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  #61  
Old 01-23-2020, 07:40 AM
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ILLINOIS

https://www.kfvs12.com/2020/01/16/il...ity-employees/
Quote:
Ill. bill lowers retirement age to 60 for DHS security employees

Spoiler:
SPRINGFIELD, Ill. (KFVS) - Illinois Department of Human Services (DHS) security employees could be allowed to retire at an earlier age if a new bill in the State Senate is approved.

Senate Bill 2467 would add “security employees” to the Tier 2 alternative retirement annuity formula under the State of Illinois Retirement System.

An example of DHS security employees would be those who work at facilities like Chester Mental Health Center.

The alternative formula allows participants to retire at age 60. The standard Tier 2 retirement age is 67.

The current formula applies to those who work with high-risk, high-stress jobs, such as corrections officers, state police and firefighters.

State Senator Paul Schimpf introduced the bill.

He believes DHS security employees perform demanding tasks and often face extreme cases.

"This is an issue of fairness in the workplace for those who do demanding jobs at mental health facilities, including Chester Mental Health Center,” said Sen. Schimpf. “These employees often face dangerous and emotionally challenging work and should be compensated accordingly.”

If SB 2467 is approved, current DHS security employees would be allowed to buy up to eight years of service to convert them towards the alternative program.


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Old 01-23-2020, 07:44 AM
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RHODE ISLAND
DIVESTMENT

https://apnews.com/ab31f2466c4dc86e0cdaf50df91d6f9c
Quote:
Rhode Island to divest from private prisons, gun makers

Spoiler:
PROVIDENCE, R.I. (AP) — The Rhode Island public pension fund will stop investing in companies that either operate private for-profit prisons or make assault-style weapons that are sold to civilians, General Treasurer Seth Magaziner announced Wednesday.

“We don’t want to be associated with businesses that we think are fundamentally immoral,” Magaziner, a Democrat, said at a news conference attended by representatives of several gun control groups including Moms Demand Action and the Rhode Island Coalition Against Gun Violence.

Several state lawmakers working on stricter guns laws, including Democratic Sens. Cynthia Coyne and Josh Miller, also attended, as did Erica Keuter, an East Greenwich woman who survived the October 2017 shooting at a country music festival in Las Vegas that killed 58 people.

The state public pension system has less than $250,000 invested in two gun companies and two prison companies, he said. That represents 0.003% of the state’s $8.7 billion pension fund.

“This move will not have a material impact on our financial performance,” he said.

After the shares of the four companies are sold, the proceeds will be reinvested across the broader market.

He acknowledged that the move, already approved by the State Investment Commission he chairs, is largely symbolic but said symbolic gestures are important.

Rhode Island is the fourth state pension system to drop its investments in private for-profit prisons, and also the fourth state to end its investments in the manufacture of certain firearms for civilian use, Magaziner’s office said in a statement.


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Old 01-23-2020, 07:44 AM
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MISSISSIPPI

https://www.northsidesun.com/front-p....9bW5v5sx.dpbs
Quote:
TIME FOR REFORM OF MISSISSIPPI’S DEFINED BENEFIT PENSION SYSTEM

Spoiler:
Reform is desperately needed for Mississippi’s defined benefit pension system.

The Public Employees’ Retirement System of Mississippi — which serves most state, county and municipal employees — now has an unfunded liability of more than $17.6 billion as of June 30, 2019. Last year, it was $16.9 billion.

An important metric to use in evaluating PERS is the plan’s funding ratio which relates the fund’s liabilities to its assets. During FY 2019, the ratio shrank from 61.8 percent in 2018 to 60.9 percent. If this was the dipstick in your car’s engine, it would be indicating the need for a change.

Another metric to use for PERS is how much of the state’s tax revenue it would take to cover the unfunded liability. The general fund tax revenue for the entire proposed state budget for fiscal year 2021 is $5.85 billion, so it would take 3 years of all the state’s general fund to make whole that liability. That is a no-go of course, as it leaves no money for all other general fund services but it provides much needed context. In short, PERS is the elephant in the state capitol that elected officials don’t want to talk about.

It would seem the stock market’s hot streak over the last few years would have boosted PERS’ returns enough to make a big dent in the plan’s unfunded liabilities. Alas, this is not the case. In fiscal year 2019 (June 30th), PERS earned $1.701 billion or a 6.64 percent rate of return on the plan’s investments, after earning $2.385 billion or a 9.48 percent rate of return in 2018. The plan expects an annual rate of return of 7.75 percent, so this year’s returns marked the first time in three years that investment returns were not above the plan’s expectations. Many organizations, who focus on this issue nationally, like ALEC and Reason, have advised states to reduce the annual rate of return assumption to something more conservative than 7.75 percent.

