, so that they know what they can and cannot expect from ABP.”
ABP manages $427 million in assets.
China is planning a major overhaul of its pension system after complaints of unfair wealth distribution and favoritism towards government employees.
Reported by Bloomberg:
China will abolish a dual-track pension system that favors government employees and discriminates against others to create a fairer retirement-savings system.
Under existing rules, about 37 million employees with government agencies, communist organs and public institutions don’t have to contribute anything to their pension savings, with the government paying pensions of about 90 percent of their pre-retirement salaries. Those employed by businesses from banks to bakeries must contribute 8 percent of their salary to pension accounts, on top of 20 percent of their wages that’s paid by employers to a pooled pension fund. On average, private retirees end up with 40 percent of their working pay.
As the system has increasingly become a source of resentment among the public, Vice Premier Ma Kai said yesterday that the State Council and the ruling Politburo have agreed to implement a “unified” pension system, and government employees will have to contribute to their own pension accounts, the official Xinhua News Agency reported.
The report didn’t provide a timetable for the reforms.
Approximately 338 million people are covered by China’s pension system.
Photo by Jonathan Kos-Read via Flickr CC License
There is growing demand for environmentally friendly investments, and as a result, “green bonds” have become an increasingly popular investment vehicle.
For proof, look no further than CalSTRS, which increased its purchases of “green bonds” by 300 percent in 2014.
But with increased popularity comes increased demands for transparency: what exactly qualifies as a “green” investment?
From Institutional Investor:
With green bonds’ rising prominence comes a need for a single set of clear and science-based criteria for what constitutes “green.” Nuclear power is low carbon, but some would balk at calling it green. And the coal industry would like investors to count fitting a coal-fired power plant with technology to reduce carbon emissions as a clean energy project, although fossil fuel consumption is hardly carbon neutral.
“When you get into the corporate space, you’re dealing with a large number of companies, and transparency is not always as good,” says Colin Purdie, head of global investment-grade credit at London-based asset management firm Aviva Investors.
None of this means Aviva wouldn’t invest in a bond because it doesn’t qualify as “green.” It just means the firm wouldn’t call it that. And therein lies the conundrum. A lot of these bonds would hit investors’ desks even without the green label. If the market is to grow into the large liquid powerhouse its proponents want, it needs a significant roster of corporate issuers to issue green bonds.
Also at issue are third-party verifications proving that issuers are spending funds on the environmentally friendly projects the bonds were designed to finance. This has begun to happen already. More than half of the green bonds issued in 2014 included an independent second opinion on their environmental credentials, from watchdogs such as the Center for International Climate and Environmental Research in Oslo and Vigeo in Paris, according to data from the Climate Bonds Initiative.
[…]
“I think the biggest concern right now is trying to grow the market and getting more issuers to issue bonds,” says Catherine DiSalvo, investment officer at the California State Teachers’ Retirement System. “We do support third-party verifications. The only problem is that it adds to the expense of issuing a green bond.”
Read the whole piece on green bonds here.
Photo by penagate via Flickr CC License
The sentencing of Fred Buenrostro, the former CalPERS executive who pleaded guilty over the summer to accepting bribes, has been pushed back nearly five months to allow further cooperation with the government.
From the Sacramento Bee:
Fred Buenrostro, who left the California Public Employees’ Retirement System in 2008, will now be sentenced May 13 in U.S. District Court in San Francisco. Buenrostro, who is free on bond, was originally scheduled for a Jan. 7 sentencing.
Buenrostro pleaded guilty in July to accepting bribes from former CalPERS board member Alfred Villalobos, a Reno businessman who earned millions in commissions securing pension fund investments for various private-equity firms. Buenrostro said he took more than $250,000 in cash, casino chips and other benefits from Villalobos, who prosecutors say was trying to gain favor for his investment clients.
As part of his guilty plea, Buenrostro agreed to testify against Villalobos, who has pleaded not guilty. Prosecutors and Villalobos’ lawyer filed a joint statement in court last week asking for the postponement “in order to permit Mr. Buenrostro’s ongoing cooperation with the government.”
Judge Charles Breyer agreed to reschedule the sentencing. Buenrostro is expected to get a five-year prison term, according to the plea agreement, although the judge will have the final say.
Villalobos, who is also free on bond, is scheduled to go to trial in February on three felony charges. If convicted, the 70-year-old Villalobos could be sentenced to up to 30 years in prison. Villalobos is a former deputy mayor of Los Angeles who served on the CalPERS board in the early 1990s.
More Pension360 coverage of the bribery scandal can be read here.
The Minneapolis Employees Retirement Fund won’t exist as of January 1, 2015. That’s because the plan is merging with the Minnesota Public Employees Retirement Association (MPERA).
