Saturday, December 11, 2010

What, the executive director of a state teacher's union (David Helfman-Maryland State Education Association) fighting against COLA cuts for current retirees who don't pay union dues? You can bet THIS isn't OHIO!
From John Curry, December 11, 2010
Would someone like to share this with Bill Leibensperger and/or ORTA to possibly give them a "kick start?" John
"Helfman said he believes the COLA formula for current retirees constitutes a contract that can't be changed."
Teacher’s Union Criticizes Pension Commission Process as Rushed, “Offensive”
By Len Lazarick
December 10, 2010
The executive director of the state teacher's union said the process being used by the commission considering changes to state pensions was "offensive," rushed, and lacked both details and consultation with affected employees.
"The whole discussion has been how are we going to cut costs," David Helfman, executive director of the Maryland State Education Association, told reporters Thursday at a briefing. "There's no indication that it's being done in good faith."
Casper Taylor Jr., the former House of Delegates speaker who heads the commission, denied most of Helfman's complaints. "I think we've been very consultative," Taylor said. "We have had a complete actuarial analysis."
Even though the commission only started meeting in October, he said, "I've had no pressure" to finish the work of the commission.
In a phone interview Thursday, Taylor also denied saying that the eight-member commission would attempt to save $400 million to $500 million for the fiscal 2012 budget. According to my notes from Nov. 29 meeting, Taylor said, given the potential deficit of $1.8 billion in 2012, "the governor may have to be looking at our commission for $400-$500 million."
"Our job isn't to balance the budget," he said Thursday, echoing remarks made by State Treasurer Nancy Kopp and former Senator Barbara Hoffman at the last meeting of Public Employees' and Retirees' Benefit Sustainability Commission Nov. 29.
He said one of the issues affecting the state budget was whether to transfer some of the cost of teacher pensions to the counties, as he and others favor.
The commission meets again on Monday, for what Taylor said would be "a complete run down of all of the options that we are going to vote on the following week."
As spelled out in last week's story, http://marylandreporter.com/Pension-commissio... the options include increasing the vesting period to obtain a pension from five to 10 years, and applying the rule of 95 to receive a full pension, meaning a state employee's age and length of service would have to add up to 95. Currently, state workers can retire after 30 years of service regardless of age, and someone can retire at a reduced pension at 55 after 15 years of service.
Several options would also reduce the amount of pension earned from each year of service from 1.8% of pay to 1.4% or even 1.2% of pay.
There is also a proposal to freeze cost-of-living adjustments for five years, or even for as long as 15 years.
Helfman said he believes the COLA formula for current retirees constitutes a contract that can't be changed.
The commission was set up to look at changes to reduce the pension's unfunded liability of $18 billion over the next 30 years.
"We see this as a funding issue, not a benefits issue," said Randall Mickens, a staff member of the Maryland State Education Association. Ten years ago, when the pension system was fully funded, the legislature switched to the "corridor method" of contributions, allowing the state to put in less than required each year if the pension funds could cover 80% of what they would have to pay out. That reduced funding, plus the collapse of the stock market, led to the current funding level of about 64%. It will probably rise to 69% this year because of an improved stock market.
Helfman said better investment returns and the lower pay raises for teachers that actuaries have not factored into projections should reduced the shortfall in the pension funds.
"Don't overreact to a short-term funding challenge," Helfman said. Major increases in school system aid fueled big hikes in teacher payrolls, but those increases have disappeared. "The growth in payroll is going to fall well under what the actuaries are assuming," he said.
Pension benefits for teachers and state employees were raised just four years ago, passed by the legislature with unanimous bipartisan support and signed by Republican Gov. Bob Ehrlich.
"Our members will be lobbying the General Assembly very forcefully to keep its promises," Helfman said.