ALEC and Reason are not alone in saying return expectations are too high in the current super-low interest rate environment. Warren Buffett, world famous investor and head of Berkshire Hathaway, has echoed that same refrain to reduce return expectations. Another world famous investor, Bill Gross, founder of PIMCO and noted bond guru had this to say in the January 2nd Wall Street Journal, “But artificially low interest rates destroy the savings function so necessary for capital to be invested in the real economy. Pension funds, insurance companies and any financed-based structure with long liabilities are slowly being strangled because they cannot earn their assumed return. The same goes for mom and pop savers, as they struggle to earn for retirement.” PERS is a good example of a “financial-based structure with long liabilities” referenced by Bill Gross.

There are two structural impediments to success at PERS today. One is the requirement to invest a significant percent of the portfolio in investment grade bonds at a time where the 10-year Treasury note is trading below 2 percent. This makes the 7.75 percent assumed return very difficult to achieve as Mr. Buffet and Mr. Gross have suggested.


The second impediment is the generous COLA (Cost Of Living Adjustment) paid to retirees once they reach age 65. Currently, the 3 percent COLA (compounded annually) is out of line with an inflation environment that warrants a 10-year Treasury note below 2 percent. In short, retirees are getting paid a COLA beyond the means of current workers and their employers to fund.

A cost of living adjustment should be related to the real world inflation rate. Mississippi PERS’ COLA at 3 percent is not. In 2005, the plan’s COLA payout to retirees was $211 million or about 18.9 percent of total benefits paid out. This year, it grew to almost $700 million, an increase of 7.6 percent from 2018 ($650 million). The COLA payouts are now 25.4 percent of all benefits paid to retirees. Unless adjusted, the total dollars and percent of benefits of the COLA will grow as a percentage of the total payout and continue to “slowly strangle” the health and stability of PERS.


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Old 01-23-2020, 04:04 PM
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NEW YORK CITY
DIVESTMENT


https://www.ai-cio.com/news/new-york...paign=CIOAlert

Quote:
New York City Takes ‘Major Next Step’ on Fossil Fuel Divestments
City hires Meketa Investment Group to develop divestment plan by end of year, citing federal inaction on climate change.

Spoiler:
Meketa Investment Group has been selected to evaluate options and develop a prudent divestment strategy from fossil fuel companies in alignment with the fiduciary duties for New York City’s largest pension funds, the city’s mayor and comptroller announced.

“While the Trump administration fails to address global warming as the crisis it is, New York City is taking action,” said Mayor Bill de Blasio. “We are dedicated to delivering what we owe to our children and grandchildren, which is why we’re the first in the nation to take major steps to divest from fossil fuels and invest in climate solutions.”

The New York State Common Retirement Fund appointed its first director of Sustainable Investments and Climate Solutions several weeks ago. Andrew Siwo’s responsibility is to support the implementation of New York City Comptroller Thomas P. DiNapoli’s Climate Action Plan, which calls for divestment from companies that fail to address minimum carbon-emissions standards.

“Climate change is one of the most significant risks facing investors and the warnings are growing increasingly dire,” DiNapoli said.

Trustees of the pension fund agreed to divest from fossil fuel reserves by 2023, according to a January 2018 agreement. The effort will see through “one of the most significant divestment efforts in the country to date,” with the city’s funds withdrawing approximately $3 billion in the securities of fossil fuel reserve companies.

Meketa is tasked with developing a comprehensive plan by the end of 2020 to carry out these divestment efforts, allowing the city to begin execution of its plan by 2021.

Last summer, DiNapoli pledged to double the New York State Common Retirement Fund’s sustainable investments, and bring the pensions environmental, social, and governance investments to $20 billion over the next decade.

To assist, the mayor and comptroller also announced the issuance of a new Notice of Search for city pension funds’ investment in climate solutions. The pension funds will select public markets managers to help fulfill the comptroller’s efforts and double investments in climate solutions.

“Fossil fuel divestment must be responsible and thoughtful, and the vast experience that Dr. Sarah Bernstein and her team at Meketa bring to this assignment helps ensure that it will be,” said Henry Garrido, a trustee of the New York City Employees’ Retirement System (NYCERS). “Divestment of NYCERS’ investment portfolio away from fossil fuels is a necessary first step to transitioning to a renewable and sustainable future and there is no time to lose.”


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Old 01-23-2020, 05:52 PM
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OHIO
OPEBs

https://perspective.opers.org/index....ealth-care-qa/
Quote:
Health care Q&A
OPERS provides answers to questions we’re being asked thus far


Spoiler:
Jan. 23, 2020 – We’ve fielded many questions about health care since announcing last week that OPERS will be changing its health care coverage in 2022.

