Kentucky Gov. Speculates Special Session in 2017

Despite promises to call a special session addressing Kentucky’s pension problem throughout the year, Gov. Matt Bevin admitted Monday that the session may not be called in the final few weeks of 2017.

“There is nothing magical about getting it done on a particular date or a particular month, or whether it is a special session or not,” Bevin told reporters in an impromptu press conference, according to Kentucky Today. “Is it still possible? Yes. Will it happen? We’ll see.”

While Bevin had continually told media and state government officials that the session would commence, each month it has been pushed back. The session in question would be for legislature to vote on Bevin’s controversial proposal for pension reform, which would put new public employees and teachers into 401(k)-style savings plans after 27 years of service. However, teachers would be given a three-year option to remain in their traditional pensions.

Although Bevin has said his plan will put the Bluegrass State on track to fix its $40 billion-plus debts without breaking any promises to current employees or retirees, much of his 505-page bill has drawn the ire of many. The most heavily rebuked provision requires an additional 3% contribution from state and local government employees and teachers for retiree health benefits.

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When asked specifically why the session may not happen in the coming weeks, Bevin pointed to a recent sexual harassment accusation involving a House GOP staffer and four representatives, including former Speaker Jeff Hoover, who resigned following the scandal’s reveal. However, Bevin remained optimistic.

“There’s absolutely a chance. It has been my intention without question,” he said.

Bevin’s adamancy for the special session has been in an effort to pass the reform bill before the regular session begins in January, when the state budget and tax reform will be discussed. He is also worried about a budget shortfall for the current fiscal year, about which he is expecting to hear more troublesome news on Friday, when the economist panel Consensus Forecasting Group meets.

“While I don’t have the ability to predict, it would be our expectations that we’re likely to see that it’s not the $150 [million] or $200 million [shortfall], that it’s even worse than that,” he said. “In the next six months, we’ll have to come up with another $250 million. That’s just for this year.”

Bevin said: “These things are imperative to be addressed. We are in dire straits financially.”

Tags: Governor Matt Bevin, Kentucky, Pension, Pension Reform

The $344 billion California Public Employees’ Retirement System (CalPERS) reported an 11.2% net investment gain for the Public Employees’ Retirement Fund (PERF), and an increase of more than $24 billion in assets for the fiscal year ending June 30, 2017.

CalPERS attributed the double-digit returns to strong financial markets, as the portfolio was led by its public equity program, which returned 19.6% for the year. Private equity also buoyed the portfolio, delivering a 13.9% net return, followed by real assets, which returned 7.4%. It also reported three-, five-, and 10-year returns of 4.6%, 8.8%, and 4.4%, respectively.

Investment assets stood at $326.4 billion for PERF, which had a funding level of 68.3% as of June 30, 2016. CalPERS said that as a result of the discount rate change from 7.5% to 7% through the three-year phase-in, the PERF funded status is estimated to be 68% as of June 30, 2017. This estimate assumes a 7% discount rate that will be in effect in fiscal year 2019-20 for the state, and fiscal year 2020-21 for schools and public agencies.

“We have a clear plan forward to ensure long-term sustainability of the Fund and to increase our funded status, but it will take time,” said CalPERS CEO Marcie Frost in a statement. “Our plan to raise the funded status is built on three strategies: addressing financial challenges, operating our organization as efficiently as possible to contain costs, and following sound investment principles.”

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In late 2016, the CalPERS Board voted to lower the discount rate for the PERF from 7.5% to 7.0% over the next three years. The move “was done to give employers more time to prepare for the changes in contribution costs,” wrote CalPERS CIO Ted Eliopoulos in the fund’s comprehensive annual financial report. “While this means many employers and employees will see increases to their costs, it also brings the PERF more aligned with what CalPERS can responsibly assume to return from our investments over the longer term.”

The one-, three-, five-, and 10-year returns for public equity are 19.6%, 5.3%, 11.6%, and 4.4%, respectively, while the one-, three-, five-, and 10-year returns or private equity are 13.9% 8.1%, 11.5%, and 9.3%; and the one-, three-, five-, and 10-year returns for global fixed income, and real assets is 0.3%, 3.5%, 3.4%, and 6.5%; and 7.4%, 8.6%, 10%, and (0.9%), respectively.

CalPERS also reported that as of June 30, 2017, the asset allocation for PERF was 48.3% in global equity, 19.4% in global fixed-income, 11.2% in real assets, 8.0% in private equity, 7.8% in inflation assets, 4.8% in liquidity, and the remaining 0.5% was allocated to “Total Plan Level,” which includes multi-asset class, absolute return strategies, transition, and plan level portfolios.

The PERF said it paid $21.4 billion in annual pension benefit payments to nearly 670,000 retirees and beneficiaries—an increase of 3% from the previous fiscal year’s total of nearly 650,000 retirees and beneficiaries.

Tags: CalPERS, Pension, Public Employees' Retirement Fund, Returns