ECON States pull back on pension fund payments as virus ravages revenue

Zagdid

Veteran Member

July 31, 2020 12:54 PM Bloomberg

Colorado and South Carolina have pulled back from making additional payments to their underfunded pension plans, moves that may play out in other states struggling to balance budgets as the coronavirus ravages tax revenue.

Colorado eliminated a $225 million supplemental payment to the $52.1 billion Public Employees' Retirement System, Denver, backing away from a 2018 plan to bolster the pension, which is about 60% funded after suffering from years of inadequate government contributions. South Carolina suspended a statutorily scheduled 1% employer contribution increase to the $28.2 billion South Carolina Retirement System Investment Commission, Columbia, for the fiscal year beginning July 1.

And New Jersey, which has one of the nation's worst-funded pension systems, has deferred a $950 million contribution to the $75 billion New Jersey Pension Fund, Trenton, from Sept. 30 to October, and Gov. Phil Murphy's plan to increase contributions 13% to $4.6 billion is in question.

"There's definitely going to be pressure in some places to not pay annual required contributions because of revenue shortfalls," said Gene Kalwarski, CEO of Cheiron, an actuarial consultant. "States are going to have to make up the shortfall somehow, some way."

States are projected to face budget shortfalls of about $555 billion through 2022, according to the Center on Budget and Policy Priorities, and without more aid from Washington they will have to cut spending or raise taxes. Postponing pension plan payments may ease budget pain in the short-run, but it will defer the costs to later years and allow unfunded liabilities, estimated at as much as $5 trillion by the Federal Reserve, to grow.

The cuts to pension fund contributions are setbacks for states that enacted reforms in the aftermath of the Great Recession.
In 2018, Colorado passed legislation to raise employee and employer contributions and require an annual lump sum payment of $225 million to the pension fund. Colorado also capped future cost of living increases at 1.5% and raised the retirement age to 64.

In 2017, South Carolina increased scheduled employer contribution rates by 1% annually starting in fiscal 2019 until they reach slightly more than 21% by fiscal 2023. The pension fund, which in 54% funded, reduced the amortization period for its $23 billion shortfall to 20 years from 30 — requiring it to pay off the debt faster — and reduced the assumed rate of return to 7.25% from 7.5%.

Colorado's decision to defer the $225 million payment from its budget was a "credit negative," allowing the pension's unfunded liability to grow at a compounding rate of 7.25%, the expected rate of return on its investments, Moody's Investors Service said Monday.

Although pension plan assets rebounded in the second quarter after losing almost $1 trillion when the pandemic caused a stock market plunge, pension plans almost certainly missed their targeted annual investment returns of about 7% for the fiscal year that ended June 30, meaning the unfunded obligations likely increased. The $396.9 billion California Public Employees' Retirement System, the biggest U.S. public pension fund, gained 4.7%, falling short of its 7% target for the second straight fiscal year.

Record state budget gaps could reignite efforts by officials to reduce pension benefits, raise employee contributions or eliminate traditional pensions altogether, Mr. Kalwarski said.

South Carolina Gov. Henry McMaster, a Republican, wants to close the state's $32 billion defined benefit pension plan and move all new state workers into a 401(k)-style plan.
 

Blacknarwhal

TB Fanatic
Maybe they can just raise taxes to make up the shortfalls? Oh, ya, they won't let people work so no taxes. Well this is a dilly of a pickle isn't it?
Property taxes! No one cares if you're not working, just jack up the annual lot rent for the privilege of living in a county!
 

Doomer Doug

Has No Life - Lives on TB
Not in oregon they didn't, brown knows her demoncrat marxists are lapdogs of the public employees.
Now you u derstsnd by thst marxist bitch and her lot are so eager to cut police etc. They need the money for the state pensions..
 

Hfcomms

EN66iq
"States are going to have to make up the shortfall somehow, some way."

Inconvenient truth. The State's are bankrupt, the Federal Government is bankrupt, the Federal Reserve is bankrupt, the United States of America is bankrupt. All the paper shuffling has tried to cover that up but the chickens are coming home to roost.
 

bw

Fringe Ranger
Cutting pension contributions doesn't cut pensions. The beneficiaries are still getting paid, so to them it's worrisome but not painful. They can go a long way in the hole by borrowing from pension funds. When I left Louisiana they were half a billion in the hole, and it was one reason we left civil service. We didn't want our eggs in that basket. I'll bet they haven't made it up yet, and that was 30 years ago.
 

nomifyle

Has No Life - Lives on TB
Cutting pension contributions doesn't cut pensions. The beneficiaries are still getting paid, so to them it's worrisome but not painful. They can go a long way in the hole by borrowing from pension funds. When I left Louisiana they were half a billion in the hole, and it was one reason we left civil service. We didn't want our eggs in that basket. I'll bet they haven't made it up yet, and that was 30 years ago.
Louisiana had one good but crooked democrat governor in Edwin Edwards. Although he lined his own pockets he did good for the state. None of the governors after him (although I did like Bobby Jindal) have done much for Louisiana. The POS democrat that we have now is worse then ever, although he is one of the the few democrat governors that is pro-life, his only good non democrap quality.