Here are answers to some of the questions we’re being asked most often.

Q: I fully understand why the change is needed. I hope I am provided with information, so I can fully understand how the changes will affect me and how I will find insurance in 2022.

A: We will be communicating extensively with retirees over the next two years until the changes go into effect on Jan. 1, 2022. We encourage all OPERS members and retirees to read their mail, refer to our website, blog and social media sites for more information, and take advantage of the extensive offerings made available by the OPERS education team. Visit the Member Education Center for seminars, dates and locations.

Q: Will the allowance for pre-Medicare coverage be added to the monthly pension benefit?

A: No, but current participants in the OPERS group pre-Medicare plan will likely see their pension checks increase as a result. Because we will no longer deduct the retiree’s portion of the premium from their pension check, current plan participants will see a net increase in their monthly payment. This amount can be used for medical expenses. The average premium amount deducted from a retiree’s benefit payment is about $345 per month in 2020.

The allowance will be deposited monthly into a Health Reimbursement Arrangement account we will set up for every participant in the plan. The HRA is an Internal Revenue Service-approved program that allows us to provide the allowance on a pre-tax basis. Retirees will pay for premiums and other expenses, then apply for reimbursement from the HRA account.

Q: I will be opting for pre-Medicare coverage in 2022. Will I be able to use the money for any health care plan?

A: Yes. OPERS anticipates offering an open coverage model in which participants will be able to select a plan that meets their individual needs from the OPERS selected vendor or from a vendor of their choice.

Q: What happens to children under age 26 who could have enrolled in the OPERS pre-Medicare plan when it is eliminated in 2022?

A: There will be no allowance for dependents as of Jan. 1, 2022. However, the retiree could use their own HRA dollars to be reimbursed for qualified medical expenses for an eligible dependent. Counseling will be available to help evaluate your options as well as identify any financial assistance available.

Q: I retired and enrolled in health care prior to 2015 with less than 20 years of service. My allowance percentage was grandfathered at 75 percent. I hear that the 75 percent grandfathering will no longer apply in 2022. What does this mean for me?

A: OPERS provides an allowance to both Medicare and pre-Medicare health care participants. The allowance amount is determined on an increasing scale based on age and years of service. Previous changes set the minimum allowance percentage at 75 percent for those already retired, even if they had fewer than 20 years of service at retirement.

Beginning in 2022, those who were subject to this grandfathering with fewer than 20 years of service will have their allowance amount reduced to 51 percent ($612 per month for pre-Medicare; $178.50 per month for Medicare).

Q: Where can we find a chart that shows the percentages for those who retired younger than age 60?

A: Anyone who retired under the age of 60 should use the age 60 column on the chart and their applicable years of service. The allowance table has not changed.

Q: If I retire between now and 2022, what are my options?

A: If you are considering a retirement date between now and when the changes become effective in 2022, we strongly encourage you to attend an OPERS educational seminar as well as schedule a meeting with an OPERS retirement counselor to evaluate your individual options. In general, current health care coverage will continue through 2021.

Q: What will the monthly pre-Medicare allowance be beginning in 2022?

A: The base allowance amount for calendar years 2022, 2023 and 2024 will be $1,200 per month. After 2024, we plan to continue to offer an allowance at an amount based on market conditions and funding.

Q: Do you have any estimates of what pre-Medicare medical, prescription, dental and vision coverage will cost per month in 2022?

A: It’s too early to say exactly what insurance will cost in two years. However, you can check HealthCare.gov for current rate examples. Based on research premiums for plans currently available range from $600-$1,200 monthly depending on your location.

Q: I’m currently a re-employed retiree and I’m enrolled in OPERS coverage because my employer doesn’t offer it to me. What will I do if I’m still working in this job two years from now, since OPERS is discontinuing its group plan?

A: More information regarding re-employed retirees will be available in the coming months.

Q: Do you have an estimate of how long the $350 base allowance for Medicare-eligible retirees will stay at that amount?

A: We anticipate the $350 base allowance to remain from 2022-2024. After 2024, we plan to continue to offer an allowance at an amount based on market conditions and funding.


