It’s that time of year again! Time for the National Conference On Public Employee Retirement Systems to update its Scrooge list to show who are verboten to have anything to do with public pensions! Shame! Shame!
Let’s go to the press release: NCPERS Expands List of Think Tanks that Undercut Pensions
28 Organizations Take Positions That Put Them At Odds with Defined-Benefit Plans
The National Conference of Public Employee Retirement Systems has added four think tanks to its list of research and policy organizations that take biased and unreasonable positions that undercut the interests of public pension plan participants and beneficiaries.
The list of 28 policy and research organizations, known as Schedule A, is part of the NCPERS Code of Conduct for Public Pension Service Providers, which was unveiled in May 2015. The Code of Conduct was designed to help pension plan fiduciaries and managers to articulate strong, consistent ethical expectations for service providers.
The newest additions to Schedule A are the Independent Institute, Washington, D.C.; the Mackinac Center for Public Policy, Midland, Mich.; the Mercatus Center at George Mason University, Arlington, Va.; and the Nelson Rockefeller Institute on Government, Albany, N.Y. Under the Code of Conduct, NCPERS urges its corporate members to disclose whether they contribute to these or other Schedule A organizations.
I will post the list in all its glory soon, but here’s the issue:
Fiduciary duty?! What’s that?!
Note that pretty much none of the orgs I’ll list below have anything to do with pension management themselves, but they may receive corporate or individual funding. This blacklist is trying to choke off third party funding by saying neither individuals nor corporations that have anything to do with public pension management should provide any money to these orgs.
Schedule A identifies research and policy organizations that:
- Advocate or advance the claim that public defined-benefit plans are unsustainable.
- Advocate for a defined-contribution plan to replace a public defined-benefit plan.
- Advocate for a poorly designed cash-balance plan to replace a defined-benefit plan.
- Advocate for a poorly designed combination plan to replace the public defined-benefit plan.
- Link school performance evaluations to whether a defined-benefit plan is available to teachers and school employees.
That last one is weird, especially given many teachers don’t get pensions at all, because they have to stay ten years on the job to vest their pension benefits! It would be illegal to do that with a 401(k) [or even a defined benefit plan] in the private sector.
THE LIST OF DOOOOOOOM
So let’s check out their current list:
American Enterprise Institute
American Legislative Exchange Council
California Common Sense
California Policy Center
Howard Jarvis Taxpayers Association
Jessie Ball DuPont Fund
Laura and John Arnold Foundation
Mackinac Center for Public Policy*
Manhattan Institute for Policy Research
Massachusetts Taxpayers Foundation
Mercatus Center at George Mason University*
National Council on Teacher Quality
Nelson Rockefeller Institute of Government*
R Street Institute
Show Me Institute
Taxpayers for Sustainable Pensions
Texas Public Policy Foundation
The Pew Charitable Trust
Wyoming Liberty Group
*NEW in 2017
I’m going to be linking to a few of the orgs’ responses, but WTF re: The Pew Charitable Trust & the Brookings Institute.
Most of the orgs I see above are libertarian or plain conservative groups who have bitched about out-of-control government costs on many scores, so it’s not surprising that an org where the point is SHOW ME DA MONEY is not going to like them.
But neither Pew nor Brookings are in any way conservative, and if they’ve been huge proponents of destroying public pensions, that’s news to me. Let me search!
THE LIBERAL PARIAHS?
Brookings Institute: Public Pension Reform Series
In their June 2013 paper, Are Public Pensions Keeping Up with the Times?, Matthew M. Chingos, Grover J. Whitehurst, and Richard W. Johnson reported a $2.7 trillion nationwide funding gap in states’ public pension systems. In two new follow-up papers, Chingos, Whitehurst and colleagues seek to answer the inevitable question provoked by their initial work: What can be done about the rampant underfunding of public pension systems?
Improving Public Pensions: Balancing Competing Priorities by Patten Priestley Mahler, Chingos, and Whitehurst makes a significant contribution to the public pension discourse by providing policymakers and stakeholders with a framework for evaluating proposed reforms to pension systems – even in light of the frequently competing objectives of such systems. The authors begin by defining three essential goals of a pension system: to provide adequate retirement security; to ensure fiscal sustainability; and to maintain/improve public-sector workforce productivity. By analyzing the performance of various pension system designs against these three goals, the authors conclude that a collective defined-contribution plan is best suited to meet the complex objectives of a pension system.
