LCPR chair reluctant to act on sustainability this year, and what you can do!

The Legislative Commission on Pensions and Retirement (LCPR) met Tuesday evening to hear a number of pension bills, most of which were individual constituent bills.

At the end of the hearing, LCPR Chairman Tim O’Driscoll, R-Sartell, said that there will be one, perhaps two, more LCPR meetings during the session. He said that he has heard concerns from commission members about the sustainability proposals and that he is working on a “road map” for that legislation, which he plans to discuss with members at the March 29 LCPR meeting.

O’Driscoll said the sustainability proposals amount to a “$3 billion fix” that is not in sync with the budget cycle. He said he believes it is important for the LCPR to do it right the first time and avoid adopting a “half solution.” He said the commission’s staff and actuary need more time to evaluate the proposals and explore alternatives.

Sen. Sandy Pappas, D-St. Paul, said that it is unrealistic for O’Driscoll to plan for a one-time fix because problems and trends can be unpredictable. She said the commission should regularly monitor the pension systems’ funded status and make adjustments when needed. Rep. Mary Murphy, D-Hermantown, said that the LCPR needs to weigh in and take action this year. She indicated that she is not willing to wait, “but I am only one vote,” she observed.

In other discussion, the LCPR discussed legislation being drafted by O’Driscoll to increase PERA’s annual salary threshold for earning service credit from $5,100 to $14,800 for calendar-year employees and from $3,800 to $11,100 for school-year employees.

Julie Bleyhl and Sarah Lewerenz testified on behalf of AFSCME and expressed concerns about the negative impact of the proposal on lower-paid public employees who might be denied PERA service credit under the proposal. PERA Executive Director Doug Anderson testified that staff needs more time to analyze the actuarial impact of the proposal on the fund. LCPR took no action on the proposal.

Recap courtesy Susan Barbieri

What you can do.

Below is a letter that you may send to one or more members of the Legislative Commission on Pensions and Retirement
Here are the names of the members and their email and postal addresses. 

House Members:

Senate Members:

Representative Tim O’Driscoll, Chair
451 State Office Building,
651-296-7808
Senator Sandra L. Pappas, Vice Chair
3205 Minnesota Senate Building, 651-296-1802
Representative Tony Albright
407 State Office Building,
651-296-5185
Senator Julie A. Rosen, Secretary
139 State Office Building,
651-296-5713
Representative Sarah Anderson
583 State Office Building,
651-296-5511
Senator Barb Goodwin
2101 Minnesota Senate Building, 651-296-4334
Representative Sondra Erickson
479 State Office Building,
651-296-6746
Senator Jeff Hayden
3109 Minnesota Senate Building, 651-296-4261
Representative Ron Kresha
531 State Office Building,
651-296-4247
Senator Alice M. Johnson
3111 Minnesota Senate Building, 651-296-2556
Representative Mary Murphy
343 State Office Building,
651-296-2676 
Senator Tom Saxhaug
2111 Minnesota Senate Building, 651-296-4136
Representative Paul Thissen
267 State Office Building,
651-296-5375
Senator Dave Thompson
131 State Office Building,
651-296-5252

Here is a draft of a letter which may be copied and modified for your information and sent by email or post.

Dear (Senator or Representatives name),

As a voter in Legislative District (##A/B), and a participant in the Minnesota Teacher Retirement Association, I am appealing to you to support the 2016 TRA sustainability proposals. The TRA pension fund has been recovering steadily since the 2010 pension fix bill was passed, under which active teachers and principals accepted contribution increases during a time of flat salaries, effectively accepting cuts. The 2016 TRA sustainability proposals are not as severe as the 2010 fix but equally important. The TRA sustainability proposals help to distribute the adjustment costs fairly while achieving a realistic actuarial outlook. This seems to me to be the goal of any pension legislation action—to make the pension plan sustainable.

Without adjustment, Minnesota can expect a less sustainable plan and a more burdensome liability against state revenues in the future. After changes to the investment assumption rate and changes in the calculated morality rates, the contribution deficiency will fall to a negative four and a half percent. Furthermore, the total dollars lost, through foregone contributions and permanent COLA savings, will come to $106.5 million in one year. The future costs of recovering from this loss will be substantially greater than the amounts in the 2016 TRA sustainability proposals.

