I Learned Everything I Know from Wily Coyote

We may not like it, and we may not understand where it is leading us as human beings, but this is what is happening.
I sit here at a computer screen and I feel nothing for it, for it is a soulless and uncaring thing. I had teachers I loved and teachers I hated. With more maturity, of the thousands of students who passed through my classrooms, I had hundreds I truly loved as if they were my children–and some I was glad were someone else’s children, and I made a personal effort to do something good for even those. I never wanted to be rich or famous, but I wanted to be appreciated, and even loved a little. And I think maybe I was loved, a little. I am a human being, after all.


What is this brave new world we live in? And how is it that, in creating this new world, those I once cherished, now sitting on the other side of a computer screen, will blindly abandon their own children to the sterility and isolation of such an education? I at least lament their loss.
I retired with tears. And society may leave me beside the road to die at some point. Still, I am so thankful to have gotten out when I did. I did my teaching with passion and dignity. And I am rich beyond the wildest dreams of any plutocrat or their science and technology minions.


Pension commission compiles 2015 Omnibus Pension Bill

The Legislative Commission on Pensions and Retirement (LCPR) on Tuesday finished debate and compilation of the 2015 Omnibus Pension Bill. The commission expects to take final action on the bill after Easter and tentatively set the next hearing date for April 8.

Administrative bills pertaining to the Public Employees Retirement Association (PERA), Minnesota State Retirement System (MSRS) and Teachers Retirement Association (TRA) were approved and rolled into the omnibus bill. The St. Paul Teachers Retirement Fund Association (SPTRFA) proposal to change the fund’s COLA calculation by capping it at 2.5 percent upon reaching 90 percent funding was also included.

The panel held further discussion on the pension systems’ request for more board discretion than allowed under current law with regard to the contribution rate stabilizer. The systems’ proposed contribution stabilizer language in statute changes “mandatory” to allow retirement systems’ boards more flexibility in implementing contribution rate changes, though LCPR retains veto power.

PERA legislative director Shana Jones pointed out that current law is too restrictive and that the PERA board felt forced to recommend a contribution increase. Rep. Mary Murphy, D-Hermantown, said school districts can’t afford a contribution rate increase because “it would come at the expense of the kids.” LCPR Executive Director Larry Martin said that a quick estimate of a PERA contribution rate increase would be about $13 million employee, $13 million employer.

The commission approved motions to not approve contribution rate increases proposed by the MSRS and PERA boards. Those boards felt compelled to propose increases due to the mandatory nature of the stabilizer but did not support the increases.

Rep. Tony Albright, R-Prior Lake, asked how a lower assumed rate of return on investments would impact contributions. Jones said that PERA contributions would be sufficient with an 8 percent investment assumption.

Albright asked State Board of Investment Executive Director Mansco Perry to testify as to which is more important: investment of the assets of the plan versus contribution revenue over time. Perry said that generally investments would be the more important piece of the equation, since investments make up 70 percent of revenue for the state’s three plans. Perry said moving from 8.5 percent to 8 percent would have only a negligible impact on asset allocation, though he opined that it is “significantly more prudent” to move to 8 percent.

Kim Crockett, lobbyist for the Center of the American Experiment, testified on a number of issues. She said she strongly opposes the longer payment period for certain TRA leaves of absence because TRA faces large funding and contribution deficiencies. Crockett also opposed SPTRFA’s efforts to change its COLA, stating “taxpayers receive nothing in this bill.” Crockett also referred to a policy paper published by the center last summer that proposes putting all Minnesota public employees into defined-contribution or 401(k)-type plans instead of defined-benefit pension plans. 

Rep. Paul Thissen, D-Minneapolis, reacted to Crockett’s testimony and commented that the motivation of some testifiers is to make the public pension plans look unhealthy in order to privatize them. Thissen objected to the notion that taxpayers receive no benefit from teachers’ service, calling that suggestion “outrageous.”

Martin then walked the panel through the Omnibus Pension Bill. Sen. Sandy Pappas, D-St. Paul, asked TRA Executive Director Laurie Hacking to testify about TRA’s delay in changing the interest rate assumption.

Hacking defended the delay in changing the assumed rate of return on investment for TRA, arguing that the TRA board wants to complete the experience study scheduled to be released in June. She said that the impact on TRA of a lower investment return assumption is significant, and that waiting for the experience study would give TRA time to bring forward a reform package, if necessary, to deal with any contribution deficiency. Sen. Julie Rosen, R-Vernon Center, asked what might be in a reform package. Hacking said it would be premature to speculate until TRA has an opportunity to work with its stakeholder groups on options.

Several articles pertaining to PERA volunteer fire plans were adopted and included in the omnibus bill, which has not yet been passed out of the LCPR.

The 75(k) Retirement Plan (repost)

Do you spend $2 a day on coffee, Monday to Friday, the 50 working weeks of the year? Well, that comes out to 250 $2 cups of coffee—$500. What if you invested that in something other than cardiovascular disease? What if you invested that money in something like bonds?
Now this only applies to those who can afford those cups of coffee, and who are unwilling to sacrifice such a small pleasure. They work hard in a stressful job, under paid and over worked. Of course caffeine probably doesn’t help that situation, but common sense isn’t the point here. Let’s switch to the other end of the work spectrum–retirement at age 67. It may be higher in fifty years, but there’s not much short term financial interest in keeping us alive much longer than we do now. It will be easier to raise the cost of those last five years of life that are some 80% of our medical costs over a lifetime.
So, at age 67, retired, could you use an extra $75,000? It may actually only be worth between $45,000 and $60,000 in today’s dollars, but that’s still pretty nice—world travel? taking grandchildren to Disney Galaxy? sailing the coastal waters? This is figured using an inflation rate of 2% or 3%, (only 0.5% on the cost of coffee!) against a low investment return of 4%, for saving the cost of 250 $2 cups of coffee a year from the age of 20. Current inflation is about 1%, of course, but it will rise, and equity returns average well above 4%, if you don’t cash out in a crash cycle. And yes, if you saved twice as much, it would grow to twice as much. Also remember, this is on top of your Social Security and/or other retirement account income.
The coffee you buy today may be a good short term solution, but it has a short term effect, measured in hours at best. Your needs for advanced years are long-term needs. They are real and will be measured in years. You have three choices there: poverty or near it, working until you drop, or planning ahead starting now. You choose. It matters. It’s your life.

