| This newsletter from the Pension Integrity Project at Reason Foundation highlights articles, research, opinion, and other information related to public pension challenges and reform efforts across the nation. You can find previous editions here. In This Issue: Articles, Research & Spotlights - Alaska Legislature Considers Reintroducing Public Pensions
- Gov. DeSantis Proposes Improvement to Florida's Defined Contribution Retirement Plan
- New Bill Would Help Arizona’s Governments Pay Down Pension Debt Faster
- How Maryland Can Help Address Pension Debt
- Mississippi Needs Pension Reform
- Milwaukee’s Pension Debt Clouds Wisconsin's Otherwise Positive Retirement System Picture
News in Brief
Quotable Quotes on Pension Reform
Data Highlight
Contact the Pension Reform Help Desk
Articles, Research & Spotlights Alaska Considers Re-opening Defined Benefit Plan for Public Safety In 2005, Alaska elected to make a defined contribution plan the primary vehicle for retirement, closing the beleaguered defined benefit plan for all new workers. Lawmakers in Alaska are now deliberating the potential reintroduction of a defined benefit pension for the state's public safety workers. House Bill 55—which has passed through the House and is now under consideration in the State Senate—would place all new public safety workers into a new tier defined benefit pension plan but does little to address the risks that drove policymakers away from this type of plan 15 years ago. According to the Pension Integrity Project's testimony and a 1-pager on HB 55, while a defined benefit option could, in theory, be designed to mitigate taxpayer risk, this proposal doesn't do enough to modernize the plan to reflect the risks facing public pensions and state budgets in the modern era. Gov. DeSantis' Proposed Budget Would Improve Florida's Defined Contribution Retirement Plan for Teachers, Government Workers In his budget proposal for the 2022-2023 fiscal year, Florida Gov. Ron DeSantis proposed increasing employer contributions into the Florida Investment Plan, the defined contribution plan that covers most new public employees. The proposal would raise state contributions to employees' plans by three percent, bringing total contributions to 9.3 percent for most teachers and government workers. This proposal would significantly improve the long-term viability of the Florida Investment plan, as displayed by our previous Florida Retirement System analysis. Even so, Florida should continue to consider additional retirement reforms, including further contributions to the Investment Plan and better investment return rate assumptions for the state's legacy pension system. Prefunding Arizona State Retirement System Contributions In Arizona, policymakers are considering a novel approach to public pension funding that would allow Arizona’s cities and counties to reduce their future costs by making extra payments to the Arizona State Retirement System (ASRS) today. The legislation, Senate Bill 1082, would establish a method for local government employers to apply supplemental payments to pre-fund only their own future contributions to the pension fund. This backgrounder outlines the purpose and benefits of this policy, suggesting that it would help alleviate some of the challenges local governments face with rising pension costs. Maryland Could Pay Down Some State Pension Debt by Leasing BWI Airport With $20 billion in public pension debt, Maryland’s leaders should consider policy options to fund the retirement benefits already promised to state employees. One possible source of new revenue could come from a long-term lease of the Baltimore-Washington International Marshall Airport (BWI), which is owned by the state. In this opinion piece published in The Washington Post, Swaroop Bhagavatula, an analyst with the Pension Integrity Project at Reason Foundation, and the Maryland Public Policy Institute’s Christopher Summers explore how revenue from leasing BWI could be used to help pay down the state’s unfunded pension liabilities. A recent Reason study by Reason’s Robert Poole examining the lease potential of 31 U.S. airports suggests Maryland could generate up to $2.3 billion by leasing BWI. Addressing Mississippi’s Pension Challenges Two new one-pagers by the Pension Integrity Project examine needed reforms to the Mississippi’s Public Employees’ Retirement System (PERS). The first backgrounder gives three reasons state policymakers should move to secure and improve the retirement benefits of public employees. It explains how the current benefit options offered to employees are not serving all new members. The second one-pager explains how the cost-of-living adjustment (COLA) benefit used by PERS is failing to achieve its intended goal and is having a negative effect on the system’s financial