I have a lot of experience talking to Congressional staffers, regulators, rating agency analysts, municipal bond traders and portfolio managers. When you pump these parties for information there is always a clear line about the type and amount of information they will share.
Chicago is drowning in unfunded pension liabilities. Last month, Illinois passed pension reform for state pensions, but did not take up Chicago’s pensions. Illinois governor Pat Quinn says the city’s pension will be taken up in the spring. Chicago’s pensions are deeply underfunded and have unique problems. The Chicago Tribune wrote:
The state of Illinois had two milestone events recently. The legislature passed a long-awaited pension reform and the state treasurer issued $350 million of taxable general obligation (GO) bonds. The Bond Buyer reported on the GO offering:
Chris Mier and his team at Loop Capital recently published the 11th Annual Public Pension Funding Review. It is the gold standard for public pension reporting. Mier was onto the pension story well ahead of Meredith Whitney and others, including myself. One thing that is great about Mier’s report is how graphic the pension data is.
Although the media is full of hair on fire stories about the level of funding in public pension funds some of the funds are in great shape. State run pension systems like the North Carolina Local Government, Wisconsin Retirement System and numerous Washington state funds have extremely high funding levels, near 100 percent in the latest figures from 2011. Each plan has different state funding requirements, retiree benefit schemes, asset mix and projected investment returns. But each plan has been prudently managed, and, most importantly, excessive benefits have not been promised to retirees.
Numerous public pension plans across America are in horrendous shape. The employee plan of the Commonwealth of Puerto Rico, funded at an alleged 7 percent of assets, is functionally broke. Other public plans, like that of Charleston, West Virginia, have 24 percent of the assets needed to meet future promises to retirees.
Muniland ground rule number one: Never use the state of Rhode Island as example of national issues. The state has been poorly managed and dominated by union interests for decades. Rhode Island is a high school dropout when it comes to fiscal management. The underfunding of its public pensions is exhibit one.
Texas Watchdog.org explains how Texas is mounting the transparency pony:
A quartet of the most powerful legislators in Texas filed bills Thursday to make available to the public detailed financial information from most local taxing entities and pension systems across the state.
There have been hundreds of articles written about how a number of U.S. states have unfunded pension liabilities. These massive shortfalls have been researched by numerous groups, and although they differ on the size of the shortfalls, they all agree that pension liabilities are creating a troublesome drag on many state budgets. The Pew Center on the States is one of the first groups to dig down and analyze the condition of city pension funds and the promises made for retiree health benefits. Their new study, A Widening Gap in Cities, reports a mixed picture.
Although the national media has always been a fan of Rhode Island State Treasurer Gina Raimondo, I’ve personally been lukewarm on her performance. She built a case for draconian changes in pension benefits for current workers by inflating the portion of the state pension plan that was unfunded. This led the State Assembly to adjust pension benefits in a way that seemed to go against the law. Unions sued the state and State Superior Court Associate Justice Sarah Taft-Carter has just ordered the case to undergo federal mediation. But I’ve always thought the bigger issue for Rhode Island was that its pension fund had horrible investment returns; some of the lowest in the country. And Treasurer Raimondo has only taken steps this week to change the fund’s management.