State Pension Threats & Defense

1. State Pension Threats & Defense NASHTU Legislative Conference April 27, 2010 Gerri Madrid-Davis, Executive Director National Public Pension Coalition July

2. National Coalition Partners National Public Pension Coalition

3. NPPC Objective To effectively defend defined benefit plans for public employees, and to take the initiative to ensure that these plans continue to provide the foundation of a secure retirement for public employees National Public Pension Coalition

4. Scope of Work • Maintain an early warning system and support strategic assessments of threats to DB pensions • Facilitate the creation of broad, effective state and local defense initiatives • Work with union affiliates and other allies to support state-based activities in defense of DB plans • Assist state-based coalitions in developing strategic plans for pension defense National Public Pension Coalition

5. Scope of Work • Support state based efforts to educate and mobilize union members and allies • Manage the development and dissemination of national messages arising from state-based experience • Synthesize and distribute research that strengthens our efforts to collectively defend public sector defined benefit pensions National Public Pension Coalition

6. Threats to Retirement Security • Defined contribution and combo plans with inadequate defined benefit components • Death by a 1000 cuts – Work longer, pay more, get less ( benefits/ contributions) • Attacks on retirees – COLAs, retiree health/OPEB • End of Career Enhancements ($100K Pensions/Spiking) • Accounting changes (GASB) & Federal interest • Ballot Initiatives & Public Dissatisfaction • Growing retirement insecurity in the private sector National Public Pension Coalition

7. Growing Retirement Insecurity in the Private Sector • “The Lost Decade” – for wage growth, retirement income, home equity, etc. • Only 1 in 5 private sector workers have a DB (21%) • ½ don’t have or don’t participate in an employer provided savings option • Rapid deterioration of personal/employer provided savings • DB freezes, 401(k) match suspensions • 401(k) losses due to market downturn and excessive fees • More Americans insecure about ability to retire as planned National Public Pension Coalition

8. Framework for Current and Continued Attacks on Public Pensions • State and Local Budget Shortfalls • Insufficient/misaligned state revenue base • State recoveries often lag national • Long-term plan recovery slow - poor investment returns for several more years due to smoothing • Stimulus funds limited in 2012; future infusions uncertain • Chronic underfunding of plans in some states • Increased contributions resulting from failure to pay in the past and poor fund performance place strain on state/local budgets National Public Pension Coalition

9. States in Play

10. California • Intense pressure to make changes to benefits for new hires on all plans; local plans particularly at risk • Renewed Gov interest—Stanford Study • ECE/Final Salaries/UL driving the threat • Anti-spiking legislation in play • Coalition in place: CHCRS National Public Pension Coalition

11. Florida • Number of bills proposed that would raise current employee contributions, reduce benefits, require that only fixed monthly salaries be used to determine benefits and enact career averaging in determining FAS have been introduced (SB 2022, SB 1902, HB 1319) • SB 600; Fasano DC bill reintroduced • Other issues in play: final computation factors (sick leave, vacation), contributions, health care) National Public Pension Coalition

12. Illinois • 2010 legislation: • Increases normal retirement age and final average salary computation • Reduces pensionable salary, colas, survivor annuities and eliminates return to work • Effects all new hires after 2011 • Also delays/reduces payments to Chicago public schools retirement system • Doesn’t change underlying problem—chronic underfunding, growing UL • Coalition in place: IRSI National Public Pension Coalition

13. Michigan • Governor Granholm supports State Budget Director Emerson’s plan to offer an early retirement incentive. Employees who don’t take the option face 3% increase in contributions & elimination of vision and dental; would move new hires into a combo dc/db plan. No Democratic support for the measures at this time. • Potential August 2010 ballot initiative would require all public employees to pay 20% of the cost of their health insurance—requires two-thirds approval of both the House and Senate. • The Senate GOP also wants to create a constitutional amendment to cut the pay of all public employees by 5% in order to reduce pension costs. • In January school administrators recommended moving new school employees to DC plans • HB 4527 would place new public school employees in a dc plan National Public Pension Coalition

14. New Jersey • Pension changes enacted this session: • Bans future part-time workers from the pension system, requires part-timers who make more than $5,000 to join a DC plan • Reduces future hire pensions by 9 percent • Requires pension payments to be based on one job • Limits payments of accrued sick leave for future workers to $15,000. • Current employees must pay at least 1.5 percent of their salary toward health care. • Senate approved a measure to place a constitutional amendment on the ballot in November asking voters to ensure the state pays its pension bill, the measure must be approved by the Assembly National Public Pension Coalition

15. Pennsylvania • Legislature debating bills to address 2012 surge in Pennsylvania schools’ required contributions; including putting future PSERS employees in a dc plan or combo plan. • HB 2135 would create a DC system other bills would reduce benefits. HB 1467 sets minimum ER contributions at 7 percent for both PSERS and SERS. HB 1583 would increase the minimum contribution level for just PSERS. HB 2135 and SB 1185 create dc plans for new state employees. • State Higher Ed System plans to offer a voluntary retirement incentive (60 years; 35 service) National Public Pension Coalition

16. Public Pension Research: Good News Growing public awareness of the importance of reliable retirement income DB plans reducing risk of elderly poverty Public DB pension plan expertise, long term horizon, and cost effectiveness Economic benefits to state & local communities Public sector wages continue to lag private sector but benefits provide a strong incentive to recruitment & retention of a quality workforce National Public Pension Coalition

17. Public Pension Research: New Resources for Defending Public Pensions National Public Pension Coalition

18. Online Member Resources • NCPERS http://www.ncpers.org/ • AFL-CIOwww.aflcio.org/issues/retirementsecurity/ • AFSCMEhttp://www.afscme.org/issues/75.cfm/ • AFTwww.aft.org/topics/pensions/defined_benefit.htm • Change to Winwww.changetowin.org/issues/retirement-security.html • NEAhttp://www.nea.org/home/30068.htm • SEIUhttp://www.seiu.org/political/issues/retirement-security/ National Public Pension Coalition

19. Other Sources • Public Fund Survey www.publicfundsurvey.org • National Institute on Retirement Security (NIRS) www.nirsonline.org • Center for Retirement Research (Boston College) http://crr.bc.edu/ • Center for State & Local Government Excellence www.slge.org • NCSL Legislative Actions 1999-2009 www.ncsl.org/programs/fiscal/all_pensun.htm National Public Pension Coalition

20. Gerri Madrid-Davis Executive Director, NPPC 1776 I St NW, 9th Floor Washington, DC 20006 202-756-4850 202-756-1399 (fax) gdavis@nppconline.org For More Information National Public Pension Coalition