Posts tagged: PERSI
PERSI, the Public Employee Retirement System of Idaho, has seen its fortunes improve dramatically since the economic downturn, lawmakers learned this morning, and during fiscal year 2013, which ended June 30, PERSI reached an all-time high asset value in excess of $13 billion. Gains have continued since then, legislative budget analyst Robyn Lockett told JFAC this morning during the joint budget committee’s interim meeting in Pocatello. By the end of the fiscal year, PERSI’s funding ratio had climbed to 87 percent; systems with funding levels above 80 percent are considered top performers by the Pew Center on the States. “PERSI is solidly in that elite group,” Lockett said.
State law requires contribution increases, for both employees and employers, when the amortization period for unfunded actuarial accrued liability exceeds 25 years; when that happened, a three-year phased increase was approved by the PERSI board in 2008, but postponed because the state couldn’t afford it in 2009. The increase kicked in this year, fiscal year 2014; it was the first increase since 2004. Now, however, the amortization period has dropped to 12.1 years. So the next phase of the rate increase scheduled for next year, fiscal year 2015, could be postponed; the PERSI board will vote on that issue at its meeting Oct. 15. “There is some speculation that they might postpone that increase,” Lockett told JFAC.
The Public Employee Retirement System of Idaho has announced that it's now 91.7 percent funded, as of April 29, up from 78.9 percent at the end of the last fiscal year, June 30, 2010; the preferred standard for such plans is to be at least 80 percent funded for all future liabilities. The PERSI fund's value has jumped nearly 65 percent since March 6, 2009; it's now valued at $12.2 billion, up from $7.6 billion then. “By applying a conservative approach in both its investing and operational practices, and by relying on the sound structure put in place by state legislators nearly 50 years ago, PERSI has remained one of the strongest and best run public pension systems in the country,” said Jody Olson, the PERSI board chairman. “Maintaining discipline during tumultuous times can be difficult; sticking to a proven investment strategy has contributed to our recovery.” You can read PERSI's full announcement here.
PERSI, the Public Employee Retirement System of Idaho, will postpone its contribution rate increase that had been scheduled for next July 1, based on the system’s current strong funding position and the impact an increase would have on the budgets of public employers and employees in the coming year. “Significant investment gains in recent months bolstered PERSI’s funding status to nearly 88 percent, relieving the need for a rate increase at this time,” said Jody Olson, chairman of the PERSI board. “We are confident postponing the rate increase will not compromise PERSI’s stability, and we know how much it will help the state and other public employers and their employees manage tight budgets. The action taken today will provide some much-needed breathing room.”
Postponing or even cancelling rate increases is not uncommon for PERSI; two others were first postponed and then canceled in the past decade due to the system’s strong funding position.
The PERSI board also announced today that it’ll grant PERSI retirees a mandatory 1 percent cost-of-living adjustment effective March 1, 2011; that’s based on a measure of consumer prices that went up 1.15 percent from August of 2009 to August of 2010. PERSI has 125,000 members, retirees and beneficiaries and 739 employers, the largest of which is the state; local governments across the state also take part. You can read PERSI’s full announcement on the rate increase here and its COLA announcement here.
Here’s a news item from the Associated Press: BOISE, Idaho (AP) — Government workers and teachers may avoid a planned increase in their pension contributions that could cost them hundreds of dollars after a key lawmaker asked the board overseeing their $10 billion retirement account to forego a planned rate hike. Sen. Dean Cameron, the Joint Finance-Appropriations Committee co-chair, suggested the board that governs the Public Employee Retirement System of Idaho not recommend hiking the contribution rate come July 1. Cameron’s motivation is twofold. For one, Idaho doesn’t have $15 million — its share of the increase in fiscal year 2012 — due to a looming budget gap. But as other states consider trimming pension benefits to cover massive liabilities, Cameron says taking focus off Idaho’s fund during the 2011 Legislature and beyond will reduce lawmakers’ temptation to tinker with it.
Jody Olson, chairman of the PERSI board, told the Associated Taxpayers of Idaho, “PERSI is not like Social Security, and it’s not going broke. … It is sustainable for the future.” For a public employee retirement system to be 80 percent funded is considered “excellent,” Olson said. “Ours is now, as of yesterday, 86 percent funded. … We’re pretty bullish on the future.”
Idaho’s public employee retirement system has been deluged by calls, email and visits from worried state retirees who are concerned that it’s going to be eliminated or cut back, but PERSI Director Don Drum said there’s no truth to the rumors driving those concerns. “I think it’s being driven by national media coverage,” Drum told lawmakers. “There are many funds out there that are in trouble.” But Idaho’s isn’t, he said.