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  #66  
Old 01-26-2020, 08:59 PM
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ILLINOIS

https://www.forbes.com/sites/ebauer/.../#41185d13ecc0
Quote:
How To Achieve A Fair Public Pension Reform In Illinois: The Target Benefit Pension Plan

Spoiler:
I’ve said repeatedly in the past that the state of Illinois should, going forward, adopt a combination of implementation of Social Security plus a defined contribution benefit — with the latter ideally in the form of a “collective defined contribution” in which the applicable unions or other entities provide protection against outliving benefits without the need for the costly guarantees of immediate/deferred annuities (or minimally a Wisconsin-style risk-sharing system), and with the latter also vesting at the much younger service levels that the government requires for private-sector plans rather than the 10 years that’s required for Illinois teachers. To refuse to reform pensions sucks up state spending that is sorely needed for other purposes. Today, the Chicago Tribune even published my opinion on the matter, though not with my byline, in a commentary titled, “Improve Illinois for you and your neighbors by supporting pension reform,” which restates my claim yesterday when the author, Adam Schuster, wrote,

“Illinois’ ever-growing pension spending is already crowding out core government services. The state spends about one-third less today, adjusted for inflation, than it did in the year 2000 on core services including child protection, state police and college money for poor students. Cuts hurting our state’s most vulnerable residents came as pension spending increased by 501%.”

That’s a crucial step one. And, yes, as I did yesterday, I’ll get on my soapbox repeatedly trying to make this happen. (And, yes, it also requires that we figure out how to make “collective defined contribution” plans work in the United States, which is a whole ‘nother soapbox having to do with multiemployer pension reform.)

Today In: Money
But what about the existing employees? It’s true that their benefits could be reduced to some degree without too much pain, or, put another way, they can share the pain in a fair way — namely, by increasing retirement ages, capping pay (with a true CPI adjustment year-over-year), and capping COLA-eligible benefits, or benefits entirely, to impact only the upper-income retirees.

Yet that’s only a second-best solution. It still leaves Illinois lawmakers tempted to play the re-amortization game, to defer funding pensions, to continue to think of pensions as a business they should be in, when they have proven repeatedly that they can’t be.

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Yet simply freezing benefits and giving existing employees the same DC benefit isn’t the right approach either. If that’s all pension reformers can offer, persuading the legislature — and the public — to support pension reform and a constitutional amendment would be a difficult task indeed.

To begin with, a DC benefit (especially with low vesting requirements) can never provide a full-career benefit as generous as that of a DB benefit for the same amount of money spent (especially when the vesting requirements for the latter are so strict) simply because the DC contribution provides much more of a benefit, comparatively, to job-changing workers. A teacher who leaves before vesting for another occupation or another state doesn’t just get nothing, but loses out by not even getting interest on the refunded mandatory employee contributions. Even teachers who leave after vesting but are still young will have small benefits, because they aren’t indexed for inflation, that is, for the increase in their pay over the rest of their working lifetimes, in the way that DC benefits implicitly are. Teachers collecting generous benefits at retirement age do so not just because of genereous state contributions but also on the backs of those who worked only a partial career before leaving teaching, or leaving the state.

But beyond that issue, the nature of backloading complicates things further. Due to the time value of money, the value of a dollar of benefit accrued at age 50 or 60 is worth far more than the same benefit accrued at age 20 or 30. Switching from one system to the other blindly is not equitable to those involved. (At the same time, someone switching into a defined benefit system from a defined contribution system at an older age — assuming they reach the vesting requirement — is much better off.)

But that doesn’t mean that employees can never be transitioned over! Instead, you need to take a different approach: provide extra contributions for the affected employees to help them reach a fair and reasonable target retirement benefit.

It’s called a target benefit plan.

Huh?

Here’s the IRS description:

“A target benefit plan is a defined contribution money purchase pension plan under which contributions to an employee’s account are determined by reference to the amounts necessary to fund the employee’s stated benefit under the plan. The benefit formula under a target benefit plan is similar to that under a defined benefit plan. However, the actual benefit that the participant will receive will be the account balance which will vary from the stated benefit based on investment performance. Thus, the stated benefit is a ‘target benefit.’”

In other words, in a target benefit plan, employer contributions to a worker’s retirement account increase each year in a manner that is roughly equal to the increase in value that worker would see in a traditional defined benefit pension plan. Implementing a target benefit plan for existing workers makes it possible to transition workers from a defined benefit to a defined contribution plan without losing out on the backloading effect of future accruals.

Now, to be sure, this sort of plan, with few exceptions, largely exists on paper only, at least in the United States. But in two countries with highly-rated retirement systems, this is the norm. The Netherlands, ranked number one by Mercer, has standardized contributions that range from 4.4% for ages 21 - 25 to 26.8% at ages 65 - 67. Switzerland, with a “B” rating, has four brackets from 7% to 18%.

Of course, I can hear the objection already: “there’s no way Illinois can afford to pay down its pension liabilities and make DC contributions at the same time!” But that is precisely what Illinois must do: pay down old debt while at the same time ending the practice of building up new debt for the next generation.



https://www.illinoispolicy.org/the-1...-millionaires/
Quote:
THE 1%: ILLINOIS’ PENSION MILLIONAIRES

Spoiler:
More than 129,000 Illinois public pensioners will see expected payouts of $1 million or more during retirement.

