Reprinted from Minnesota Teacher Retirement Association release
Opponents of defined-benefit pensions are having a field day with the news out of Detroit. Though that city’s financial woes have much more to do with lack of a diversified economy, stark population and demographic challenges and mismanagement at city hall, public-pension foes nationwide are trying to argue that pensions sank Detroit and will sink other cities, too.
Kim Crockett of the Center of the American Experiment (http://www.americanexperiment.org/) is only the latest voice in a well-orchestrated effort to misrepresent the role of pensions in state and local government financial management. On her blog, she claims that Minnesota taxpayers will pay higher borrowing costs because of pension debt, and she cites Moody’s slight downgrade of Minneapolis’ credit rating. Moody’s signaled last year that it was going to take an approach to pension liabilities that would result in downgrades for cities nationwide.
Here’s what the ratings agencies said about Minnesota’s pensions in their August 2012 ratings of our state’s general obligation bonds:
- Fitch: “Pension funding is adequate, and in the 2010 session the state passed pension reform that increased employee contributions and reduced benefits, affecting both current employees and retirees. … The burden of net tax-supported debt and adjusted unfunded pension obligations as a percentage of personal income is well below the median for U.S. states.” (Fitch Ratings, 8/2/2012)
- Moody’s referred to Minnesota’s “relatively well-funded pension system” as one of the state’s five “credit strengths.” (Moody’s Investors Services, 8/3/2012)
- Standard & Poor’s Ratings Services: “Minnesota’s pension plans are reasonably well funded relative to those of other states and there have been significant reform measures implemented in the past couple of years aimed at lowering the liabilities. … Litigation relating to these changes was resolved in favor of the state and we would expect these changes to improve funded ratios over time.” (S&P Ratings Services, 8/3/2012)
Ms. Crockett repeatedly charges that “accounting tricks” are being used to “obscure the size of the pension problem” and hide “the pension crisis from public view.” Information on the financial status of Minnesota’s public pensions is readily available to the public. Each of the three statewide funds must issue a Comprehensive Annual Financial Report every January, provide financial status updates to the legislature in open meetings at least once a year, and disclose annual actuarial valuation reports – among other financial documents.
The problem for Ms. Crockett is that the facts don’t support her “pension crisis” storyline – therefore, someone must be hiding something. So she is urging voters to pressure Minnesota’s elected officials and convince them that there is a Detroit-style crisis where none exists.