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PENSIONS

Pensions

Unfunded pension liabilities are the dark cloud on the horizon of state budgets; a cloud totaling $4.1 trillion dollars for state-administered public pension plans, as SBS reported this year. Though they represent unavoidable fiscal debt, pension liabilities often slip under the radar when states tally up their spending, thanks to their status as "future payments" and accounting games. Aggressive pension reform is urgently needed in almost every state.

A recent group of studies by the GAO and Fed show how dire the situation really is.  Read about them here.

Courts are weighing in on what pension reform is feasible. Check out our monthly pension litigation update here.

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    • HEADLINES: North Carolina

      Nation's Seventh Largest State Pension Can't Afford Financial Audit

      Forbes | by Edward "Ted" Siedle | April 17, 2014

      It's hard to believe that there are no audited financial statements for the North Carolina state pension, the seventh largest public fund in the nation with $87 billion in assets.

    • HEADLINES: New Jersey

      Christie 'will force' legislators to address state pensions

      BenefitsPro | by Lisa Barron | April 17, 2014

      New Jersey Governor Chris Christie told a town hall meeting that the state's public pension system is unsustainable and that he plans to force legislators to tackle the issue during his last term.

    • HEADLINES: Rhode Island

      Raimondo: Losing pension case would be catastrophe

      Boston.com | April 15, 2014

      General Treasurer Gina Raimondo said Monday that it would be catastrophic for Rhode Island to lose the legal challenge over the state's pension overhaul but that she has a ‘‘high degree of confidence'' that won't happen.

    • HEADLINES

      Pace of pension reform ebbs after 49 states change laws

      Hazel Bradford | by Pensions & Investments | April 15, 2014

      While the sense of urgency has diminished, reform attempts have become a legislative staple, as public retirement systems continue to grapple with unfunded liabilities and political pressure to change.

    • HEADLINES: Florida

      House and Senate not in sync on state pension reform

      The Gainesville Sun | by Lloyd Dunkelberger | April 14, 2014

      House Speaker Will Weatherford said the changes, which will not directly impact current public employees, are needed to reduce the state's long-term costs for the retirement system.

    • HEADLINES: Alaska

      Governor's plan to address pension obligation gets municipal support

      The Anchorage Daily News | by Becky Bohrer | April 14, 2014

      Under the plan, about $1.9 billion would go to the public employees' system and the rest to the teachers' retirement system.

    • HEADLINES: Rhode Island

      RI pension case will go forward in court; mediation fails

      The Providence Journal | by Randal Edgar | April 11, 2014

      In a joint statement, Governor Chafee and state General Treasurer Gina Raimondo said that while they there was a strong effort to reach a mediated settlement, the rejection of that settlement "by a small group of union members" means the process "has failed and the mediation process has ended."

    • HEADLINES: California

      New pension plans differ greatly from 'classic' models

      Sacramento Bee - The State Worker | by Jon Ortiz | April 10, 2014

      California became a dual-class public employee state last year when a sweeping law lowered pension benefits for state and local government workers hired in 2013 and later.

    • HEADLINES: Rhode Island

      Rhode Island is considering options on pension deal, Chafee says

      The Boston Globe | April 10, 2014

      Governor Lincoln Chafee said Rhode Island is considering various options on how to proceed with lawsuits brought over the state's landmark pension overhaul, after a proposed deal was rejected by members of police unions.

    • HEADLINES: Illinois

      Chicago pension overhaul OK'd by House, Senate

      ABC7Chicago | by Charles Thomas | April 9, 2014

      State lawmakers approved Chicago Mayor Rahm Emanuel's overhaul proposal for two city pension programs that officials say could otherwise be out of money in little more than a decade.


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    • RESEARCH

      The Public Pension Crisis

      Boston Univ. School of Law, Public Law Research Paper | by Jack M. Beermann | August 27, 2012

      Unfunded employee pension obligations will present a serious fiscal problem to state and local governments in the not too distant future. This article takes a looks at the causes and potential cures for the public pension mess, mainly through the lens of legal doctrines that limit public employers' ability to avoid obligations.

