Welcome to this week’s edition of This Week in Pensions! This is the news you need to know in the fight for a secure retirement.
Before you dive into our top stories from this week, check out some stories of public employees helping their communities during the coronavirus pandemic.
Here are the top stories from this week:
Wyoming’s retirees support economic activity in our local communities by Anastasia Marchese. In this op-ed for the Wyoming Tribune Eagle, Marchese (the Acting Director of the Equality State Policy Center) writes how retired public employees provide a valuable economic boost for the state. Marchese cites a study from the National Institute on Retirement Security (NIRS) which found that, in 2018, pension expenditures supported 5,121 jobs that paid $219 million in wages and salaries, along with $891.5 million in total economic output throughout the state and $129.4 million in federal, state and local tax revenues. Furthermore, according to NIRS, every dollar paid to a retiree results in $1.12 in economic activity in Wyoming. And even though only 16% of funding for Wyoming’s public pensions comes from employer contributions, taxpayers also experience a high return on investment, as every dollar spent by taxpayers in Wyoming results in $6.90 in economic activity in Wyoming. This op-ed shows that the spending from pension benefits creates real economic value in communities across Wyoming.
Teachers deserve better by Debbie Hogue-Downing. In Oklahoma, lawmakers are currently considering House Bill (HB) 2293, which would reduce payments into the state’s Teachers’ Retirement System (TRS) by $28 million a year. In an op-ed for the Oklahoman, Hogue-Downing, a retired public educator, shares how devastating HB 2293 would be for public pensions in the state. After teaching for 32 years, Hogue-Downing has retired with security because of the defined-benefit pension she has earned. “I live very modestly and I have my pension to thank for that,” she writes. “Without my pension, I would not be able to survive in retirement.” Now, because TRS relies on both employer and employee contributions, Hogue-Downing notes that “not only would [the] pension system lose those direct dollars,” but it would “also lose out on millions more in lost investment revenue annually.” After it passed the State House, the State Senate will be voting on HB 2293 next week, and we hope they listen to the voices of retired public employees like Hogue-Downing on how damaging HB 2293 would be for TRS.
Alaska Supreme Court restores access to public employee and teacher retirement benefits by Matt Miller. Last Friday, the Alaska Supreme Court ruled that the state’s public employees could buy back into Tier 1 of the states’ Public Employees’ Retirement System (PERS) and Teachers’ Retirement System (TRS). Both systems provide a defined-benefit plan with guaranteed income in retirement. In 2005, the Alaska legislature closed the state’s pension plans to newly hired public employees and moved them into a riskier, less secure defined-contribution retirement plan. Since the state does not participate in Social Security, this ensured the defined-contribution plan was the sole source of retirement savings for many workers, making the court’s decision a great victory for Alaska’s hard-working public employees and their retirement security.
Bill changing Florida pension system fixes a problem that doesn’t exist by Scott Mazur. Yesterday, the Florida Senate passed Senate Bill (SB) 84, which would close the Florida Retirement System (FRS) to nearly all newly hired public employees and place them in a defined-contribution plan. Earlier this week, Mazur argued in an op-ed for the Tallahassee Democrat that passing SB 84 is a misguided move because FRS does not need to be repaired. “[FRS] is one of the most well-funded plans in the country,” Mazur states. In our blog on SB 84 this week, we also noted that “in FY 2019, FRS’ funding level was at 84.1%, well above the national average of 72.2% for the same fiscal year.” Mazur argues that closing the plan would negatively affect the state’s economy, as FRS produces around $20 billion in economic output from the spending of retirees’ pension expenditures. Finally, Mazur claims that SB 84 would also hurt Florida’s ability to recruit and retain qualified public employees. We cited research from NIRS on our blog this week which “shows that at least 70% of teachers cite the offered pension benefit as a major reason for going into public service,” making pensions a valuable recruiting tool for public employers. Now that the State Senate has approved SB 84, it’s unclear if the bill will become law before the end of the legislative session on April 30, as the State House does not have a companion bill yet.
8 big things you need to know about Colorado’s $34 billion state budget by Jesse Paul. This week, Colorado legislators started the debate on SB 205, the state’s budget for the year. The budget currently restores a $225 million yearly payment to the Public Employees’ Retirement Association (PERA) agreed to two years ago when the state legislature passed SB 200. SB 200 was a package of reforms designed to shore up PERA’s funding that included increasing employee and employer contribution rates and reducing cost-of-living adjustments (COLAs) and an annual direct payment from the state. Lawmakers skipped the annual direct payment last year.
Markets rebound boosts US state pension plans by Chris Flood. At the beginning of the coronavirus-induced economic crisis, some pension critics exploited it to try and gut public pensions. However, recent financial market data shows that public pensions have withstood the market turbulence well from the past year. As Flood’s article for the Financial Times notes, “the aggregate funded ratio for US state pension plans reached 78.6% at the end of December,” which puts most plans in solid fiscal shape. Flood also interviewed Tyler Bond, the research manager at NIRS, on why pensions have been able to ride out the economic volatility. “Public pension plans have made design changes over the past decade and adopted more conservative assumptions about future growth that have helped them to become more resilient,” Bond said. “The rally in the US stock market means we are likely to see an improvement in the funded status of more public pension plans once data for the current fiscal year ending in June 30 are reported.”
Be sure to check back next week for the latest news in the fight for a secure retirement!