Illinois is home to a small, powerful and protected class of wealth.

Their profits are immense. They bear little to no risk. And the state’s social safety net has been gutted to pay for their privileges, which are closely guarded by politicians.

Sound familiar?

These are Illinois’ pension millionaires.

Among the state’s 12.7 million residents, they constitute the 1%.

More than 129,000 Illinois public retirees will collect estimated payouts of more than $1 million each over the course of their retirements, according to new analysis from the Illinois Policy Institute.

No public-sector worker should be personally shamed for getting a great deal. Those who choose a life of public service deserve honor and praise.

At the same time, it’s crucial that Illinoisans understand these retirement benefits and call for reform. They have resulted in cuts to core services and constant calls for tax hikes across the state for more than two decades. They’re also pushing the pension funds toward insolvency.

Extreme payouts and early retirements are the norm across Illinois’ five state-run retirement systems:

More than 22,000 retirees in the State Universities Retirement System (43%) will receive an expected lifetime payout of more than $1 million, with 42% retiring before their 60th birthday.
More than 31,000 retirees in the State Employees’ Retirement System (51%) will receive an expected lifetime payout of more than $1 million, with half retiring before age 60.
Nearly 75,000 retirees in the Teachers’ Retirement System (68%) will receive an expected lifetime payout of more than $1 million, with more than half retiring before age 60.
The remaining pension millionaires at the state level are spread across the Judges’ Retirement System (nearly 900, or 94%) and the General Assembly Retirement System (more than 200, or 67%).
Meanwhile, the average 401(k) balance nationwide for people aged 60 to 69 is $195,500, according to CNBC.

These numbers can be difficult to believe. So they’re often spun. There are four common “buts” used to justify the status quo:

1) But these benefits attract top talent

In fact, these benefits have made important fields like teaching much less attractive in Illinois. That’s because in order to pay for the extreme benefits promised in the past, new teachers are enrolled in an unfair “Tier 2” retirement plan that is so lousy it will likely result in a lawsuit when the first Tier 2 worker vests on Jan. 1, 2021.

2) But these workers don’t get Social Security

In fact, almost all state employees in SERS are eligible for Social Security benefits on top of their pensions, which average $1.7 million for career workers.

For other public retirees in Illinois, trading million-dollar payouts for a Social Security check would be a serious downgrade. The average Social Security benefit for 2019 is $17,532 per year. And the earliest anyone can qualify for Social Security is age 62, with the full retirement age pegged at 67 for anyone born after 1960.

3) But workers paid into the system

The average state worker or teacher in Illinois retires before age 60, takes home a lifetime pension benefit of more than $1 million and contributes less than 10% of that amount to the system – the rest is covered by taxpayers.

4) But politicians underfunded the system

Illinois pensions were underfunded because they were overpromised. Like a teenage barback trying to front a monthly payment on a Lamborghini, state politicians have kicked the can, borrowed and lied to keep up appearances. Illinois state and local governments now spend the most in the nation – about double the national average – on pensions as a share of their budgets. Consider that the state spends about one-third less today, adjusted for inflation, than it did in the year 2000 on core services including child protection, state police and college money for poor students. During that time, pension spending increased 501%.

Paying more is not an option.

Backing reforms for a fair pension system should be the No. 1 priority for Illinois state lawmakers. And other states can show them how.

A pension constitutional amendment in Illinois that matches states such as Hawaii and Michigan would allow for changes to retirement ages, capping maximum pensionable salaries, and doing away with guaranteed permanent benefit increases in favor of a true cost-of-living adjustment pegged to inflation. All of this can be done without cutting a dime from the checks of current retirees. These changes to “future” benefits have been enacted in Arizona, where they had support from union leaders who realized pensions were in peril.

If Illinoisans work together, commonsense pension reform can ensure state government works for everyone.

Not just the 1%.


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Old 01-27-2020, 03:46 PM
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ILLINOIS

https://wirepoints.org/put-up-or-shu...ints-original/
Quote:
Stonewalled Again on Savings Claimed from Illinois Pension Buyout Program - Wirepoints Original
Spoiler:
When asked last month to document his claim that Illinois’ pension buyout program would save the state as much as $25 billion Gov. J.B. Pritzker said, “the numbers on savings, and there are several different estimates, but the numbers on savings were actually given by an outside consulting firm that was brought in to one of our agencies….”

We immediately filed a Freedom of Information Act request for any data or report produced by that outside consulting firm.