    • RESEARCH

      Retirement Plan Reform and Intergenerational Equity

      National Conference of State Legislatures | by Girard Miller | August 27, 2012

      Girard Miller's presentation at the National Conference of State Legislators in Chicago August 2012.

    • RESEARCH

      Wall Street Feeds and The Maryland Public Pension Fund

      Maryland Public Policy Institute and the Maryland Tax Education Foundation | by Jeff Hooke and Michael Tasselmyer | August 10, 2012

      If public pension fund assets were indexed to relevant markets rather than actively managed, the public pension systems in Maryland and across the united States would save enormous amounts of money on fees, without undue harm to investment performance.

    • RESEARCH

      Pensions and Retirement Plan Enactments in 2012 State Legislatures

      National Conference of State Legislatures | by Ron Snell | August 1, 2012

      This report summarizes selected state pensions and retirement legislation enacted in 2012.

    • RESEARCH

      State Defined Contribution and Hybrid Retirement Plans

      National Conference of State Legislatures | by Ron Snell | August 1, 2012

      This report describes state retirement plans that depart from the traditional public sector model of defined benefit (DB) plans.

    • RESEARCH

      Links: State and Local Government Pensions and Retirement Internet Resources

      National Conference of State Legislatures | August 1, 2012

      This document provides links to resources provided by other organizations on state pensions and retirement issues. Also included are links to many state-specific studies from recent years, which constitute important contributions to the national debate on public retirement systems' structures and funding.

    • POLICY BRIEF

      'GASB won't let me'-- A false objection to public pension reform

      The Laura and John Arnold Foundation | by Robert Costrell | June 25, 2012

      It might seem improbable that huge unfunded liabilities would be proffered as the reason not to adopt alternatives designed to prevent new unfunded liabilities. And yet, this claim has effectively stymied reform in state after state.

    • POLICY BRIEF: Wisconsin

      Wisconsin proves the lie of Pew pension numbers

      State Budget Solutions | June 22, 2012

      Wisconsin's public pension system demonstrates how big the public pension catastrophe really is. 

    • RESEARCH

      Checklist of State DB, DC, and Other Retirement Plans

      National Conference of State Legislatures | by Ronald K. Snell | June 18, 2012

      This compilation of state defined benefit, defined contribution, and hybrid plans includes plans that cover general state employees and teachers in K-12 education (although some of the plans counted here may cover additional categories of employees).

    • RESEARCH

      Pension Fund Asset Allocation and Liability Discount Rates: Camouflage and Reckless Risk Taking by U.S. Public Plans?

      by Aleksandar Andonov, Rob Bauer and Martijn Cremers | May 30, 2012

      This study uses an international pension fund database to compare the asset allocation and liability discount rates of public and non-public funds in the U.S., Canada and Europe. We document that U.S. public funds exploit the opaque incentives provided by their distinct regulatory environment and behave very differently from U.S. corporate funds and both public and non-public pension funds in Canada and Europe. In the past two decades, U.S. public funds uniquely increased their allocation to riskier investment strategies in order to maintain high discount rates and present lower liabilities, especially if their proportion of retired members increased more. In line with economic theory, all other groups of pension funds reduced their allocation to risky assets as they mature, and lowered discount rates as riskless interest rates declined. The arguably camouflaging and risky behavior of U.S. public pension plans seems driven by the conflict of interest between current and future stakeholders, and could result in significant costs to future workers and taxpayers.  Find the full study here.


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    • SOLUTIONS: Kentucky

      Future Shock Solutions

      The Bluegrass Institute | by Lowell Reese | April 8, 2013

      The goal is to enact systemic change and create a climate for long-term solvency for Kentucky's public pensions. This requires changing the very structure of the system while providing the minimum amount of one-time immediate funding to stave off bankruptcy in the state employees’ fund. Steps also must be taken to set in place policies that will enable the commonwealth to avoid such pension crises in the future.