Reported by Pensions & Investments:
Minnesota PERA already administers the $869 million Minneapolis plan, and its assets are managed by the $80 billion Minnesota State Board of Investment, St. Paul, said Mary Most Vanek, PERA executive director.
The Minneapolis plan has been closed to new employees since 1978; since then, new employees hired by the city of Minneapolis and six other municipal governments have been participants in PERA.
The Minneapolis plan will no longer exist as of Jan. 1, Ms. Most Vanek said.
Under a pension bailout approved by the Minnesota Legislature in 2010, contributions from the city and the state were required to bring the Minneapolis pension fund to 80% funding before it could be merged into the state plan. It reached that mark in late 2014.
The pension plan was 56% funded in 2009.
The Minneapolis pension fund has received annual state contributions of $24 million since 2010, Ms. Vanek said. The annual contribution of the city of Minneapolis, as well as the six other municipal governments with retirees in MERF, totaled about $27 million.
A new contribution payment will be established after Jan. 1, Ms. Vanek said. What part of the new contribution will be paid by the state and municipalities will be negotiated and then must be enacted through state legislation, she said.
The Minneapolis Employees Retirement Fund is approximately $869 million in size; MPERA, on the other hand, is a $22 billion fund.
Photo by Sunburned Surveyor via Flickr CC License
Texas budget analysts and pension officials are attempting to draw lawmakers’ attention to the unfunded liabilities of the Employee Retirement System of Texas. The analysts and the director of the pension system say the liabilities, if left unaddressed, could lead to a credit downgrade for the state.
From the Austin American-Statesman:
At a legislative hearing this month, outgoing Employee Retirement System Executive Director Ann Bishop piqued lawmakers’ interest when she said the plan’s current unfunded balance of $7.5 billion could at some point affect the state’s good credit rating if the Legislature doesn’t devise a plan to pay it off. The 2016 onset of new accounting rules will double that risk, she noted. The state only has 77 cents for every dollar needed to pay future benefits, according to the retirement system. If not addressed during next year’s legislative session, it is projected to grow to nearly $10 billion by 2018.
The agency again has asked the state for additional funding to make the plan actuarially sound – so that contributions and investment returns cover expenses and payouts – which it has not been since 2003. That would require an additional $350 million every two years.
Absent that, Bishop told members of the Senate State Affairs Committee that the solution is some combination of more benefit cuts or increased contributions from both the state and employees. Lawmakers in 2009 and 2013 increased state and employee contributions and cut benefits for newly hired workers.
While that “has done a lot to help close the gap,” Bishop said “it isn’t enough.”
“It will have to be fixed. And it’s just going to get worse before it gets better,” she told the committee, noting the plan will run out of money to pay for promised pension benefits by the 2050s if nothing changes.
That “sounds like a long time from now,” she continued, but “when you’re talking about attracting people into the workforce and you’re telling them they’re going to pay into a fund for 30 years and not have it in their retirement, that’s not much of a benefit.”
She also warned that further diminishing the plan could inspire a lawsuit or – even worse – spark a mass retirement exodus as more than a third of the state’s workforce is either already eligible to retire or will become so in the next five years. In 2013, retirees received an average annuity of $18,946 from the plan.
ERS Texas manages $25.6 billion in assets.
Massachusetts Governor-elect Charlie Baker says he will push for more transparency and openness from the MBTA retirement fund.
Baker’s statements come days after it was reported by the Boston Globe that the pension fund posted its annual report a full year late; the fund also waited a year to disclose troubles at a hedge fund that held pension money. The hedge fund is now shutting down in the wake of civil fraud charges brought against its executives.
From the Boston Globe:
The incoming Baker administration will press for greater openness at the MBTA retirement fund and encourage it to operate more like other pensions for public workers, a spokesman for Governor-elect Charlie Baker said Monday.
“The governor-elect wants to protect the pensions of hard-working MBTA employees and feels greater transparency and disclosure could help the pension board make better investment decisions,’’ the spokesman, Tim Buckley, said in a statement. Given the significant investment of taxpayer dollars in the MBTA, he said, Baker “feels it is appropriate to explore ways to align the MBTA pension board’s investment practices with those of other public pension boards.”
[…]
Baker’s spokesman declined to offer specifics on how he might tackle the issue. The pension fund is organized as a trust and in 1993 won a Supreme Judicial Court ruling that it does not have to make records public, hold open meetings, or follow the ethics rules of public agencies.
[…]
A governor’s main leverage with the MBTA pension fund is indirect. Governors get to appoint people to the seven-member Department of Transportation board, which in turn sends three “management” appointees to the six-member T retirement board.
Read more Pension360 coverage of transparency issues at the MBTA fund here.
Photo by Marissa Babin via Flickr CC License