Nothing. As usual on this matter, we are getting jacked around. So far Pritzker’s office has sent us four extensions for answering our FOIA request.

Get off it. You either have something or you don’t.

Pritzker is hardly alone. For two years now, Democrats and Republicans alike have been claiming grandiose savings from the buyout program while refusing to produce evidence, despite extreme skepticism from pension experts.

Offenders include former Gov. Bruce Rauner and most of the General Assembly. They even banked over $400 million in savings from the buyout for the 2019 budget. That budget sailed through the legislature in 2018 with bipartisan support, as reported by the Associated Press and others at the time, which Rauner then signed. “The plan was not vetted in public hearings or evaluated by pension actuaries,” the Civic Federation has noted, before it was stuck in the budget as a fake savings measure.

Actual results from that budget year? A lousy $13 million, about three percent of what was claimed.

We’ve asked repeatedly over the past couple years for something – anything – showing how the supposed savings were calculated. We asked the Rauner Administration and any number of legislators but we were ignored.

More recently, Pritzker is floating still bigger claims — $25 billion – over some unknown time period. “Mostly false,” Politifact wrote about that claim.

One legislator who at least returns our calls on this topic is Rep. Mark Batinick (R-Plainfield), a leading proponent of the buyout program. When I spoke to him last week to ask for the study Pritzker referenced or anything else documenting savings, he suggested I check directly with the pension plans themselves.

That’s unacceptable. Any legislator or governor supporting the program should at least know where to find an analysis and be prepared to back up claimed savings. Furthermore, we have talked to pension officials. We were told on background not to expect any material savings from buyouts.

Batinick also brought up the uncertainty about take-up rates, where evidence is still coming in. That is, how many pensioners are accepting the buyout offers? How many will, eventually.

We accept that take-up rates are an inherently unpredictable aspect of the program, but that’s no excuse for having no analysis. At a minimum, the state should have savings calculations based on a range of possible take-up rates. Those calculations should include all costs and benefits associated with the program.

Those costs, by the way, include interest on money borrowed to pay for the buyouts. Taxpayers are on the hook for $300 million of bonds already sold to pay for buyouts, with more to come. As of last summer, almost all the proceeds from bonds sold were sitting unused, costing taxpayers 5.74% per year thereon.

Finally, Illinois reporters need to do their job. Aside from the question from Jeff Berkowitz linked at the top of this article, I recall no other reporter challenging Illinois politicians who brag about the buyout program. Says who? That should be their question. The national press, in contrast, has been skeptical about Illinois’ program from the start, as you can see in some of the articles linked below.

Says who? That’s what you should ask next time you hear any politician making claims about fixing our pensions through buyouts, even if reporters don’t.

There’s one place where the state makes an effort to be more truthful. That’s its bond offering disclosure statements where unfounded claims can result in a securities fraud case. Here’s what the state said in its most recent bond offering statement in November 2019: “The State is unable to quantify the amount or timing of any [reduction in pension liabilities] at this time.”

That’s no doubt true. They have no idea.

*Mark Glennon is founder of Wirepoints.


https://www.thecentersquare.com/illi...0.html#new_tab
Quote:
Despite marginal increase in some Illinois pension funding ratios, state still 'worst in the nation,' watchdog says
Spoiler:
Although funding ratios for three of the state’s five public sector pension funds increased, a public finance watchdog said Illinois taxpayers still face a debt crisis.

The Auditor General released financial audits of the State Employees, Judges and General Assembly retirement systems.

The audits showed the total liability for two of the funds increased while the total liability for GARS decreased. All three funds had marginal improvement in unfunded ratios.

Wirepoints President Ted Dabrowski said taxpayers aren't off the hook.

“These numbers are one of the worst in the country, if not the worst, and if anything if they get slightly better it means nothing because it still keeps us at the worst in the nation,” Dabrowski said.

For the State Employees Retirement System, the total liability grew $1.4 billion to $51.9 billion in the year that ended June 30, 2019. The funded ratio increased from 34.57 percent of the total liability in the bank in 2018 to 35.64 percent in 2019. Administrative costs decreased slightly for SERS, but the total number of members increased by nearly 2,000.

The Judges Retirement System's total liability increased by $66.6 million to $2.9 billion. The system's funded ratio increased from 36.37 percent in 2018 to 37.65 percent in 2019. Administrative costs went up slightly for JARS, costing just under $1 million. There were 2,200 members, an increase of around 800 from the year before.

The General Assembly Retirement System, the worst-funded of all the pension funds managed by the state, reported its total liability decreased $1.3 million from the year before, to a total of $321.8 million. While it's a very low funding ratio, the percentage of funds compared to the total liability is 15.65 percent, up from 14.84 percent the year before. There are 609 active members, eight more than the year before.