At an annual cost increase of $43 million to state’s education funding beginning in the 2017-2018 school year, passing the TRA sustainability proposals into law would seem very timely given the strong financial standing of the state for the last seven years and the prospects for continued financial stability in Minnesota. Failing to pass the TRA sustainability proposals into law further threatens our future financial stability, destabilizes the pension fund, and sends future teachers and principals elsewhere for jobs. Minnesota cannot afford to pay the price of falling from the ranks of best among state education systems, either academically or financially.

Please support the 2016 TRA sustainability proposals, and thank you for taking your time to listen.

Respectfully,

(add your name and address)


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Second hearing for sustainability bills at LCPR

The Legislative Commission on Pensions and Retirement (LCPR) met Tues., March 15, to consider several bills including granting a second hearing for the TRA and MSRS sustainability bills.

As a first order of business, the LCPR unanimously approved HF 2807 (O’Driscoll) / SF 2536 (Pappas), which contains the retirement system administrative and actuarial assumption provisions. This bill will become the carrier bill for omnibus pension legislation.

After approving several minor bills, LCPR chair Rep. Tim O’Driscoll (R-Sartell) asked MSRS and TRA to address the commission about the sustainability proposals and answer several questions that had been provided to the directors in advance of the hearing. O’Driscoll indicated that the commission would not be taking a vote on the proposal at that hearing, but wanted more information about the bill.

Dave Bergstrom, executive director of MSRS, and Laurie Hacking, executive director of TRA, testified about the necessity of passing sustainability measures this session rather than wait a year, as has been suggested. The cost of a one-year delay in passing sustainability legislation would be $106.5 million for TRA and $71 million for MSRS in foregone revenue from contribution increases and foregone savings from COLA changes. The directors pointed out that waiting a year could negatively impact the state’s bond rating since MSRS and TRA would be showing sizable funding deficiencies if no action is taken this year.

Members of several stakeholder groups testified in support of the TRA proposal, including Joan Beaver, Government Relations Chair for Education Minnesota Retired; Don Leathers, Legislative Co-Chair for Retired Educators of Minnesota (REAM); Louise Sundin with the Committee of 13; and Mark Schmiesing with Education Minnesota.

Jill Schurtz, Executive Director of the St. Paul Teachers Retirement Fund Association (SPTRFA) testified regarding that fund’s sustainability bill, which includes employer contribution increases and elimination of COLA triggers.  Representatives of the St. Paul School District and the St. Paul Federation of Teachers offered testimony in support of the proposal.

The other measures receiving commission approval last night were bills affecting volunteer firefighters, an MSRS proposal to allow its board to extend disability application deadlines in cases of cognitive impairment, and a bill allowing MSRS to grant Rule of 90 eligibility to a small group of MnDOT employees.

courtesy Susan Barbieri, Minnesota TRA

Martin Sabo Dies at 78

       We already miss this great man who demonstrated dignity, wisdom and humor in a time when leaders were respectable and admirable. Our condolences go out to his family and all who had the chance to know him. Thanks, Marty, for all you did for all of us.                              Minneapolis Committee of Thirteen

Martin Sabo, Minnesota Congressman Known for Compassion in Era of Partisanship, Dies at 78

The Associated Press, March 13, 2016

m sabo

Martin Olav Sabo announcing his retirement from Congress in 2006.
Craig Lassig, Associated Press

Martin Olav Sabo, a longtime Minnesota congressman whose quiet Scandinavian demeanor conveyed a sense of civility during increasingly partisan times in Washington, died on Sunday in Minneapolis. He was 78.

His daughter Karin Mantor said Mr. Sabo, a longtime smoker, had been hospitalized for a week because he was having trouble breathing.

Mr. Sabo, a Democrat, served 28 years in Congress, easily winning each re-election and eventually becoming chairman of the House Budget Committee. He announced his retirement in 2006 and was succeeded by Keith Ellison, the first Muslim elected to the House.

