Category Archives: Public Sector

State conservative groups plan US-wide assault on education, health and tax

Source: Ed Pilkington and Suzanne Goldenberg, The Guardian, December 5, 2013

State Policy Network co-ordinating plans across 34 US states
• Strategy to ‘release residents from government dependency’
• Revelations come amid growing scrutiny of tax-exempt charities
Read key excerpts from the SPN proposals
• Group’s plan to eliminate taxes in Maine county – read the report from the Portland Press Herald

…The strategy for the state-level organisations, which describe themselves as “free-market thinktanks”, includes proposals from six different states for cuts in public sector pensions, campaigns to reduce the wages of government workers and eliminate income taxes, school voucher schemes to counter public education, opposition to Medicaid, and a campaign against regional efforts to combat greenhouse gas emissions that cause climate change….

Public Fund Survey – Summary of Findings for FY 2012

Source: National Association of State Retirement Administrators and the National Council on Teacher Retirement, December 2013

…The primary source of Survey data is public retirement system annual financial reports. Data also is culled from actuarial valuations, benefits guides, system websites, and input from system representatives. The Survey is updated continuously as new information, particularly annual financial reports, becomes available. This report focuses on fiscal year 2012. Using graphs, this summary describes changes and trends in selected elements of the survey.

Figure A plots the aggregate actuarial funding level among plans in the Survey since its inception in FY 2001. The funding level in FY 12 declined to 73.5 percent, down from 75.8 percent the prior year. The aggregate actuarial value of assets increased to $2.67 trillion, an increase of 0.9 percent. This increase was outpaced by growth in the actuarial value of liabilities, from $3.49 trillion to $3.63 trillion, or 4.1 percent. Liabilities grow primarily as active (working) plan participants accrue retirement benefit service credits.

Most plans have completed, or are nearing completion, of recognition of the sharp investment losses incurred in 2008-09. Those losses are being offset by asset gains since the market decline….

2012 NIGP Compensation Report

Source: NIGP: The Institute for Public Procurement and Public Procurement Research Center (PPRC), 2013

Understanding the developments in compensation structures within any profession is critical when constructing a strategic framework for the field’s future. The significant changes in the nature of governance of the last decade have imposed additional and increasingly more complex demands on public procurement specialists. Whether these increased demands are reflected in the levels of compensation could in large part dictate the pool of talent that local and federal governments will have available in terms of selecting their workforce. The research presented here is part of the popular Public Procurement Compensation Series and investigates, from an organizational perspective, the most recent compensation levels within the profession. The two-fold purpose of this research is to offer a snap shot of the compensation levels across several dimensions and to provide practice-driven and useful compensation benchmarks. …

… A total of 319 American and Canadian agencies have participated in this edition of the survey. Based on their responses three primary trends were identified. First, bonuses have not been a prevalent part of compensation in 2011 or 2012; however, in 2012 agencies were more likely to offer bonuses to their employees. Second, after an accentuated dip from 2008 – 2010, salaries for most positions have been experiencing a recovering trend. Outside a small number of exceptions, reported compensation levels have not reached their previous peaks. Finally, a large proportion of agencies are asking their procurement specialists to work overtime without additional pay…

Public Pension Funds and Assumed Rates of Return: An Empirical Examination of Public Sector Defined Benefit Pension Plans

Source: Odd J. Stalebrink, American Review of Public Administration, vol. 44 no. 1, January 2014
(subscription required)

From the abstract:
This research adds to an existing body of research that suggests that the adoption of investment return assumptions associated with public sector defined benefit (DB) pension plans may partly be explained by political opportunism. This research adds to this literature by examining how oversight and monitoring efforts and investment boards’ relative independence from the political process influence adopted investment return assumptions. Based on a multivariate regression analysis of data on 88 state DB pension plans in the United States, the results of this study suggest that adopted investment return assumptions are partly determined by investment boards’ affiliation with the political process. The results also indicate that the adopted assumptions are influenced by asset allocations and the fiscal condition of pension plans. The findings of the study are important in part because they draw attention to possible linkages between the quality of financial information that is reported about the financial condition of public pension funds and their surrounding governance structure. Reliable information about the actual size of unfunded pension liabilities is critical in political environments, where there tend to be a bias toward shifting pension obligations to future constituents.

Pensions at a Glance 2013: Retirement-Income Systems in OECD and G20 Countries

Source: Organisation for Economic Co-operation and Development (OECD), ISBN Number: 978-92-64-20405-8, 2013

From the summary:
This fifth edition of Pensions at a Glance provides a range of indicators for comparing pension policies and their outcomes between OECD countries. The indicators are also, where possible, provided for the other major economies that are members of the G20. Two special chapters (Chapters 1 and 2) provide deeper analysis of recent pension reforms and their impact and of the role of housing, financial wealth and public service for retirement income adequacy.

Chapter 1. Recent pensions reforms and their distributional impact
Chapter 2. Housing, financial wealth and public services for adequate living standards in old-age
Chapter 3. Design of pension systems
Chapter 4. Pension entitlements
Chapter 5. Income and poverty of older people
Chapter 6. Finances of retirement-income systems
Chapter 7. Demographic and economic context
Chapter 8. Private pensions and public pension reserves
Chapter 9. Pensions at a Glance 2013: Country profiles
See also:
Press release

The Most Dangerous Government Jobs and Why They’re Riskier Than the Private Sector

Source: Mike Maciag, Governing November 19, 2013

Public-sector workers typically face a greater risk of suffering an injury on the job than other segments of the workforce. Read five key takeaways from new industry-level data. … Public transportation employees are far more likely to suffer an injury on the job than those working in most private transportation operations. Public hospital staff don’t have a hazard-free work environment, either. For police and fire personnel, the risk of getting hurt is even greater….