Oh, because they point out that defined benefit plans have become insanely expensive, they’re to be cast into outer darkness. Got it.
Pew Charitable Trusts: Public Sector Retirement Systems
I’m not going to copy it over, but it looks like both Brookings & Pew had their activity around 2013/2014, and have since been quiet. Kentucky’s Successful Public Pension Reform from Pew in 2013 makes me really wonder, but I’ll get back to Kentucky another time. What a mess. Pew has done stuff since 2014, but they just haven’t updated their issue page well since then.
Pew & Brookings tend to be what I consider middle-of-the-road, and by no means conservative. Indeed, I mainly consider them liberal, but being an archconservative myself, I may not have a good measuring stick on that.
In any case, this is not to say there aren’t some questionable pension proposals from leftish sources that NCPERS should be casting a jaundiced eye on.
But they may want to think about who exactly is undermining the stability of public pensions.
DEFINED BENEFIT IS THE BEST CHOICE! FOR OTHER PEOPLE!
NCPERS, based on their latest available 990 filing, pays well:
They also provide a pension. In fact, two pensions. There is a Defined Benefit Plan established in 2007 and a 401(k) Plan established in 2006. As of 12/31/15 there were four participants in the Defined Benefit Plan (three of whom were active) and six participants in the 401(k) Plan (four active). However the bizarre twist here is that an organization that advocates for Defined Benefit plans in the public sector and decries all attempts at even a DB/DC hybrid funds the retirements of their own employees primarily through their 401(k) plan.
Of the total assets in both plans over 70% ($677,144 out of $926,211) was in the 401(k) plan. The Defined Benefit Plan to which only $20,000 was deposited for 2015 – compared to $42,718 into the 401(k) – is not the main retirement vehicle and is currently 132% funded. No issues for anyone at NCPERS with getting retirement plan money when the time comes….as there will be for the people NCPERS claims to advocate for.
At the Actuarial Outpost, every so often we have a discussion about the type of retirement benefit offered by our companies. Our percentage of DB plans is relatively high for white collar work in the private sector, but many of these actuaries work for actuarial consultants in the DB pension space.
They kinda have to provide DB pensions, or look bad.
Bury did a followup post, looking at what some of these blacklisted think tanks provide as pay and benefits. Not too different from NCPERS, it turns out.
The people who, in theory, know more than us have effectively abandoned Defined Benefit plans. Even the primary advocate of Defined Benefit plans in the public sector (NCPERS) has only a token DB plan that could just as easily switch the $20,000 annually being deposited into it to the much larger 401(k) plan that they maintain.
Could they all be jealous of public sector workers and their super-underfunded Defined Benefit plans?
Speaking for myself, I’ve got a legacy 401(k) and separate employee retirement account at TIAA (I rolled over one employer’s 401(k) into the TIAA account, when I found out I could do that), I’ve got a DC plan with a standard, small match at my current employer. No, I don’t max out my contributions, as I have current expenses of kids with special needs that I have to pay for out-of-pocket, but I do max out the match. I’ve been increasing my contribution %age every year, if I have a base pay increase.
The TIAA plan was great – the percentage contribution was graded by age (highest age at highest ages), and the amounts were akin to DB plan %age contribution (albeit, not the 50 you’re seeing for some public plans). I have a small amount of the money in their fixed annuities, which guarantees a lifetime income stream (yes, it’s a small guarantee, but these types of guarantees are expensive and they have to recognize that….unlike public pensions.) But there’s also a variable annuity portion (CREF… I think they rebranded it, though.)
I really like the TIAA set up, and there is more to it than I’m writing above. TIAA has done very well for its participants throughout the years….
….and by the way, TIAA has been providing these types of plans to universities/colleges, including state-run universities/colleges, for almost 100 years. Perhaps NCPERS should look into what TIAA does. Yes, I know they provide a competing business model, but it’s something to think about. Saying “the pensions must be paid!” doesn’t make them get paid, after all.