    • SOLUTIONS

      Why government employee collective bargaining laws must be reformed now

      State Budget Solutions | by Bob Williams | December 5, 2012

      There are three important lessons from the Wisconsin collective bargaining battles over the past eighteen months:

      1. The power of the government-sector unions and their impact on elections is greatly overestimated. With the November 2012 victory for  Senate Republicans to regain control of the Wisconsin Senate,  government employee union  suffered their sixth  major defeat since March 2011.

      2. When given a choice, government employees will quit their union in large numbers.

      3. Government employees' salaries and benefits, particularly pensions, are financially unsustainable in most states and collective bargaining reform is needed.

    • SOLUTIONS

      How to Prevent Future Pension Crises

      by Cory Eucalitto | November 1, 2012

      The time for state and local governments to offer defined contribution retirement plans that protect both taxpayer dollars and public employee retirement security is now.

    • SOLUTIONS: California

      Reform Before Revenue: How to Fix California's Retiree Health-Care Problem

      The Manhattan Institute | by Stephen D. Eide | October 31, 2012

      This paper examines the ongoing fiscal crisis caused by health-care plans for retirees (known as "other post-employment benefits," or OPEB) in one of the hardest-hit states, California, and outlines necessary reforms that should come before tax increases or cuts to government services.

    • SOLUTIONS: California

      Rising Pension Costs Threaten Cities’ Ability to Provide Services

      Hoover Institution of Stanford University | by Chuck Reed | October 16, 2012

      In June 2012, nearly 70% of San Jose voters approved "Measure B" - a set of pension reforms that the City Council placed on the ballot after more than 8 months of negotiations with our employee unions.

    • SOLUTIONS: North Carolina

      Reforms Needed for North Carolina's Ailing Pension System

      Civitas Institute | by Brian Balfour | September 12, 2012

      In numerous measurable ways, North Carolina's pension benefits are more generous than those offered in the private sector and most other states. Financial and demographic trends point toward rapidly increasing obligations in the near- and long-term future. Sensible reforms that bring North Carolina's pension benefits more on par with those of other states and the private sector are needed to avoid a massive taxpayer bailout of the pension fund.

    • SOLUTIONS

      Solutions to the public pension crisis

      State Budget Solutions | by Bob Williams | August 1, 2012

      Public pensions at the state and municipal levels are unsustainable in their current form.  State Budget Solutions' recent study by Andrew Biggs found that public pensions are underfunded by $4.6 trilion. Here we offer solutions to the pension crisis

    • SOLUTIONS: Maine

      Unfunded Government Employee Pension Liabilities Reform

      The State of Maine | December 7, 2011

      Proposal for reforming Maine's pension plans, including freezing pensions for three years (2011 - 2013), identical to the state employee salary freeze, and ensuring reasonable increases in pensions after that, close to the historical norm of 2.8% annually, based on CPI (inflation), but capped at 2% (currently capped at 4%).

    • SOLUTIONS

      Creating a New Public Pension System

      The Laura and John Arnold Foundation | by Josh B. McGee, Ph.D. | December 5, 2011

      Sound pension reform meets four general criteria: (1) establish transparency with respect to the true cost of the benefits promised to public employees; (2) mandate that the pension plan sponsor pay the full cost of accrued benefits each year; (3) mandate that the pension plan sponsor pay down the unfunded accrued liability over a reasonable time horizon and (4) improve the generational equity, portability and security of benefits for public employees.

    • SOLUTIONS: Virginia

      Pension Plan Reform in Virginia

      The Thomas Jefferson Institute for Public Policy | by Robert C. Carlson | December 2, 2011

      Paper suggesting Virginia move toward a combined retirement program that includes partially a defined benefits program and added to this should be a defined contributions program. Such a balanced system would make the Commonwealth’s costs lower and more predictable while providing attractive benefits to employees.


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