I had a business trip this last week, and I’m super-busy on projects. So there may be more pension quicktakes posts in the coming weeks.Thanks to my top referrers from the past week:
- This is Big Brother post (though I have no idea what they’re talking about, nor will take any time on it)
- Pension Tsunami
And for those searching, I hope you found what you sought:
- chicago board of education credit rating
- bank of america interest rate swap
- RI pension 4/2015
- chicago bond rating april 2015
- pension obligation bonds kansas
about that last one….
For all my warnings re: POBs to Brownback, he did not take my advice. Can you believe it?
Gov. Sam Brownback has signed a bill approving the issuance of $1 billion in state pension bonds, his office announced Thursday.
SB 228, which Brownback signed Wednesday, will put an influx of cash into the state’s pension system for teachers and state employees, reducing the unfunded liability to $6.3 billion from $7.3 billion.
The state will also have to pay interest on the bonds. Critics have compared this to using a credit card to pay off the debt on another credit card.
The state is planning to invest the proceeds of the bonds in hopes that the rate of return will surpass the interest on bonds.
The move has been called risky by the Wall Street Journal, but the state has done it before.
Oh, they’ve done it before. MUST MEAN IT’S A-OKAY.
Now, authorizing the sale does not mean it will actually occur…..
…oh, whatever. Nice knowin ya, Kansas.
John Bury puts down the record on NJ downgrades:
2/9/11 S&P Downgrade: AA- from AA
4/27/11 Moody’s Downgrade: AA3 from AA2
8/18/11 Fitch Downgrade: AA- from AA
4/9/14 S&P Downgrade: A+ from AA-
5/1/14 Fitch Downgrade: A+ from AA-
5/14/14 Moodys Downgrade: A1 from AA3
9/5/14 Fitch Downgrade: A from A+
9/10/14: S&P Downgrade: A+ to A
4/16/15: Moodys Downgrade: A2 from A1
Heck of a job, Christie.
New Jersey officials are launching a formal investigation into skyrocketing taxpayer fees paid to Wall Street firms by Gov. Chris Christie’s administration. As Christie has called for cuts to retirees’ pension benefits, his administration has paid ever-bigger fees to firms whose executives have made campaign contributions to Republican groups affiliated with the GOP governor.
The announcement of the new probe followed an investigative series by International Business Times documenting a significant spike in disclosed payments to financial firms.
Despite calls from investors like Warren Buffett for pension systems to avoid high-risk hedge funds, private equity firms and other so-called alternative investments, Christie officials have plowed billions of dollars of pension savings into those investments. They have delivered results that have trailed low-fee stock index funds while sending big fees to Wall Street firms. Indeed, under the Republican governor, the state pension’s disclosed fees have risen from $140 million in 2010 to more than $600 million in 2015.
While I agree that pensions should not be chasing returns, the accounting trickery encourages this type of behavior.
So, let us compare the $600 million in fees to the assets and returns.
TRENTON — New Jersey’s pension fund earned 7.3 percent on its investments last year, which state officials said beat market expectations.
New Jersey’s public worker pension system is underfunded by about $37 billion. With roughly 770,000 active and retired employees, the fund doles out $650 million to $700 million a month to pay for pensions and benefits. Its roughly $80 billion in assets puts the state’s fund among the 12 largest public pension funds in the U.S., according to the Division of Investments.
Let’s compare the fees against the asset amount: $600M/$80B = $600M/$80000M = 6/800 = 3/400 = 0.75%
75 basis points.
To be sure, those are the disclosed fees, but 75 bps doesn’t sound all that high to me. It is high compared to index funds, I will admit. I think I’m paying 12 bps for that in my own retirement accounts.
But I’m not doing anything fancy.
Anyway, it’s underfunding that’s killing NJ. Not asset management fees.
All the way back in 2013, when I learned of Detroit’s insane plan to issue “bonus checks” to retirees every time the pension system’s investment returns exceeded the target rate, I was rendered speechless. Anyone with even a modicum of understanding of how investments work understands that the target return is the average return expected over a number of years. Some years will be higher, some years lower, but over time, these should average out. If you hand out the “excess” during the good years but don’t dock checks during the years in which your funds underperform, you’ll quickly drive your pension into insolvency. What kind of numerically illiterate trustees would allow this madness?
Hers was all the way back in 2013. All the way back in 2008, I learned of some appalling practices in public pensions, and so I started a watch at the Actuarial Outpost.
I am rarely rendered speechless, though the Kansas thing did put me off my drink for a few minutes and I decided I did not want to talk about it more at the time.
BUT SERIOUSLY, KANSAS, DON’T LET THE DEVIL DRAG YOU DOWN TO HELL!
Tales of Pension Fraud: Hidden Deaths and Elder Abuse
Pension Quicktakes: How About that Stock Market? And Red Light Cameras?
Public Pension and Finance Quick Takes: Will You Pay My Lottery Bills? Will You Pay my Healthcare Bills?