Minnesota politicians praised Mr. Sabo for his understated manner and ability to deliver millions of dollars to the Minneapolis-St. Paul area for road and housing projects.

Mr. Sabo was born on Feb. 28, 1938, in Crosby, N.D., the son of Norwegian immigrants. He grew up on his family’s wheat farm, and graduated in 1959 from Augsburg College in Minneapolis.

Before his election to Congress in 1978, he served 18 years in the Minnesota Legislature. He was first elected in 1960 at age 22, and he rose to House minority leader, then speaker.

Besides his daughter Karin, he is survived by his wife, Sylvia; another daughter, Julie; and six grandchildren.

In announcing his retirement after a 46-year political career, Mr. Sabo called putting together the 1993 federal budget and deficit reduction package as the House Budget Committee chairman one of his proudest accomplishments. The measures resulted in a budget surplus in 1998, the first in almost 30 years.

Mr. Sabo also took pride in never publicly disparaging another politician. He said Congress had become more polarized during his time there.

“I’ve always believed the fundamental problem with politics today are people who over-promise and overstate. I’ve tried to do the opposite,” Mr. Sabo said. “I’ve also tried to treat my colleagues with respect. I don’t recall ever making a public statement critical of my colleague, whether it’s Democrat or Republican.”

Pension funds update governor, State Board of Investment

The executive directors of the three statewide retirement systems presented a funding status update on Wed., March 2, to the Minnesota State Board of Investment. Among the board members in attendance were Gov. Mark Dayton, state Attorney General Lori Swanson, State Auditor Rebecca Otto, and Secretary of State Steve Simon.

After a review of SBI performance over time and relative to other public pension funds, longtime actuary Doug Anderson, executive director of the Public Employees Retirement Fund Association (PERA), explained the impact of recent experience studies on the Minnesota funds. Anderson pointed out that life expectancy increases are affecting each of the three statewide funds differently.

Dave Bergstrom of the Minnesota State Retirement System (MSRS) outlined the impact of assumption changes recommended by the fund actuaries as a result of his system’s experience study. Bergstrom noted that putting each of the statewide funds on track to reach 100 percent funding is a key aspect of fund officials’ fiduciary duty.

Upon viewing a line chart showing a significant decline in funded ratios for MSRS, TRA, and to a lesser extent, PERA, the governor suggested that 100 percent funded ratios may not be necessary to meeting the funds’ financial obligations and would be a significant cost to the General Fund.

Bergstrom said that it would be wise to continue to work toward that goal, and he outlined the proposal that MSRS seeks to put forward this legislative session. The proposal includes a 0.5 percent employee contribution rate increase and a 1.5 percent increase in the employer rate as well as a COLA reduction from 2 percent to 1.75 percent.

With sustainability changes, MSRS is projected to reach 104 percent funded by 2041. Without the changes, MSRS flat-lines and declines until reaching 75 percent in 2041.

Teachers Retirement Association (TRA) Executive Director Laurie Hacking then walked the board through TRA’s numbers, and explained the shared-responsibility ethos behind TRA’s sustainability proposal. TRA’s proposal includes a 1 percent increase in the employer contribution rate, no change in the employee contribution rate, and a decrease in the COLA from 2.0 percent to 1 percent for five years and 1.75 percent after.

PERA is not pursuing sustainability measures this session, and Anderson began his portion by addressing Dayton’s concerns about the 100 percent funded ratio goal, saying that during his decades as an actuary, 80 percent was traditionally regarded as an adequate funded ratio for public pension funds, but that market volatility has caused many plan administrators to think in terms of maintaining a “cushion” for downturns. Dayton said that this is an expensive proposition.

Otto opined that as long as the ratio of retirees to active employees is not upside-down – with more retirees receiving benefits than workers paying into the system – the plans should theoretically be fine.

Dayton thanked the fund directors for their conscientious stewardship of the funds but questioned whether we need to go as far with the sustainability proposals.

Courtesy of Susan Barbieri, MTRA Communications