Public pensions described as "ticking time bombs"

Experts say the country's public employee pensions plans face a shortfall of nearly $300 billion. The Arizona Capitol Times quotes an analyst with the Council of State Governments, described as a bipartisan organization for state government officials.

The premise of the article is that traditional public pension plans, known generally as Defined Benefit (DB) plans, are unaffordable and that many states are attempting to replace them with 401k-style Defined Contribution (DC) plans. The primary difference between DB plans and DC plans is that DB plans offer a set pension, a defined benefit, to retirees. It does not go up or down based on external factors such as the performance of a stock portfolio.

Under a DC plan, the contributions and the performance of the investement portfolio determine the value of the pension for the retiree. There is no guaranteed monthly amount.

The article mentions the Republican governors of Alaska, Californina, Massachusettes and Rhode Island who proposed DC plans for public employees in their states and all of whom but Frank Murkowski of Alaska failed in their attempts.

But their proposals also faltered in the face of fierce opposition from public employee unions, which say the 401k-style plans provide less comprehensive retirement security for state and local government employees.

Alaska estimates that its public employee and teacher retirement systems currently are short about $5.7 billion owed to employees when they retire. Supporters say the new program, which will apply to all state employees from Statehouse janitors to highway patrol officers to teachers, will help ensure that the state’s pension systems stay in the black.

The article also points out that one advantage of DB plans is that they give state governments firmer numbers with which to plan for the future since the costs are predictable.

Pension Reform - The government's disgrace

The Washington Post calls attention to the "Government's Disgrace" in addressing the problems facing corporate America's Defined Benefit pension plans:

Congress has an appalling record on pension legislation, which is why the pension rules are dysfunctional in the first place. Business and labor groups share a common interest in lobbying for lax funding rules, which allow them to keep promising big pensions while sticking the taxpayers with part of the cost. Nobody lobbies on behalf of the taxpayers. This is why the last round of pension legislation, a year ago, made the underfunding problem worse.

This time there was talk of doing better.

As you might guess, and as the editorial explains, all that talk of doing better was just that - talk.

Port workers allowed to withdraw from San Diego pension fund

Governor Schwarzenegger has signed legislation allowing employees of the San Diego Unified Port District to separate their pension fund from that of the City of San Diego. According to the SD Union-Tribune, the port workers' fund could place its assets with CalPERS, the California Public Employees' Retirement System.

Though port officials have been concerned for some time about having their retirement assets in the city's system, they have not yet made any move to shift the assets to CalPERS.

"That is an option, but it could take a long time to do that," McCormack said.

The Port District has 606 employees and about 250 retirees receiving benefits. The port's pension plan has assets of about $141.4 million.

The city of San Diego's $3.6 billion retirement system has an estimated deficit of $1.4 billion. In recent months, there have been several audits and ongoing investigations into the city retirement board's actions and the city's underfunding of its pension system.

The new legislation "ensures that employees who long have invested in their future will be able to enjoy greater peace of mind when it comes to their retirement options," Ducheny said in a statement released Tuesday by her Sacramento office.

Maryland - Millions more for benefits possible

From ABC 7 News:

A change in an accounting rule could force the state to set aside hundreds of millions of dollars a year to cover future state employee retirement benefits.

Read more here.

$100 million shortfall in Huntington, WV

The police and fire public pension plans in Huntington, West Virginia face an mnfunded accrued liability (UAL) of $117 million. The UAL is the difference between what a pension system owes in benefits to its members and the amount of cash available to pay those benefits.

The Herald-Dispatch reports that Huntington's problem began growing in the 1980s "when the state Legislature gave cash-strapped cities an alternative funding method that was similar to making the minimum monthly payment on a credit card with a high-interest rate."

While the alternative funding method temporarily reduced the minimum pension contributions for cities that chose to use it, it also caused their unfunded liabilities to increase. Now, many of those cities are faced with years of skyrocketing pension costs and no revenue source to pay for it.

Huntington, for example, spent about $1.3 million, or 6 percent of its budget, on police and fire pensions in 1993. This year, the city will spend $7.1 million, or 20 percent of its budget, on those pensions.

The problem is expected to get worse. Assuming that the city budget increases at an average annual rate of 3 percent as it has in the past 12 years, pensions will eat up more than 31 percent of the budget in 2018. The annual pension payments then are scheduled to slowly decrease until the unfunded liability is paid off in 2034.

Read the full story for more details.

New Jersey pension fund - Future political headaches expected

Pension reform in the Garden State is expected to become a chain around the neck of New Jersey's next governor.

The Gloucester County Times reports:

The winner of the Nov. 8 contest between Republican Douglas Forrester and Democrat Jon Corzine will need to find a way to cover the cost or to restructure perks and entitlements for state workers, one political scientist said.

"It's not a sexy issue, or one that grabs the public's attention and holds it for very long," said David Rebovich, director of Rider University's Institute of New Jersey Politics.

"But it is a top issue for the next governor and Legislature because (the cost) is likely to prevent the next governor from pursuing his agenda."

See the full story here.

Pennsylvania fund spent thousands on travel

The Associated Press picks up a report from a Harrisburg, PA newspaper about out-of-state travel at the Public School Employees' Retirement System.

According to the Patriot-News, the system spend more than $200 thousand on 116 out-of-state trips over a seven year period.

Europe and Asia were among the places board members went on behalf of the Public School Employees' Retirement System, The Patriot-News of Harrisburg reported Sunday.

The system, regarded as a top performer among the nation's public pension systems, received nearly $255 million in funding from the state's budget this year.

Last spring, the conference itinerary for the board's chairman, Williamsport teacher Roger May, included trips to Washington, D.C., Las Vegas, the Czech Republic and Russia.

Retirees benefit from the conferences, he said. He attributed the system's ability to hold down health benefit costs to the board's conference attendance.