THE BLACKLISTED BITE BACK
So the various organizations that are listed by NCPERS aren’t going to take this sitting still, and have their own press releases out:
Anyone who needs evidence to back up our assertion that government pension systems are joined with powerful financial special interests should consider the relationships between NCPERS and their “corporate membership.” NCPERS describes itself as “the principal trade association working to promote and protect pensions by focusing on Advocacy, Research and Education for the benefit of public sector pension stakeholders.”
NCPERS helpfully discloses those 36 corporations who have purchased the “enhanced level of corporate membership,” and it includes some of the most powerful financial firms on earth. To name a few: Acadian Asset Management, BNY Mellon, Evanston Capital Management, J.P. Morgan, Milliman, NASDAQ, Nikko Asset Management Americas, Northern Trust, Prudential Insurance Company, State Street Corporation, and Ziegler Capital Management.
One would think corporate members with this much clout would mean the tail wags the dog, but NCPERS is a very big dog. As the political voice for nearly all major state and local public employee pension systems across the entire U.S., their lobbying muscle is backed up by nearly $4.0 trillion in invested assets. At one of their recent conferences, Chevron was a “platinum sponsor.”
Will Chevron ever oppose the lobbying agenda of NCPERS? Probably not. According to Yahoo Finance, BNY Mellon owns 1.34% of Chevron’s stock, Northern Trust owns 1.35%, and State Street Corporation owns 4.7%. That’s just the holdings of the NCPERS “enhanced members.” Moreover, pension systems don’t just invest through intermediaries such as BNY Mellon, they invest directly in these corporations. There is no financial special interest purchasing publicly traded U.S. stocks that is bigger than the pension fund members of NCPERS, and there is no client to the financial firms on Wall Street bigger than the pension fund members of NCPERS. Nothing comes even close.
No report on NCPERS would be complete without documenting just how thoroughly it is dominated by public sector and union operatives. Their president “served 3 terms on the Chicago Fire Fighters Union Local 2 executive board, resulting in two decades of union leadership.” Their first vice president, a retired police officer, “served as the first woman president of her union, FOP Queen City Lodge No. 69, from 2005 through 2015.” Their second vice president “is currently the statewide president of AFSCME Council 67, representing well over 30,000 members in 21 separate political jurisdictions.” Their secretary “has more than 30 years of service as a Tulsa public employee.” Their treasurer “served as a firefighter for 41 years. During his career, he held offices on the board of the IAFF Local 58.” Their immediate past president “is the treasurer of the United Federation of Teachers (UFT), Local 2, American Federation of Teachers (AFT).”
That’s everyone. The entire management team of NCPERS. A government union controlled financial juggernaut, marching in lockstep with the most powerful players on Wall Street. The consequences are grim for the rest of us.
Being in the biz myself, I don’t find these “Wall Street” behemoths all that scary. It does look a little pay-to-play, of course, as these “behemoths” provide services to public pension plans in asset management, actuarial valuation, etc. And that various “service providers” would be blackballed if they even THOUGHT of donating to these various think tanks on the NCPERS blacklist gives you an idea what would happen if you stepped out of line.
Yeah, whatever. I doubt they were doing much contributions to these orgs to begin with, though both Pew & Brookings should be just fine for your standard liberal groups.
Minnesota Center for Fiscal Excellence: A Profile in Shamelessness:
As public pension debacles continue to unfold around the country threatening both public services and the retirement plans on which millions depend, there are two possible avenues their defenders can pursue. Option 1: work diligently and aggressively to understand the reasons and contributing causes to these current conditions and embark on necessary remedial actions and reforms. Option 2: flatly deny that any pension sustainability problem exists and blacklist any organization that has the temerity to suggest otherwise.
Introducing the architects of option 2: the National Conference on Public Employee Retirement Systems or NCPERS, the self-proclaimed “Voice of Public Pensions.” According to its website, NCPERS is the largest trade association for public sector pension funds; providing a network for the large number of trustees, administrators, public officials and investment professionals who collectively manage nearly $3.7 trillion in pension assets held in trust for approximately 21 million public employees and retirees. Membership includes unions, public pension funds, organizations representing public pensions or public employees, and the wide variety of businesses that service this industry (think big investment firms, banks, actuarial and legal firms, for example).
