Michael Mannino says on Education Online Blog:
March 31st, 2009 at 9:50 am
Alex has written a careful analysis of the situation facing PERA and DPSRS as well as many other plans. Unfunded liability and the current economic situation are creating huge challenges for many state and local governments. Many studies and commentary have expressed alarm over the situation especially with the claims by public employee groups and pension plan agencies that benefits cannot be reduced for current retirees and workers.
My work does not involve the funding side of the pensions. My work involves compensation. I feel that the underfunding problem is largely due to misunderstanding of retirement compensation for public employees under defined benefit plans. The highly subsidized early retirement involves large amounts of retirement compensation that is unrecognized by employer contribution rates. If legislators and taxpayers understood retirement compensation, they would demand tradeoffs. If government workers want guarantees of defined benefit pensions, the benefit formulas should be reduced. Government workers that do not want these reductions could assume more risk so that they could capture market gains and possibly achieve larger retirement compensation.
The cheap shots taken by PERA and Representative Merrifield against me are grandstanding. PERA has known about my studies for a long time. The proper place for a rebuttal is the academic journal in which the study is published. PERA seems unhappy that someone has broken their data monopoly. Rather than engage in thoughtful debate, PERA has chosen mocking statements in which no chance for rebuttal is available.
PERA’s assertion that my data quality is poor is baseless. My data is excellent for the relationships and hypotheses tested in my studies. My data quality is better than any other academic study on public employee pensions. Whether my data is good enought to indicate if deferred compensation is $520,000, $510,000 or $530,000 does not detract from the basic results of my studies. PERA and DPSRS pension benefits provide large amounts of deferred compensation, well above the amount of retirement benefits expected from conservative investment of employee/employer contributions. These levels of deferred compensation are largely the result of heavily subsidized early retirement.
1/27/09: (From a GJ Sentinel blog in response to a story about PERA).
"PERA and the state legislature are guilty of fraud and malpractice if major reforms are not made this year. A major part of the reform must be a reduction in pension benefits. The major problem with PERA is the highly subsidized early retirement. In most private sector plans and Social Security, 65+ is the normal retirement age. You can retire earlier (to some extent) but your benefits will be reduced substantially. In PERA, you can retire at age 50 after 30 years of service with full benefits (75% of highest average salary with inflation protection). This highly subsidized early retirement is equivalent to a lump sum payment of more than $500,000 at retirement date. This subsidy is in addition to the employee/employer contributions with interest. Taxpayers can no longer afford golden parachutes for state employees. Please demand an end to highly subsidized early retirement for state employees. State employees moaning about your low salaries should try the private sector now. You can experience the joys of massive layoffs and salary reductions. Plus, you would even need to pay Social Security tax." Dr. Michael Mannino
Rocky Mountain News
PERA members better snap out of it
Michael Collins, Denver February 16, 2009
Letter writer Lynn Harrington's response to the Colorado Public Employees' Retirement Association stories indicates how woefully uninformed she is concerning PERA investment activities. If she were engaged, she would understand that $25 billion to $30 billion does not magically appear just because the economy picks up.
I work in retirement planning, and when I meet with a person who has an IRA or 401(k) they usually know who is managing their money. However, my experience with PERA members shows me they often assume all is well and display a disconnect in the understanding of the risks inherent to their retirement.
I have heard more than once from a PERA participant that if it doesn't work out, the state must ante up. I am sure the majority of the working population would love to have that sort of backstop for their retirement now that most have seen their 401(k) balances drop by 40 percent or more.
PERA members need to wake up, get in contact with their PERA board and start demanding answers before it is too late.
The Denver Post
The future of PERA: 2 letters -- by DP Opinion on February 12, 2009
Re: “Don’t delay on PERA problems,” Feb. 8 editorial.
Your Sunday editorial calling for action “sooner rather than later” regarding the Colorado Public Employees’ Retirement Association (PERA) contained a contradiction. On the one hand, you called for immediate action and, on the other hand, noted that PERA is “already underfunded due to short-sighted decisions made by state lawmakers … .” So why should PERA members and retirees, and other Colorado taxpayers, trust that the legislature will know what to do now?