Friday, December 10, 2010

STRS report on December 2010 Board meeting

From STRS, December 10, 2010
This week, the State Teachers Retirement Board held its monthly meeting. Following the regularly scheduled meetings, a report titled "Board News" is posted on the STRS Ohio Web site, as well as mailed to a number of members and education organization representatives who have requested it. As a member of STRS Ohio with an e-mail address on file, you will also receive this report each month. The December report follows.
DECEMBER BOARD NEWS
2010 ANNUAL FINANCIAL STATEMENT AUDIT COMPLETED
Clifton Gunderson reported the results of its audit of the STRS Ohio financial statements for the fiscal year ended June 30, 2010, at the December Retirement Board meeting. The report noted that the system's financial statements were fairly stated in accordance with generally accepted accounting principles; further, no material weaknesses in internal controls or instances of statutory noncompliance were found. As a result, STRS Ohio received a "clean" audit known as an unqualified opinion, which is the highest level of opinion that an organization can receive.
STRS Ohio's financial statements are included in the 2010 Comprehensive Annual Financial Report, which will be posted on the STRS Ohio Web site by Dec. 31, 2010. Copies of the report can also be requested by calling STRS Ohio's Member Services Center toll-free at 1-888-227-7877. In addition to the financial statements noted above, the report also includes investment, actuarial and statistical information about STRS Ohio.
RETIREMENTS APPROVED
The Retirement Board approved 132 active members and 72 inactive members for service retirement benefits.
OTHER STRS OHIO NEWS
SELECT HOME DELIVERY PROGRAM SAVINGS REPORTED
The Select Home Delivery Program through Express Scripts (ESI) was rolled out this summer to STRS Ohio Health Care Program enrollees. The program encouraged individuals who were currently filling prescriptions for long-term maintenance medications at retail pharmacies to move to home delivery and thus incur lower copayments. Through a series of mailings, enrollees were required to take action and could either choose to use home delivery or continue using a retail pharmacy to fill those prescriptions. ESI targeted 54,103 STRS Ohio enrollees who were filling their long-term maintenance medications at retail. Preliminary results show that about 19,000 or 35% of these enrollees made the decision to convert to home delivery. More than 40,000 retail prescriptions were converted to home delivery as of Nov. 30. The total combined savings during the initial start-up period of 3-1/2 months for enrollees and STRS Ohio is about $1 million.
STRS OHIO CONTINUES AS THE PRIMARY CHOICE FOR NEW FACULTY
During the last 12 months, 1,450 new full-time faculty at Ohio public universities and colleges made an election between STRS Ohio's retirement plans and alternative retirement plans (ARPs) run by private vendors. STRS Ohio was the choice of 70% of the educators. Eight vendors shared the 441 new faculty who elected an ARP.
RETIREMENT BOARD ELECTION PROCESS UNDER WAY
In spring 2011, an election for one contributing member seat on the State Teachers Retirement Board will be held. The election process begins this fall, when individuals interested in running for this seat can request petitions from STRS Ohio. Those eligible for nomination are individuals presently contributing to STRS Ohio or those who have contributions on deposit with STRS Ohio. STRS Ohio retirees who are reemployed in an STRS Ohio-covered position are not eligible for nomination.
Individuals interested in running for this seat can request petitions from STRS Ohio by calling toll-free 1-888-227-7877. The deadline for returning petitions is Feb. 25, 2011. STRS Ohio members will receive their ballots and voting information in April; they will have through May 2 to cast their vote. The winner of the election will begin his or her four-year term on the board on Sept. 1, 2011.

Does cutting a COLA violate the takings and contract clauses of the U.S. Constitution?