I have a cousin that is almost 78 who worked in civil service and retired at 55. He has bought, repaired and sold farm equipment to supplement his retirement check, but never worked a job after retirement. He hated Bobby Jindal because he did something to retiree's health insurance that he didn't like. Cousin's retirement "check" has been a livable income.

Personally I think 55 is too early to start collecting a pension check. A lot of people think 62 is too young to start collecting SS, although to retire at 62 one does take a 25% cut in income. I did retire at 62. My ss income at retirement was $887 a month. After Katrina rents in New Orleans and now everywhere are more than my whole income. Because I was blessed to have 12 acres in the piney sand hills of northern Louisiana, I bought a fema camper and moved to my land, rent and debt free. Other wise I'd still be stuck with my ex in the Slidell area. Three times Obunghole didn't give SS an increase so it took a long time for me to have a little more money. My brother and my mother helped me some, particularly my brother or I probably would not have made it.

As for living in Louisiana, I hope and pray nothing ever forces me to leave.

God is good, all the time

Judy
 

bw

Fringe Ranger
I'm drawing Louisiana retirement for about 15 years service. Frankly it startled me to get it, because I'd mentally written it off, but it's a nice chunk. I didn't even apply when I could have, because I'd forgotten about it, and they don't make up arrears. Oh well.
 

Zagdid

Veteran Member
Not in oregon they didn't, brown knows her demoncrat marxists are lapdogs of the public employees.
Now you u derstsnd by thst marxist bitch and her lot are so eager to cut police etc. They need the money for the state pensions..
well..... they are going about it all the wrong way


A Huge Pension Sold Apple, Microsoft, and Tesla Stock. Here’s What It Bought.
By Ed Lin Aug. 1, 2020 7:00 am ET

The Oregon Public Employees Retirement Fund made some big second-quarter moves in its domestic equities portfolio.
Operf, as the pension is known, lowered positions in Apple (ticker: AAPL), Microsoft (MSFT), and Tesla stock (TSLA) in the quarter, while adding to its investment in Intel stock (INTC). The pension disclosed the trades, among others, in a form it filed with the Securities and Exchange Commission.

Operf, which managed assets of $82 billion as of Dec. 31, didn’t respond to a request for comment on the stock trades.
The pension sold 55,633 Apple shares in the second quarter to end the period with 685,131 shares of the iPhone maker.

Apple stock surged 43.5% in the quarter, more than wiping out a 13.4% slump in the first quarter, when the coronavirus pandemic roiled markets. So far in the third quarter, shares have surged 16.5%, compared with a 1.2% rise in the S&P 500 index, a broad measure of the market.

Apple crushed earnings expectations Thursday night, and announced a four-for-one stock split. Analysts have been upbeat on Apple stock for the company’s upcoming 5G phones and services segment. Morgan Stanley removed the shares from its focus list as they continued to rally, but remained optimistic on the stock for the long term.

Operf sold 159,319 Microsoft shares to end June with 1.2 million shares of the software giant.

Microsoft stock soared 29% in the second quarter, after a flat first three months of the year. So far in the third, the shares have been flat once again.

The company’s second-quarter report was strong, but there were soft spots. Competitors have been alleging that Microsoft has been engaged in illegal and anticompetitive competition in marketing its Teams communications tools—effectively forcing users to use Teams by tying it to the Office suite of products—a claim the tech giant denies. Still, for a number of observers, Microsoft stock remains the way to play the cloud.

The pension sold 12,000 Tesla shares in the second quarter, lowering its stake in the electric-vehicle maker to 35,800 shares.

Operf had initiated a stake in Tesla in the first quarter, when the stock gained 25.3%. Shares more than doubled in the second quarter, and the out-performance continues, with Tesla stock up 32.5% so far in the third.

Some analysts are saying investors should be selling Tesla stock at this point. Our latest Roundtable found a fan of the shares, however.

Operf bought 73,443 Intel shares in the second quarter, lifting its investment to 3.7 million shares of the chip giant.
Intel stock was flat for 2020 at the end of June, but since then, shares have slumped 20.2%.

