W. Virginia voters defer pension fund obligations

Voters in West Virginia said "no" to $5.5 billion in pension obligations bonds, which leaves in place a 40-year payment plan draws money from the general fund.

The Bluefield Daily Telegraph reports:

This year's payment takes about $350 million from general revenue: the final, 2034 payment is estimated at $724 million - about one-fourth of this year's budget.

The Legislature approved the special election because the state constitution required an amendment for [Gov. Joe] Manchin's plan to devote bond proceeds to the state's pension plans - including its teachers pension program, one of the worst-funded public pension plans in the country.

Changes to Louisiana state pension plan

The New Orleans Times Picayune reports:

Gov. Kathleen Blanco may soon have to decide between one of two bills aimed at trimming retirement benefits for new state employees.

Already on her desk is a bill by Rep. Pete Schneider, R-Slidell, that says state employees hired after July 1, 2006, would have to work for at least 10 years and wait until age 60 before they can collect normal pension benefits. Current employees can retire at age 55 with 25 years of service, even younger if they've been working for 30 years.

The House on Wednesday approved a similar bill by Sen. Jay Dardenne, R-Baton Rouge, with the same retirement age provision as Schneider's. However, it would apply to employees hired after Jan. 1, 2006. And it includes other changes designed to make bigger cuts in future employees' benefits.

Schneider backs the Dardenne measure, which was approved by the House 58-42. It goes back to the Senate, however, for approval of House language changes, and the Senate may balk at final approval of the tougher bill

It is worth noting that the bills in question address only new rank-and-file members of the Louisiana State Employees' Retirement System (LASERS), one of the Bayou State's four statewide public pension plans.

LASERS is the second-largest of Louisiana's public pension systems. The Teachers' Retirement System of Louisiana (TRSL) remains unaffected.

Also unaffected by the legislation scaling back benefits are the members of special benefits groups of LASERS. LASERS has several categories of membership whose members accrue benefits at a higher rate than the rank-and-file.

Corrections officers, for example, accrue benefits as high as 3.5 percent of annual salary, compared to 2.5 percent for regular members. There are many other special member groups for judges, law enforcement and, interestingly, state lawmakers. Not one of those groups is affected by the roll-back of benefits.

Also, see this piece in the Baton Rouge Advocate.

Pittsburgh Post Gazette: "Who watches the store for public pensions?"

In an article from Saturday's paper, the Post-Gazette uses some recent high profile scandals, such as Ohio's Coingate, as a jumping off point to examine the accountability of those who make investment decisions for public pension plans.

It isn't as though public pension funds don't have oversight: Most have boards of trustees, formal investment policies -- sometimes set by statute -- and, often, committees to either directly approve asset purchases or hire money managers to do so on pre-agreed terms.

But public funds are not subject to the same federal scrutiny as private pensions, the majority of which are protected by a federal insurance plan. And sometimes the investments they make or the money managers they hire vault into headlines when political favoritism is suspected -- or found.

Those who work closely with public funds contend cronyism is the exception, not the rule. They also argue that the tiny bets on oddball investments that some public funds make often are placed for the same reasons -- and to the same effect -- as risky investments made by private interests: enhancing overall returns.

"I find the people we deal with take their fiduciary responsibility very seriously," said Fred Nesbitt, director of the National Conference on Public Employee Retirement Systems, a nonprofit advocate for public pension plans. "There are some isolated cases of people not using common sense, or getting greedy."

Robert Strauss, a public policy and economics professor at Carnegie Mellon University, was more skeptical. He said that cases of "self-dealing" -- in which public pension trustees or their associates benefit from a fund's activities -- are not uncommon.

Read the whole article.

State employee systems face massive UALs

Many state employee public pension funds are struggling under enormous UALs.

"UAL" stands for Unfunded Accrued Liability. The UAL is the difference between what a public pension fund (or any such entity) owes in benefits to current and future retirees, and the money available to pay those benefits.

The Financial Times reports that many U.S. state pension funds are facing massive UALs.

State pension funds are facing a shortfall of several hundred billion dollars, and are in much worse shape than their corporate equivalents, the head of one of the biggest state pension funds in the US revealed.

Orin Kramer, chairman of the $70bn New Jersey pension fund, has warned that deficits in the state funds, which provide pensions for teachers, fire and police officers and other public employees, would grow if no action was taken, jeopardising the entire pension system. He estimated the shortfall for the New Jersey fund alone was more than $30bn.

This is the third, wobbly leg of financial security for retirees in the United States. Along with GOP efforts to dismantle Social Security and the disastrous state of private Defined Benefit pension plans, the environment for retirees is growing hostile.