Despite the funding ratio increases, Dabrowski said Illinois taxpayers still face a pension crisis because the total unfunded liability taxpayers must pay is larger than reported.

“When you look at these audits that say the state has a shortfall of about $137 billion [for all five funds combined], but listen to a place like Moody’s and they’ll tell you it’s more like $230 billion [or] $240 billion,” Dabrowski said. “It’s important to know that because the crisis is much larger and that means the reforms that are needed need to be much larger.”

Last year, Gov. J.B. Pritzker floated the idea of extending the pension contribution ramp, a move critics said would simply kick the can down the road. WTTW reported that the idea could resurface this year. Dabrowski said that’s the wrong path.

“Because that will make the debts bigger and bigger, make the whole worse, and it’s just a lie,” he said.

He said sustainable reform would include changing the state constitution’s pension protection clause, something the governor and Democrats have resisted.

“[Pritzker] has to embrace that if he really cares about preserving the retirement security of all these workers,” Dabrowski said. “There’s a huge risk of eventual default”

Pritzker has said a constitutional amendment for voters to decide on pension reform isn’t popular and wouldn’t pass the General Assembly. He is set to give his State of the State address next week.

Another audit released Wednesday, of the All Kids healthcare program, reported a 10 percent decrease in the number of enrollees in fiscal year 2018, but showed that costs continue to increase. The Illinois Auditor General financial audit of the insurance option for low-income families after premiums cost $88.1 million in 2018, up $3 million from the year before. That’s despite having 10,900 fewer children enrolled. The audit also found coding errors led to the loss of $10.7 million in federal funds over four years.


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Old 01-27-2020, 03:47 PM
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CALIFORNIA
PENSION OBLIGATION BONDS


https://www.dailybreeze.com/2020/01/...sion-woes/amp/
Quote:
Bonds are a risky way to deal with pension woes

Spoiler:
Recently, this column exposed the foolishness of two proposed statewide bond measures: A $15 billion school bond, which will be on the March 3 ballot, as well as a “climate resiliency” bond.

Both are horribly flawed for several reasons, not the least of which that it makes no sense for California to go further into debt when we have a large surplus.

But at the local level, taxpayers need to be aware of a recent resurgence in the use of pension obligation bonds, a risky financing method that fell out of favor during the recession but is now making a comeback.


Fortunately, there is more scrutiny on this form of debt financing than in years past, which may help to dissuade our elected leaders from making ill-advised decisions.

There is a technical definition of POBs set forth below but we prefer a definition that most people can understand: A POB is basically paying your Visa bill with your MasterCard.

Here’s the technical definition: Pension obligation bonds (POBs) are bonds issued to fund, in whole or in part, the unfunded portion of public pension liabilities by the creation of new debt.

The use of POBs relies on an assumption that the bond proceeds, when invested with pension assets in higher-yielding assets, will be able to achieve a rate of return that is greater than the interest rate owed over the term of the bonds.

Back in 2003, the state of California attempted to float a statewide pension obligation bond without voter approval.

The Howard Jarvis Taxpayers Association sued to invalidate the bonds and prevailed in court.

For HJTA, the assumption of any long-term financial obligation by a government entity should be approved by those financially obligated for the repayment. That means the taxpayers.

More recently, others have questioned the return of POBs as a strategy to deal with unfunded pension obligations. State Sen. John Moorlach, R-Costa Mesa, and Orange County Treasurer-Tax Collector Shari Freidenrich, in an op-ed for the Los Angeles Times, sharply criticized a plan by the city of Huntington Beach to use POBs to paper over that city’s growing obligations to CalPERS.

While many try to paint CalPERS as the bad actor — probably deserved in some cases — Huntington Beach’s wounds are mostly self-inflicted: It made promises to the public employee unions that are not sustainable over the long term.

As Moorlach and Freidenrich argue, “converting a soft debt into a hard debt, with bondholders unwilling to make payment schedule adjustments, may come to haunt POB issuers in the future.”

And it’s not just fiscal watchdogs who are worried about the resurgence of POBs.

The Government Finance Officers Association (GFOA), an association of officials employed by government entities, has issued a stern warning: “POBs involve considerable investment risk. Failing to achieve the targeted rate of return burdens the issuer with both the debt service requirements of the taxable bonds and the unfunded pension liabilities that remain unmet because the investment portfolio did not perform as anticipated. In recent years, local jurisdictions across the country have faced increased financial stress as a result of their reliance on POBs, demonstrating the significant risks associated with these instruments for both small and large governments.”


