January 10, 2017


Pulling U.S. Public Pensions Back from the Brink (Frances Denmark, 1/04/17, Institutional Investor)

"We're seeing more and more communities take steps to protect public pensions, and it's a trend that has largely fallen under the radar," says Bailey Childers, executive director of the National Public Pension Coalition. Most public pension funds have increased employee and employer contributions to help counteract the hit of U.S. equity markets' 40 percent drawdown during the crisis.

Among those steps: establishing dedicated funding sources, such as revenues from gambling or so-called sin taxes (on cigarettes and alcohol, for example). The Kansas legislature kicked things off in 2012, when it approved legislation allowing gaming revenues from state-owned casinos to be directed to the Kansas Public Employees Retirement System, along with proceeds from any sale of state surplus real estate. The following year, Montana legislators approved a bill dedicating a portion of the coal extraction tax to the state's unfunded pension liabilities.

In 2013 the state of Oklahoma created the Oklahoma Pension Stabilization Fund, to be used when any of the state pension systems' funding ratios fall below 90 percent. A dedicated portion of sin taxes and lottery proceeds will fund this asset pool. And in April, to pay for cost-of-living adjustments and shore up overall funding status, Oklahoma Governor Mary Fallin (a vice chair of president-elect Donald Trump's transition team) signed legislation to protect contributions beyond one-fiscal-year horizons.

In Louisiana, voters have approved the Revenue Stabilization Trust Fund, which will be funded by recurring mineral and tax revenues. Hawaiian taxpayers approved a constitutional amendment to include unfunded pension liabilities in the existing list of possible recipients of general fund surplus money.

"We've seen a lot of improvement in the past few years," says Keith Brainard, research director of the National Association of State Retirement Administrators, pointing to the $150 billion increase in total public pension assets from September 2015 to September 2016.

Posted by at January 10, 2017 6:54 PM