From John Curry, December 10, 2010
In the September ruling, Hyatt decided the lawsuit could proceed on many of the claims made by the plaintiffs, including whether SB 1 violated the contract clause of the Colorado Constitution, whether the law violated the plaintiffs’ due process rights, and whether SB 1 violated the takings and contract clauses of the U.S. Constitution. At that time, all the parties agreed to dismiss parts of other claims that sought monetary damages from individual defendants. Hyatt has delayed ruling on the plaintiffs’ request for class action status until after discovery is completed.
Pincus told The Statesman that unless the judge decides to delay ruling on the motion for summary judgment, the case “can be decided right now as there are no facts in dispute.”
Springs legislator wants more changes for pension plan
12/10/2010
By Marianne Goodland
THE COLORADO STATESMAN
Dissatisfaction with the fixes for PERA and its structure is prompting Republicans at the state capitol to come up with more changes for the state pension plan for 2011.
Sen.-elect Kent Lambert, R-Colorado Springs, told The Colorado Statesman local governments are struggling to pay for the increased contributions required under SB 10- 001, and he intends to run legislation next year to address it.
Under SB 1, PERA employers have a statutory contribution, an amortized equalization disbursement (AED) contribution and a supplemental AED that technically comes out of the pockets of state employees, in the form of pay increases they no longer get. State PERA employers contribute 11.35 percent of total payroll, the school division contributes 13.85 percent, state trooper employers put in 14.05 percent, judicial employers contribute 14.86 percent and local governments kick in 13.7 percent.
It’s the latter contribution that is causing headaches for at least one local government. Colorado Springs Mayor Lionel Rivera told The Statesman that the City of Colorado Springs, the city-owned Memorial Hospital and the city’s utilities are responsible for 50 percent of the assets of PERA’s local govern-ment division, with about 8,000 employees. Rivera, who has been on the Colorado Springs City Council since 1997, said that during that time he has watched as the employer contribution grew from 10 percent to 13.7 percent.
Rivera said he would like employees to increase their contribution from the current level of 8 percent to 10.85 percent, and at the same time allow local governments to reduce their contribution to the same 10.85 percent. (For 2010-11, state and judicial employee contributions are 10.5 percent, to cover a portion of the state’s contribution as a budget-balancing measure.) The savings to Colorado Springs, Rivera said, would be about $1.8 million annual for the city, $3.5 million for the utilities and $5 million for the hospital.
While Rivera said his intention was that this be an option just for local governments, Lambert said this week he intends to ask that all PERA employers and divisions be given that 50/50 contribution option.
Lambert said the likely House sponsor on this bill would be Rep. Jim Kerr, R-Littleton, who has his own ideas on changes he’d like to see for PERA. Kerr told The Statesman his first bill of the 2011 session would try to change the composition of the PERA board of trustees.
The bill would be identical to one Kerr carried in the 2010 session, HB 10-1153, which sought to add more gubernatorial appointees who are not PERA recipients to the board, and decrease in equal numbers trustees who are elected by PERA members.
Kerr’s bill died in the House State, Veterans and Military Affairs Committee last February. It’s likely to get a very different reception the next time around — Kerr will be the committee’s chair in 2011. But Kerr said he doesn’t expect the ultimate results to be much different than they were in the 2010 session, because of Democratic control of the Senate.
PERA director being wooed by state of Texas
And in other PERA news: Meredith Williams, PERA’s executive director since 2000, has been named a finalist for a similar position with the Teacher Retirement System of Texas.
Williams is one of five finalists for the position. A decision on the next executive director for that system is not expected until next year, as the current executive director doesn’t plan to step down until July. Williams also is in the midst of contract negotiations regarding compensation; his current contract expires at the end of this year, but the PERA board of trustees decided last month to extend it to 2012 and possibly another year beyond that.
Williams is just the fifth person to lead PERA since its founding in 1931. Prior to coming to Colorado, Williams was the head of the Kansas public pension system.