LCPR hears testimony on pension bills, 3 March

The Legislative Commission on Pensions and Retirement (LCPR), chaired by Rep. Tim O’Driscoll (R-Sartell), devoted the Tues., March 3, meeting to hearing testimony on three bills that address the investment return assumption, a contribution stabilizer proposal, and a self-correcting COLA mechanism.

Representatives of three public funds – Minnesota State Retirement System (MSRS), Public Employees Retirement Association (PERA) and St. Paul Teachers Retirement Fund Association (SPTRFA) – spoke in support of lowering the investment return assumption from the current “select and ultimate” rate to 8 percent (HF660/SF613). Legislation passed in 2012 directed the state’s public pension funds to use a “select” rate of 8 percent for five years and an “ultimate” rate of 8.5 percent after 2017.

Laurie Hacking, executive director of the Teachers Retirement Association (TRA) testified that TRA supports the investment return bill as originally written, omitting TRA. An amendment had been drafted to include TRA in the bill, but was not considered. Rep. Paul Thissen, D-Minneapolis, moved other amendments clarifying TRA’s exclusion from the bill.

Dave Bergstrom, executive director of MSRS, said that the investment return assumption is the “most important and powerful assumption” used to value pension fund assets and liabilities. He noted that the rate has not actually been 8 percent for the past two years, because actuaries must “blend” the rate for the five year period. The rate started at 8.35 percent and will ramp up to 8.5 percent, Bergstrom said.

Bergstrom added that MSRS’ actuary recommended a rate between 7 percent and 8 percent. He said that MSRS is pursuing the legislation to lower the investment return assumption to avoid paying a higher (2.5 percent) COLA to retirees and avoid having to return to the LCPR to ask for contribution rate increases.

Jill Schurtz, executive director of SPTRFA, also spoke in support of lowering the rate. She said that although moving to 8 percent would hurt the SPTRFA’s funding ratio initially – lowering it to about 64 percent – it is a more accurate assumption and should be the primary driver for determining the fund’s financial status.

Hacking testified that unlike MSRS, TRA has no need for an immediate change in the investment return assumption to avoid a higher COLA. Also unlike MSRS, TRA would experience a significant negative financial impact if the rate were lowered to 8 percent, increasing liabilities by $1 billion and producing a contribution deficiency of about 1.9 percent of covered payroll. She said that TRA administration and board of trustees prefer to wait until an experience study, mandated by law, is completed this year. This will permit TRA to quantify the impact of all assumption changes and work with its stakeholder groups to develop sustainability measures.

Sen. Sandy Pappas, D-St. Paul, asked whether TRA will have to change its COLA if the investment return assumption were lowered. Hacking said that TRA would need time to work with all stakeholders on how to offset the negative effects of a lower investment assumption.

TRA stakeholders showed up in force to testify about the investment return assumption and urge the panel to wait for TRA’s experience study and a planned State Board of Investment (SBI) asset liability study. Among those who testified in support of the bill as originally written (without TRA) were members of the Retired Educators Association of Minnesota (REAM), Minneapolis’ Committee of 13, Education Minnesota Retired, the Minnesota School Boards Association (MSBA), Education Minnesota, and the Minnesota Association of School Administrators (MASA). The American Federation of State, County & Municipal Employees (AFSCME) testified in support of the bill lowering the investment assumption for PERA and MSRS.

LCPR director Larry Martin reviewed HF566/SF518, which would change the contribution stabilizer law from mandatory to a recommendation. The proposal would provide the MSRS, TRA and PERA boards with more flexibility and authority to set contribution rates; the LCPR would still have the final say

During the contribution rate discussion, Martin explained the difference between market value of assets and actuarial value of assets, and recommended that the commission consider replacing the five-year smoothing method (actuarial value) with market value.

Keith Carlson, lobbyist for Minnesota counties, testified in support of HF566/SF518, noting that PERA was forced to increase employee and employer contribution rates by 0.25 percent. Mark Haveman of the Center for Fiscal Excellence also spoke in support of granting more flexibility and authority on setting contribution rates, saying that the move would help neutralize the politics around contribution rates. Haveman said that contribution rate reductions should only occur when justified by funded ratios.

Haveman also testified in favor of using a “risk free” investment assumption rate (4 to 5 percent). He added that if Minnesota does not use market value to evaluate the funds’ health, then funded ratios need to be the standard before any contribution rates are lowered.

The bill proposing a “self-correcting” COLA (HF565/SF519) was also heard, and each of the public fund directors spoke in favor of the proposal. All three bills (investment assumption, contribution stabilizer and self-correcting COLA) were laid over with the intent to include them in the omnibus pension bill, which would be voted on at a later date by the LCPR.

Next Tuesday’s meeting will focus on the PERA fire relief associations.