Trade associations are supposed to be aggressive advocates for their membership, and NCPERS delivers in a unique way. Under the deliciously ironic theme of “promoting transparency” NCPERS has created what it calls its “Schedule A” — a blacklisted group of state and national non-profit public policy organizations that “take biased and unreasonable positions that undercut the interests of public pension plan participants and beneficiaries,” and “engage in ideologically, politically, or donor driven activities to undermine public pensions.”
According to NCPERS “Schedule A” serves a simple purpose: “Pension funds are naturally leery of paying fees to service providers that support organizations that intentionally undermine public pensions, and can use our list to identify potential conflicts.” Or if you prefer a more Tony Soprano-like translation, “if you guys want a piece of our $3.7 trillion business, choose your friends very carefully.” (Which might help explain J.P. Morgan’s stunningly contrarian conclusion in a widely circulated 2014 policy paper that “most states are in good shape” with respect to their long term pension and retiree health care obligations. J.P. Morgan is a NCPERS corporate member.)
If the “Schedule A” membership roster was populated only with staunchly conservative organizations who are ideological opponents of public sector defined benefits plans, the blacklist might be at least understandable. But it’s not. The latest additions include the State University of New York’s Rockefeller Institute of Government— without question one of the most distinguished, credible, and influential fiscal policy education and research organizations in the nation. And here is the kicker — the Rockefeller Institute is a supporter of the concept that public sector defined benefit pension plans should continue to be viable and secure.
There’s more to the letter at the link.
WHO ARE THE FRIENDS OF THE PUBLIC PENSIONS?
As the above intimate, some of the NCPERS blacklist smacks of deliberate blindness to the problems of public pensions.
Pretending that all is well is not going to make the pensions get paid, as mentioned repeatedly before.
Some of the blacklisted groups have made the very common observation that some of the promises already made are unlikely to be able to be paid. I doubt the moderate & liberal groups are really all that interested in cutting pensions, but they do realize that some kind of cut – implicit or explicit – will be made for the very simple reason that we ain’t got the money of. Really, we ain’t got the money of. Not only we ain’t got the money of, we ain’t got the young people of.
(Yes, I’m being Southern-ish above. Yankee interpretation: There’s not enough money, there’s too many old people, and not enough young people with enough money to pay for the old people.)
Some very well-meaning people are trying to do a triage before retirees end up like those in Prichard, Alabama, Detroit, or Loyalton, California. Those are current retirees seeing benefits disappear, not some theoretical future loss.
There will be more.
So one can figure out how to deal with the problem already accrued to try to protect current retirees and workers, and then figure out what will be most stable going forward. (Hint: it won’t be “let’s do more of what got us here”).
Tarring those who give answers you don’t like can mean a couple of different things:
1. If it effectively shuts those voices out, you can end up with very ugly “surprises” that should not have been surprises in the first place.
2. If you do not shut out those voices but don’t engage their arguments, you may find choices being made without your input at all.
The first part is the old phase, I’d say. The ugly surprises are here, and there should have been no surprise involved. It took decades to get to this point – this isn’t an overnight development.
The second one… that may be the trend to come.
At least NCPERS is doing nonpartisan targeting here, when moderate and liberal organizations are tarred alongside superduper conservative ones, and I highly appreciate that. But it’s obvious it’s not the motivations that get an org added to the list, but the specific recommendations.
As DB plans come more and more under the squeeze as the demographic bulge of the boomers retire, and as some of these pension promises have been more generous than originally thought, NCPERS is going to be the one needing to do a lot more defending DB plans.
And won’t it be a kick in the pants if the would-be blackballer finds that nobody is listening to it any more.
Because we know “What ya gonna believe – our pretty infographics or your lying eyes/tax bills?” has been a real winner the past few years.
Kentucky County Pensions: 60 Percent Fundedness and Decreasing is Awful
Dallas Police and Fire Pensions: Pulling into the Abyss
Stupid Public Pension Trends: Divestment Expands