In a Nov. 24 e-mail to PERA employees, Williams indicated he did not seek out the job opening. In September, Williams said, he was approached by a search firm that was developing a list of candidates for the Texas job. Williams was notified a month later that he had been named one of five finalists. However, Colorado PERA, its members and the board remain his “sole focus,” he wrote, and he looks forward to “memorializing our continuing relationship.”
The announcement comes at a time when PERA is close to setting a record for the number of employees retiring in a calendar year. Recent figures show the number of state and public employees initiating retirement proceedings may at least match the record, and with two months to go in 2010 may even surpass it.
The high water mark for retirements was set in 2004, with 5,171 PERA members choosing to retire. Through Oct. 31 of this year, 4,924 members have or are retiring this year.
PERA spokesperson Katie Kaufmanis told The Statesman that November and December tend to be slow months for retirements; most people elect to retire at the end of the fiscal year, or the end of the school year in June, she said.
Kaufmanis said PERA has no way to track why people are retiring in greater numbers, but for state employees, it may be due in part to three years without a raise and a change in the PERA cost of living adjustment beginning in 2011.
Currently, those who retire by Dec. 31, 2010 will be able to get the cost of living adjustment in July 2011. Those who retire Jan. 1 through June 30, 2011 will have to wait until July 2012 for that COLA adjustment, Kaufmanis explained. The change in COLA is a result of SB 10-001, which passed the General Assembly in March and is now the subject of a lawsuit from PERA retirees.
Kaufmanis said several other states are seeing lawsuits on similar issues, with plaintiffs represented by the same law firm, and that PERA’s general counsel, Greg Smith, expects one or more of the cases to go all the way to the U.S. Supreme Court.
It’s not clear which one will get there first, but the most likely candidates are lawsuits moving through the courts in Colorado and Minnesota.
The Minnesota case is Swanson et al., v Minnesota. That state has three public pension plans: one for local government employees, another for state employees and a third for public school teachers. The state employee plan has had a post-retirement adjustment since 1992 that takes into account inflation and investment returns. In 2009, the Minnesota legislature eliminated that formula and replaced it with a “guaranteed 2.5 percent increase.” According to the lawsuit, the inflation rate between 1992 and 2009 was on average 2.83 percent.
That guarantee lasted barely a year; on May 15 of this year, Gov. Tim Pawlenty signed into law a new pension reform plan, reducing the inflation adjustment to between 1 percent and 2 percent, depending on which plan the retiree is in, until the plans reach 90 percent of full funding. The plaintiffs filed the lawsuit two days later.
A hearing on the case was held Sept. 15 and at that time, the plaintiffs asked for more time for discovery. Attorney Stephen Pincus of Stember, Feinstein, Doyle, Payne & Cordes said cross-motions for summary judgment will be filed in January, and oral arguments are scheduled for March.
Pincus also is representing the Colorado plaintiffs in Justus et al. v State of Colorado and PERA. In September Denver District Court Judge Robert Hyatt ruled on some of the claims from the plaintiffs, and last week, the plaintiffs filed a motion for partial summary judgment related to claims that SB 1 violates the contract clause of the Colorado Constitution.
In the September ruling, Hyatt decided the lawsuit could proceed on many of the claims made by the plaintiffs, including whether SB 1 violated the contract clause of the Colorado Constitution, whether the law violated the plaintiffs’ due process rights, and whether SB 1 violated the takings and contract clauses of the U.S. Constitu- tion. At that time, all the parties agreed to dismiss parts of other claims that sought monetary damages from individual defendants. Hyatt has delayed ruling on the plaintiffs’ request for class action status until after discovery is completed.
Pincus told The Statesman that unless the judge decides to delay ruling on the motion for summary judgment, the case “can be decided right now as there are no facts in dispute.”
The most recent addition to the group of lawsuits dealing with cost of living adjustments for public pensions is Tice, et al., v South Dakota and was filed on June 15. That lawsuit also seeks class action status.
In South Dakota, prior to 2010, the annual cost of living increase for retirees in the state’s public pension plan was 3.1 percent. It was reduced through legislation to between 2.1 percent and 2.8 percent, and under the bill, signed by Gov. Mike Rounds in March, the COLA could go back to 3.1 percent only when the plan is fully funded.