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RHODE ISLAND
ESG
DIVESTMENT

https://www.ai-cio.com/news/rhode-is...paign=CIOAlert
Quote:
Rhode Island Launches Offensive Against Assault Weapons and Private Prisons
State Treasurer Seth Magaziner cites perverse corporate incentives and escalating violence for pulling investments out of the two industries.
Spoiler:
Investments in companies that manufacture assault-style weaponry and for-profit private prisons are soon to be a thing of the past for the Rhode Island State Investment Commission (SIC), State Treasurer Seth Magaziner announced.

Magaziner and the SIC cited perverse corporate incentives caused by for-profit prisons and escalating domestic violence in part caused by assault weapons.

“Assault weapons and for-profit prisons have caused too much pain for countless Americans, including many Rhode Islanders,” Magaziner said. “The State Investment Commission is taking this action after careful consideration. With today’s decision, we can do the right thing without impacting the health of Rhode Island’s pension system.”

In his statement, Magaziner also cited the use of assault weapons in the five deadliest mass shootings of the past decade.

The state’s withdrawal and future prohibition of investments in assault weapon companies follows that of other states. Recently, the Connecticut State Treasury adopted a “first-of-its-kind” gun divestment policy, pledging to withdraw $30 million of stock holdings in five companies that are directly associated with the manufacturing of civilian weaponry and ammunition, and preventing future investments in such companies.

Additionally, Connecticut requested any banks and financial institutional conducting business with the state’s treasury to disclose their relationships with such companies and reveal their policies on the topic.

Mayor Bill Peduto of Pittsburg, Pennsylvania, asked the city’s pension to divest from guns, fossil fuels, and private prisons. The endowment of Yale University announced its pledge to divest from several gun-associated companies as well.

Some chief investment officers disagree with such divestment policies and assert that staying as an activist investor has a more profound impact on the direction of a company than simply selling its shares.

Chris Ailman, CIO of the $225 billion California State Teachers’ Retirement System (CalSTRS), admitted that the recent string of divestments from oil and gun companies “hasn’t made the world a better place.”

“The business model of the for-profit prison industry creates corporate incentives for increasing the number of people who are incarcerated and cutting costs at the expense of the health and safety incarcerated individuals and prison employees,” Magaziner said. “Private prison companies have a monetary motivation to lobby for public policies that increase already high incarceration levels in the United States.”

Rhode Island’s state pension system has less than $250,000 invested in affected investments, representing 0.003% of assets across the $8.7 billion pension fund.


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Old 01-27-2020, 04:29 PM
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INVESTMENTS

https://www.ai-cio.com/news/head-can...liquid-assets/
Quote:
Head of Canada’s Largest Pension Warns Against Illiquid Assets
CPPIB CEO Mark Machin ‘rings the alarm bell’ about not being too invested in the asset class.
Spoiler:
Canadian Pension Plan Investment Board (CPPIB) CEO Mark Machin warned investors against pouring their capital into illiquid assets, particularly private markets holdings, in an interview with Bloomberg at the World Economic Forum in Davos, Switzerland.

“I do ring the alarm bell on not to be too invested in illiquid assets,” Machin said. “We do have half the portfolio in illiquid assets. We are very comfortable with our risk models and what we would do in various lurches down markets, but I do worry about the expansion of a lot of funds like us around the world into private illiquid assets.

“I think people have to be very careful to make sure that they truly understand their liquidity positions, truly understand that thing they’re relying on to be liquid, turns out not to be liquid, that they can cope with that and still fulfill their fiduciary obligations.”

CPPIB’s investment portfolio returned 2.3% net of costs during the second quarter of fiscal 2020. That raised its total net asset value to C$409.5 billion ($307.4 billion) from C$400.6 billion at the end of the previous quarter.

Machin asserted that he and his team will continue to delve into private equity, given that the asset class offers attractive characteristics for CPPIB’s portfolio.

“The trends with private equity is still pretty robust,” Machin said. “When you look at different returns with asset classes, private equity’s still quite robust.”

Machin clarified that he doesn’t forecast a fall in the asset class anytime soon, but noted if a wide variety of investors were transitioning from public to private markets investments at around the same time, “it’s one of the things that could create a systemic issue down the road.”

Machin added that venture capital provides a clear avenue to disparage the information asymmetry that’s typically existed between investors and the companies that stay private for a little bit longer than anticipated.

“We find that by not being in some of those earlier companies, we’re a little less clear-eyed on those changes than we’d like to be. I wouldn’t say we’re blind to it, we have a lot of investment strategies that get closer to it. But getting into venture capital is one way that we hope we can partner with them to get insight on these trends.”

CPPIB’s illiquid portfolio includes a variety of holdings, including an Indonesian infrastructure investment executed last September, and a stake in an Indian logistics provider.


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