stability. Milwaukee Pension Debt Clouds Wisconsin's Otherwise Positive Retirement System Picture Wisconsin’s state retirement system is one of the best-funded and most resilient in the country, but the retirement plans for the city of Milwaukee and Milwaukee County continue to struggle with funding and runaway costs. As of the latest reporting, the city of Milwaukee’s Employes’ Retirement System has $1.3 billion in unfunded pension liabilities and pension contributions are expected to take up more of the city’s budget in the upcoming years. With a funded ratio of 75 percent, Milwaukee County is facing similar challenges. Reason’s Marc Joffe highlights the growing need to reform the city and county pension plans. News in Brief Analysis on the Change in Investment Strategy that Could Save Pennsylvania $100 Million in Annual Costs Facing one of the nation's highest levels of investment fees, the board for Pennsylvania's Public School Employees' Retirement System (PSERS) adopted a new investment strategy that strategically focuses more on lower-cost assets. Pew Research Center's Project on Public Sector Retirement Systems has released an analysis on this new strategy for PSERS investments, finding that most of the fee reduction measures targeted the absolute return asset class, which made up nearly one-third of investment fees despite accounting for just under 10 percent of total assets. Pew’s full report is available here. Brief Finds Little Difference in COVID-19 Impact Between States that Participate in Social Security and Those that Do Not Many see Social Security as a partial safeguard from market volatility for public retirement systems since a portion of retirement benefits fall outside the responsibility of state and local government employers. Along this line of thinking, one would expect to see state retirement plans that decline Social Security participation to experience a larger funding impact in years of significant losses. A new brief from the Center for Retirement Research at Boston College applies this theory to the brief recession of 2020 but finds that both Social Security participants and non-participants weathered this market stress similarly. While a quick and significant rebound in 2021 may have masked any measurable differences between these groups, this analysis suggests that Social Security may not be as valuable of a hedge for public pensions as some expect. The full brief is available here. Quotable Quotes on Pension Reform "Despite a historic year in returns for many public pension plans, it's worth keeping in mind that one good year of returns will not make up in most cases for decades of systematic underfunding." —Senior Managing Director of the Pension Integrity Project at Reason Foundation Leonard Gilroy in "Sagging Stocks Aren’t the Only Threat to Pension Plans," Governing, Jan. 25, 2022 “I think the work we've done has helped the program; it will help the system. I don't think this will be the end-all-be-all fix-all that gets us out of the hole…I think we make these adjustments and we monitor them for the next three to five years and then reconvene if we have to, but I think it's a step in the right direction." —Vermont Sen. Corey Parent on reforms proposed by the Pension Benefits, Design, and Funding Task Force, which would commit $200 million as a one-time cash infusion and increase employer and employee contributions, cited in "Unions, Lawmakers Finalize Plan to Address Vt. Pension Shortfall," VPR News, Jan. 11, 2022 Data Highlight Each month we feature a pension-related chart or infographic of interest generated by our team of Pension Integrity Project analysts. This month, analysts Jordan Campbell, Truong Bui, Swaroop Bhagavatula, and Anil Niraula created a tool that simulates possible investment returns for a theoretical pension plan. The interactive tool uses market forecasts and allows the user to adjust how assets are allocated to generate a probability analysis of returns for the next 30 years. You can access the tool here. Contact the Pension Reform Help Desk Reason Foundation's Pension Reform Help Desk provides information on Reason's work on pension reform and resources for those wishing to pursue pension reform in their states, counties, and cities. Feel free to contact the Reason Pension Reform Help Desk by e-mail at pensionhelpdesk@reason.org. Follow the discussion on pensions and other governmental reforms at Reason Foundation's website and on Twitter @ReasonPensions. As we continually strive to improve the publication, please feel free to send your questions, comments, and suggestions to zachary.christensen@reason.org. The post Pension Reform Newsletter: Alaska and Florida consider retirement reforms, Arizona looks to pay down debt, and more appeared first on Reason Foundation. | 
No comments:
Post a Comment