The Plot Against Pensions: The Pew–Arnold campaign to undermine America’s retirement security – and leave taxpayers with the bill

Source: David Sirota, Institute for America’s Future, September 2013

From the press release:
The Institute for America’s Future released a new report authored by David Sirota (The Plot Against Pensions: The Pew–Arnold campaign to undermine America’s retirement security – and leave taxpayers with the bill) that examines how former Enron executive John Arnold is partnering with Pew Charitable Trusts’ Public Sector Retirement Project to fund an effort to undermine retirement security and slash public pension benefits.

The report reveals how the Pew-Arnold partnership has distorted the conversation about public pensions and created a movement to convert traditional public pensions into riskier and costlier schemes.

The report exposes how:
– Conservative activists are manufacturing the perception of a public pension crisis in order to both slash modest retiree benefits and preserve expensive corporate subsidies and tax breaks.
– The amount states and cities spend on corporate subsidies and so-called tax expenditures is far more than the pension shortfalls they face. Yet, conservative activists and lawmakers are citing the pension shortfalls and not the subsidies as the cause of budget squeezes. They are then claiming that cutting retiree benefits is the solution rather than simply rolling back the more expensive tax breaks and subsidies.
– The pension “reforms” being pushed by conservative activists would slash retirement income for many pensioners who are not part of the Social Security system. Additionally, the specific reforms they are pushing are often more expensive and risky for taxpayers than existing pension plans.
– The Pew Charitable Trusts and the Laura and John Arnold Foundation—the latter run by conservative political operatives and funded by an Enron billionaire—are working together in states across the country to focus the debate over pensions primarily on slashing retiree benefits rather than on raising public revenues.
– The techniques used by conservative activists to gain public support to privatize the public pensions that public workers have instead of Social Security are, if successful, likely to be used in efforts to privatize Social Security in the future….

An Analysis of the Treatment of Employee Pension and Wage Claims in Insolvency and Under Guarantee Schemes in OECD Countries: Comparative Law Lessons for Detroit and the United States

Source: Paul Secunda, Marquette Law School Legal Studies Paper No. 13-21, November 6, 2013

From the abstract:
To put the plight of the Detroit city employees into an international and comparative context when it comes to considering how their pension and wage claims should be treated in bankruptcy, it is instructive to consider how similar employee pension and wage claims would be treated in corporate insolvencies in other countries. It is necessary to focus on corporate insolvencies in other countries as the relevant comparison because most other countries do not have government systems in which municipalities have the same financial independence to borrow money and take on debt as municipalities do in the United States as part of the municipal bond market. Additionally, exploring the corporate bankruptcy systems in other countries provides a beneficial way to consider how to approach municipal bankruptcy situations in the United States, especially since corporate and municipal bankruptcies in the United States have a number of features in common when it comes to employee creditor claims.

This article therefore undertakes a comparative analysis of the treatment of pension and wage claims in insolvency proceedings and under guarantee schemes in the thirty-four member countries of the Organization of Economic Cooperation and Development (OECD) to understand whether the United States’ approach to employee claims in bankruptcy (in both the corporate and municipal context) is consistent with international norms. After completing the comparative analysis (which is comprehensively set out in the Country-by-Country Appendix at the end of this paper), this article then highlights common approaches to these issues, as well as important distinctions, setting up a number of tables to summarize the results.

All in all, most OECD countries have adopted hybrid systems which combine both some form of priority for both pension and wage claims, as well as some form of guarantee fund to complement the insolvency system. It is especially important to have these guarantee funds in place because insolvency processes can last for years, while the guarantee schemes are more likely to pay employees their claims within weeks or months. Unfortunately, the United States provides only limited priorities in most bankruptcy proceedings (and no such wage or pension priorities in Chapter 9 municipal proceedings), a guarantee system under the Pension Benefit Guaranty Corporation (PBGC) that is limited to pension plans, and then only to private-sector defined benefit pension plans. Neither private-sector defined contribution plans nor public sector pension plans come under a guarantee scheme in the United States.

One possible approach to employee claims in both municipal and corporate bankruptcies would be to pass pension and bankruptcy reform laws similar to what Canada enacted in 2008 as part of its Wage Earner Protection Program Act (WEPPA). Unlike the American system, WEPPA provides limited absolute priorities for pension contributions and a broad array of wage claims in insolvency, as well as a robust wage guarantee scheme. As to the policy reasons supporting this approach, it appears that greater emphasis is placed on the need to protect the weakness of employees creditors in the insolvency process as opposed to focusing on the need to ensure the existence of cheap, accessible credit for companies and governments.

This article concludes that given the relative vulnerability of employees and the sophistication of most lenders, the United States should balance these interests to provide increased protection for employment claims during municipal and corporate insolvency proceedings through giving heightened priority treatment to employees pension and wage claims in bankruptcy in tandem with a federally-operated guarantee scheme for both pension and wages claims.