Production issues overshadowed second-quarter earnings, reported in July. Shares tumbled. Delays with Intel’s next-generation manufacturing could be a red flag for the entire industry, Barron’s noted. A shake-up in its engineering team could be good for Intel stock.
 

mikeabn

Finally not a lurker!
"States are going to have to make up the shortfall somehow, some way."

Inconvenient truth. The State's are bankrupt, the Federal Government is bankrupt, the Federal Reserve is bankrupt, the United States of America is bankrupt. All the paper shuffling has tried to cover that up but the chickens are coming home to roost.
Buy canned goods. Ammo comes in cans for example.
 

MinnesotaSmith

Has No Life - Lives on TB
Semi-easy solution: have all pension statements show what pension could be expected at current rate of gov't contributions, if continued in the future, and compared with promised contributions. When people see they are slated to get <$400.00 a month/11% of promised payouts, think they'll go nuts? Me too.

Oh, and who can still get 7.25% returns?!? Any fund that could get at least 5% (better over inflation, going by gold prices) for 5 years in a row would never lack for clients.
 

ivantherussian03

Veteran Member
Alaska spent their 14 billion emergency fund, and look we have a bonfide emergency. Dang, what did my Sargent say.......oh yeah.....poor planning on your part doesn't constitute an emergency on my part.
 

Dozdoats

On TB every waking moment
poor planning on your part doesn't constitute an emergency on my part

It does if you were depending on whoever was doing the poor planning!

New watchword for 2020 - YOYO! You're on your own.
 

20Gauge

Has No Life - Lives on TB
Semi-easy solution: have all pension statements show what pension could be expected at current rate of gov't contributions, if continued in the future, and compared with promised contributions. When people see they are slated to get <$400.00 a month/11% of promised payouts, think they'll go nuts? Me too.

Oh, and who can still get 7.25% returns?!? Any fund that could get at least 5% (better over inflation, going by gold prices) for 5 years in a row would never lack for clients.
To do that means they will lose office. They will show the $4k + per month for the janitor until reality forces someone in the future to show the real numbers. Then they will blame someone else for the shortfall. Most likely Trump
 

MinnesotaSmith

Has No Life - Lives on TB
To do that means they will lose office. They will show the $4k + per month for the janitor until reality forces someone in the future to show the real numbers. Then they will blame someone else for the shortfall. Most likely Trump
Oh, the state and local governments would NEVER do that voluntarily, no question. It'd take force at the level of "do this or you can't float ANY bonds for any purpose", minimum (and maybe jailing some appointed state/local officials that drag feet).
 

20Gauge

Has No Life - Lives on TB
They won't raise property taxes. There has to be a vote for that to happen. They will just keep raising the property appraisal yearly. Easier and cheaper than having a tax election
That is a difference in most states.

We never have a tax election. It is all determined by the following factors.

1) Appraisal
2) Millage rate
3) Who hasn't gotten their name on a new school this decade.

The county and the School district decide how much to tax based upon their "budgets" and then do the adjustments. They need more money? Do one of the three.
 

lonestar09

Veteran Member
That is a difference in most states.

We never have a tax election. It is all determined by the following factors.

1) Appraisal
2) Millage rate
3) Who hasn't gotten their name on a new school this decade.

The county and the School district decide how much to tax based upon their "budgets" and then do the adjustments. They need more money? Do one of the three.
In the county here they just raise the appraisal yearly since that is done by a separate entity then the county can say we haven't raised taxes in "x" years and people can be happy. And the game goes on
 

20Gauge

Has No Life - Lives on TB
In the county here they just raise the appraisal yearly since that is done by a separate entity then the county can say we haven't raised taxes in "x" years and people can be happy. And the game goes on
Every county seems to have its way of raising taxes without actually raising them.

Ours blame valuations and claim they have no control over it. Yet when the value book is presented and the county has to approve or disapprove. Funny thing they disapprove the book when revenues are too low.
 

20Gauge

Has No Life - Lives on TB
My property taxes went up $300 already and that was put out before the virus took hold. Next year it is going to be bad.... really bad.
 
...some areas increase prop. tax via 'parcel taxes' - often a fixed dollar amount
applied to each 'lot' - thus getting around the usual tax limitations
 
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NoDandy

Has No Life - Lives on TB
Yes, raising taxes is ALWAYS their first option. They never, never, ever consider reducing expenses. Things like eliminate unnecessary expenses, cut salaries, cut people on payroll, sell off unneeded vehicles, cut expense accounts, etc, etc.

Believe me, it can be done ! But they want the taxpayers to bleed more !!!

:mad::ld:
 
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