Tuesday, December 07, 2010

Oregon pension recommendation quite similar to CORE's Dave Parshall's suggested plan to STRS to protect the lowest pension recipients....except.....Oregon IS seriously listening!

From John Curry, December 7, 2010
"Limiting cost-of-living adjustments to the first $24,000 of a retiree's annual benefits."
"The Reset Cabinet also recommended that any COLAs be applied only to the first $2,000 per month that any retiree receives. That way, they figured, low-income state retirees would be protected while retirees with more generous benefits would receive some increases for inflation."
State Government PERS PERS study picks apart suggested pension cuts
Moves would lower pay for state workers by at least 6 percent
Statesman Journal, December 7, 2010
Cuts to Oregon state workers' pension plans that have been recommended by Gov. Ted Kulongoski's Reset Cabinet could result in more than $511 million in savings to the state during the 2011-13 biennium.
But they also would create sharp reductions in public employees' pay and retirees' benefits, according to an analysis produced by the Oregon Public Employees Retirement System.
The PERS report concludes that the steps set forth by the Reset Cabinet would:
-Lower state workers' annual wages or total compensation by 6 percent or more.
-Reduce annual benefits of the 15 percent of state retirees who have relocated out-of-state by about 6 percent.
-Cut annual cost-of-living adjustments for about 42 percent of all state retirees.
The two major state workers' unions already have come out against the Reset Cabinet's recommendations, arguing that the experts have mistakenly offered draconian solutions for a budget deficit created by a economic down cycle.
"We will want to sit down and work with the governor and the Legislature to figure out ways we can get from here to there," said Ed Hershey, a spokesman of Service Employees International Union Local 503. "Some of those ways will involve short-term or sunsetted sacrifices. We're not buying into the argument that this is a systemic problem."
Officials from the unions have said they do not expect incoming Gov. John Kitzhaber to follow the Reset Cabinet's lead.
However, the budget-cutting ideas offered by the panel are included in a number of possibilities that PERS staffers decided to analyze for the pension system's board.
PERS staffers wrote the report independent of the Reset Cabinet's work, spokesman David Crosley said. They performed the analysis to provide the PERS board with context regarding proposals that have been circulating throughout state government.
Board members received the analysis at November's regular meeting, but it since has been updated.
The Reset Cabinet recommendations for the pension system include:
-Elimination of the 6 percent pickup and the Individual Account Program.
State employees are required to contribute 6 percent of their pay to PERS. Agencies have been making this contribution on their workers' behalf since 1979, when this arrangement was agreed to in lieu of a pay raise.
The nature of the pickup changed in 2003 when the Legislature passed PERS reform measures. Agencies still pay the 6 percent pickup, but the money now is routed not into the PERS pension fund but into an Individual Account Program more akin to a private-sector 401(k).
The Reset Cabinet recommends eliminating both the 6 percent pickup and the Individual Account Program, arguing that the state "can no longer afford to maintain two retirement programs," according to its report.
If both the IAP and the legally required employee contribution are eliminated, then state employees' take-home pay will remain the same but their total compensation will decrease by 6 percent, the PERS report says.
But if only the IAP is killed off, state workers could face a double-whammy. They would lose 6 percent of their take-home pay, which would go to the PERS pension fund, as well as the additional 6 percent that had been going into the IAP.
-Halting income tax offset payments to PERS retirees who live out-of-state.
Oregon began taxing PERS pension benefits in the early 1990s, PERS Actuarial Services Manager Dale Orr said. But after a series of lawsuits, the Legislature passed statutes that boost state workers' pay to cover the amount due in taxes.
The Reset Cabinet suggested eliminating the tax remedy payments for any PERS employees who have established residence in another state. The move would save $5.9 million for state general-fund agencies and $17.9 million in the state's support for schools and community colleges in 2011-13, according to the Reset report.
However, as many as 15,000 retirees who now live outside of Oregon would find their pension benefits reduced by about 6 percent on average, PERS estimates.
-Requiring a minimum 10 years of service to be eligible for annual cost-of-living adjustments to pension benefits.
Retirees currently need to have served at least five years with the state and become vested in the PERS pension plan to be eligible for annual COLAs for their retirement benefits.
The Reset Cabinet suggested the minimum service required for COLA eligibility to 10 years, arguing that such a move would save the state about $7.4 million in 2011-13 for state general-fund agencies and $22.4 million in the state's support for schools and community colleges.
It also would mean that the purchasing power of a small number of retirees would decrease over time, as inflation eats into their fixed pension benefit. About 7 percent of PERS members who retired in 2009 had less than 10 years of service, the agency's report said.
-Limiting cost-of-living adjustments to the first $24,000 of a retiree's annual benefits.
The Reset Cabinet also recommended that any COLAs be applied only to the first $2,000 per month that any retiree receives. That way, they figured, low-income state retirees would be protected while retirees with more generous benefits would receive some increases for inflation.
This change would produce big savings in 2011-13: $47.3 million for state general-fund agencies and $143.5 million in the state's support for schools and community colleges.
But it also would cost a large number of public retirees. PERS estimates in its report that 58 percent of its members receive annual benefits of $24,000 or less.
The other 42 percent of retirees would receive lower COLAs, allowing their purchasing power to falter in the face of inflation.
Crosley was careful to note that the PERS report should not be considered an endorsement of any particular budget-cutting notion.
"We want to provide a framework so people can understand what that discussion is," Crosley said. "These are things we've heard about. The report is not anything we're advocating or saying this should or should not happen."
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