When he’s heard rumors that some Idaho legislator is working on legislation to change or eliminate PERSI, Drum said he’s tried to track them down and found them all false. “I have not found any legislator who is working on any changes to PERSI,” Drum said. “I’ve talked with the governor, the governor is not working on any changes to PERSI. That’s the message I’m trying to get out.”
He added, “I’m not aware of anyone who is working on any changes to PERSI, and the fund is recovering well. … Time is on our side.”
Idaho’s public employee retirement fund gained a billion dollars on its investments in the past year, and fund officials say it’s healthy, despite a $2.8 billion unfunded liability over the long term. “We’ve just made a good rebound,” said Patrice Perow, Public Employee Retirement System of Idaho spokeswoman. “We’ve been healthy - we’re in good shape, particularly compared to our peers.”
PERSI ended the fiscal year on June 30 77 percent funded, up from 73.3 percent a year earlier, when the unfunded liability hit $3 billion. That figure prompted Idaho House Republicans to push this year to block a scheduled 1 percent cost-of-living increase for state and local government retirees, but the move, which angered retirees who said lawmakers were taking away their money, not the state’s, fell short in the Senate. “I just chalked that up as lessons learned,” said House Speaker Lawerence Denney. He said, “That’s good news that they’re gaining. I just hope everything continues.”
Experts recommend that pension funds be 80 percent funded as a benchmark; Idaho’s was funded at 105.1 percent as recently as 2007, and 2009 and 2010 are the only fiscal years in the past decade that it fell below 80 percent.You can read my full story here at spokesman.com.
There’s nothing in the record that shows why lawmakers passed legislation in 1993, with only one dissenting vote in either house, to ban severance payments to state employees who leave voluntarily. There was little discussion in committee, where the bill passed near-unanimously. But a look back at news clips from the time provides an answer: That year’s legislative session opened just as a big scandal was breaking over new U.S. Sen. Dirk Kempthorne’s payment of more than $38,000 in severance bonuses to two top aides who worked for him when he was mayor of Boise, when they left city employment to take higher-paid positions on his Senate staff. The severance bonuses were paid with city funds. The move caused such a fuss that the office of the new senator, on his first day in D.C., was besieged with outraged calls from Idaho, particularly as he had campaigned on a reform platform and decried congressional perks and “midnight pay raises.”
Kempthorne initially said it was then-Boise City Council President Sara Baker who had approved the bonuses, but she said she’d done so only at his request. It turned out the city of Boise had had a severance pay policy in effect since 1990 designed to give it a way to get rid of top executives without lawsuits, but it also was being used to pay a minimum of two months’ pay to top city officials who left for better jobs. After a week of building outrage, both Kempthorne aides paid the money back to the city, and the City Council revoked the policy. In that year’s legislative session, two pieces of legislation were introduced to ban severance payments, one for state employees who leave voluntarily, the other for city or county employees. The city and county bill died on the Senate floor, but the state one passed both houses overwhelmingly, was signed into law by then-Gov. Cecil Andrus and took effect on July 1. Then-Sen. John Peavey, D-Carey, sponsor of the successful bill, said, “It kinda takes a jolt to get something done in the Legislature with that kind of support. Obviously everybody was of a single mind over there.”
He added, “Y’know, there’s that old barn-door story, it’s all well and good to close the door after the horses are gone. In this case, we had a warning, so we busily went around and shut doors before anything else happened.”
Two state laws are at play in the issue of recent state purchases of PERSI service for certain retiring employees: 67-5342, which bans any severance pay to a state employee who leaves voluntarily, and 59-1363, which covers purchases of additional membership service by a PERSI member. That statute states, “The member shall be solely responsible for the costs of such purchased service, except that an employer may participate in the costs at its option.” Employers who are part of PERSI include not only the state, but local governments, some of which permit severance and have established early retirement incentive programs. Purchases of service by employees have become increasingly common in recent years, according to PERSI Director Don Drum, particularly as retiring employees opt to roll the money from their 401K accounts into PERSI as they retire. Purchasing service is an expensive proposition, he noted; the employee must pay the full actuarial cost so that PERSI is not providing them with an enhanced benefit, they are purchasing an enhanced benefit. Click below to read more.
Idaho state agencies have spent more than $125,000 in the past six months to boost the retirement accounts of three departing employees, including one agency director - though Idaho state law bans all severance payments to state employees who leave voluntarily. Gov. Butch Otter’s administration maintains the payments don’t violate the severance ban because the state paid the money to the Public Employee Retirement System of Idaho, rather than directly to the employees. But at a time when many state workers are being hit hard by budget cuts, furloughs and layoffs, lawmakers and a state employee association are upset about the move, and have questions both about its legality and its fairness. You can read my full story here from today’s Spokesman-Review.