Sexy, they’re not.  But public pensions need repairs. And taxpayers are potentially on the hook. 

Greater transparency and lower levels of taxpayer risk are needed in this exceptionally complicated area of government finance.  Making these plans work for all stakeholders—active employees, retirees, and taxpayers—requires transparent, careful, and judicious decision-making with respect to both the promises being made and the means to pay for them. 

According to the January 2011 issue (Vol. 23 No.1) of the fedgazette, the publication of the Federal Reserve Bank of Minnesota, there are some basic rules that help keep public pension plans on the right path:
- Make the necessary contributions every year.
- Don’t promise benefits that you can’t guarantee with assets.
- Align fiduciary responsibilities with decision-making.
- Don’t chase investment yield. 
- Spread the risk.
- Plan for a rainy day.

  • With each passing day, the pension problem grows
    From a study to determine the amount of additional money that would have to be devoted annually to state and local pensions systems to achieve full funding in 30 years, a standard period over which governments target fully funded pensions:

    On average, a tax increase of $1,385 per U.S. household per year would be required. For some states, the number is much higher, including Minnesota where it’s $1,928.

    From the Washington Post, reprinted in the St. Paul Pioneer Press, October 25, 2012

  • Duluth, St. Louis County retirees see six-figure pensions
    A Chicago-based watchdog group shows that 17 retired city or county workers receive pensions of more than $100,000 a year.

    "At present, Public Employees Retirement Association of Minnesota (PERA) is only 76 percent adequately funded to meet its future commitments. The system would need another $4.4 billion to become fully funded."

    "Solvency - or the assurance that 100 percent of potential pension payouts have money behind them - is mandated by state law by 2031. PERA is on track to reach that goal...."

    According to David Montgomery, chief administrative officer for the city of Duluth: "Minnesota is not the worst out there, by far. But there is an issue... It's not an imminent, crisis-tomorrow issue, but if you let it go, the less time you have to make up any shortfall. And time is your best friend to make the impact of any change more moderate."
    Duluth News Tribune, April 22, 2012

  • Will Pension Plans Run Out of Money?
    A new research report using GASB proposed metrics reveals risks of “depletion”
    “…The burden of proof now empirically resides with the elected officials and these plans’ officials to show that they have a strategy in place (or at least underway) to put their house in order.” The Minnesota Teachers fund is included in the list.

    This demonstrates the need for greater transparency in local budget reporting in Minnesota.
    Girard Miller, Governing.com, December 8, 2011

  • State of Minnesota / Legislative Commission on Pensions and Retirement Memo
    To: Members of the Legislative Commission on Pensions and Retirement
    From: Lawrence A. Martin, Executive Director; Ed Burek, Deputy Director
    RE: Designated Commission Interim Topic: Potential Actuarial Assumption Changes, Especially Interest Rate Actuarial Assumption Changes

    Read the memo.
    September, 2011

  • Minnesota's Public Pension Funds
    An in-depth look at the health of six of the largest funds in Minnesota, how the Legislature has handled their liabilities, and what to do to ensure their long-term viability for public employees' retirement benefits. Prepared by the Minnesota Taxpayers Association.
    Executive Summary
    Full Report
    May 2006

  • Public pension benefits & the law
    Two pension experts offer insights into legal aspects of pension benefit protections for local and state government workers.
    fedgazette, January 2011

  • Public pensions: Feeding, and fixing, the sausage machine
    Many public pensions are underfunded. Does that matter? There are some basic rules that help keep public pension plans on the right path: Make the necessary contributions every year. Don’t promise benefits that you can’t guarantee with assets. Align fiduciary responsibilities with decision-making. Don’t chase investment yield. Spread and share risk. Plan for a rainy day.
    fedgazette, January 2011

  • The pension bill. Ouch.
    As pension officials and lawmaking bodies scramble to stabilize underfunded pension plans, government sponsors and workers are laboring under the weight of steadily growing costs, which are likely to continue upward, maybe substantially.
    fedgazette, January 2011

  • Top of the Pension Class
    While pension plans are almost universally underfunded at the moment, some plans have weathered the storm better than others. In the district, two plans at opposite ends of the spectrum stand out: the Wisconsin Retirement System, with $80 billion in assets, and the city of Sioux Falls, S.D., which sponsors two separate plans for general workers and firefighters, and has assets of about $350 million.
    fedgazette, January 2011

  • We’ve dug ourselves into a really big hole
    That’s Legislative Auditor James Nobles’ take on the state’s pension system.  How did it happen?  And how long a ladder might taxpayers need to provide?
    Twin Cities Business, November 2010


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