The administrators of PERA have exceeded expectations for rates of return on investment since the fund’s inception, with one or two years of exception. Furthermore, PERA has fared better than many other investment funds because of the conservative strategies of its managers. These facts argue strongly that the administrators know what they are doing. Legislators cannot know PERA as well as its administrators.
Therefore, this time around it seems best that the legislature listen to the recommendations of the PERA executive director and wait for things to settle down. After all, leaping before they looked is what put PERA at risk in the first place.
Roger Piwowarski, Green Mountain Falls
This letter was published in the Feb. 13 edition.
I believe the PERA trust fund is in great hands. The track record of the staff and the board of directors has been exemplary over the life of the fund. If the board of directors and the management of this program believe that this is a time of studied response to the investment climate, I am in favor of this. To have a knee-jerk response to the worst financial times in two or more decades would be a serious error. The outlook will be more studied, and the necessary corrections will be more appropriate, if the approach is carefully thought-out and analyzed.
The results of the last year’s investments are not all in and analyzed yet, and will not be until May 2009. The staff of PERA can make the expert and proper analysis and can then suggest the corrections that will set the program back on track. Let’s carefully analyze the present and make a careful correction to the trust fund that will result in a positive, moving-forward approach that can be a long-term plan. I urge the legislature to do the same.
Norman Bertelsen, Wheat Ridge
This letter was published in the Feb. 13 edition.
Rocky Mountain News
PERA pensions
This letter has not been edited
David F. Stevens, Aurora — Published February 11, 2009 at 6 p.m.
In your 1/24/2009 editorial on PERA pensions (P. 27) you claim that the 3.5% COLA that PERA pensioners receive is excessive. This claim by you is opinion, not fact. The fact is that PERA pensioners selected a retirement date based on many factors, including the COLA. For example, our 25-year post-retirement financial plan has, as one of its key elements, the 3.5% COLA. Any loss in the COLA amount ruins the projections and, being on fixed incomes, puts our retirement in jeopardy. We were told, in the decades before our retirement, that retirement benefits were part of our total compensation package. Our salaries, back in those days, were quite low so a good retirement income became part of the incentive to teach. There are also some severe cost escalation issues making it essential that the COLA be retained. The most outrageous example, for us, is that our monthly medical insurance costs just went up 26%, and this is not the first year that happened. Perhaps, at some point, PERA will have to reduce the COLA but that should be the last thing to go for existing retirees who have little or no hope of finding supplemental income through work in these parlous times.
Hopefully, when you are a pensioner, you will understand how fine a financial line the already-retired must walk.
Rocky Mountain News
Mike Rosen at it again
This letter has not been edited
Michael Campbell, Longmont
Published February 12, 2009 at 6 p.m.
Mike Rosen is at it again with his insulting assault on public employees. Debating the soundness of PERA is legitimate, but insinuating yet again that those in the public sector are out to goldbrick off the taxpayer is just mean spirited nonsense. Rosen conveniently leaves out facts such as, public employees don’t receive Social Security, don’t have a choice in where their retirement funds go, and don’t get to argue when the legislature cancels yearly wage increases—as measly as they may be. Salary increases to state employees are routinely axed partially or completely in time of tight budgets. As in this year and next year — and several others in the past.
In fact, all retirement plans have taken a big hit recently. What has happened to PERA is not because of the benefits offered, or the features of the plan, but a general failure of the overall financial system in this country. A system, I might add, that Mr. Rosen has always championed.
But the most insulting words out of Rosen’s mouth are these. “Among the things that attract some people to government employment are greater job security and lower pressure and performance standards than in the private sector.” Hogwash. I doubt that state troopers, judges, or school teachers would will take kindly to that kind of neocon sentiment.
Mike Rosen is always upfront about his bias against government and the public sector. So, expect misleading arguments based on half truths to bolster his very general claims. Typical.
