AC Alert for November 1, 2011 Controversy Over Public Pensions Boils Over Again AC Alert for November 1, 2011 Controversy Over Public Pensions Boils Over Again

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AC Alert for November 1, 2011 Controversy Over Public Pensions Boils Over Again #Sustainability #ESG #SRI #CSR
Wednesday, November 2, 2011 - 12:00pm

Just when you think you’ve heard it all about the looming public sector pension crisis, and the deteriorating condition of public sector budgets, along comes unwelcome news like this:

“Eleven people were charged Thursday in an enormous fraud scheme in which hundreds of Long Island Rail Road (New York) workers falsely claimed to have disabling injuries, with some of them collecting tens of thousands of dollars in annual pensions while spending time playing golf, law enforcement officials said. The charges involving the railroad come at a time when public workers’ unions across the country have faced heavy criticism for negotiating pension obligations that led many government agencies to slash services and lay off teachers, police officers and other workers.

“The claims of disability made by the seven people charged with obtaining their pensions fraudulently contrasted sharply with their lifestyles, according to court papers. One of the defendants receives $105,000 in pension and disability payments each year, plays tennis several times a week and played golf 140 days over the course of one nine-month period, despite his reports that he had severe pain when gripping objects, bending or crouching, the complaint filed in the case said.

“Another defendant, a railroad office worker who lives in New Hyde Park, N.Y., collects $108,000 a year in pension and disability payments; she had complained of significant neck, shoulder and hand pain caused by sitting at a desk and using a computer, and leg pain caused by standing for more than five minutes. But surveillance showed her shoveling snow for over an hour and walking with a baby stroller for 40 minutes, the complaint said.

“And a third defendant, of North Babylon, N.Y., who receives more than $75,000 in payments annually and claimed to be suffering from severe and disabling back pain, went on a 400-mile bike tour around New York State, the complaint said.” (Source: The New York Times)

We must stress that these are only allegations and that the accused must be presumed innocent until proven guilty in a court of law. However, the LIRR is a quasi-public agency, wholly-owned and operated by New York Metropolitan Transportation Authority, so just these allegations alone are bound to rekindle the flame and raise the decibel levels from public officials, candidates for office, and voter interests advocating major cuts in public employee pension benefits.

Who stands to lose? Clearly, the accused if the allegations are proven to be true. However the larger group of losers is the taxpayers who, if these charges are true, via their fares and taxes have paid for a portion of the allegedly ill-obtained benefits. There’s another big group and important group of potential losers too: the majority of public employees who go about their duties day-after-day and legally collect modest pensions when they retire. These employees are losing the confidence and support of the general public through no fault of their own.

Not a good situation by any measure, but yet another day in the never-ending debate over what should be done about public pensions in the US. AC editors have been carefully tracking the developments in this matter for years, establishing a special Hot Topics section entitled “Pensions: The Next Financial Crisis.” As our recent excerpts indicate there have been some very interesting developments:

Major pension reforms announced in NYC
(Source: Empire State News.Net) City Comptroller John Liu, Mayor Michael Bloomberg and organized labor leaders have announced an agreement in principle to reform and professionalize the investment governance and management of the City’s pension funds.  The proposal would place investment advisory authority for all five of the currently independent City pension funds under one new pension board, supported by an independent, full-time staff led by a Chief Investment Officer, who would be appointed to a fixed-term. The proposal is intended to insulate management of pension assets from any political office, further professionalize it and make it more consistent with industry best practices.

Brown Proposes Overhaul of California Pension Programs
(Source: Bloomberg) California Governor Jerry Brown has unveiled a package of changes to the biggest U.S. public-employee pension system that would shunt new workers into a hybrid of conventional and 401(k)-style coverage to lower costs. Brown would also raise the retirement age for full benefits to 67 from 55 for most, curb abuses known as “pension spiking” and “double dipping,” and revamp the board overseeing the $225 billion California Public Employees’ Retirement System (CalPERS).

NYS Pension Fund Investment Will Provide Affordable Housing in Saratoga, Dutchess
(Source: WAMC Radio) The $146.9 billion New York State Common Retirement Fund has partnered with the not-for-profit Community Preservation Corporation to invest millions of dollars in affordable housing rehabilitation projects in Saratoga Springs and Poughkeepsie. The fund has committed $700 million to the CPC program and has already invested in affordable housing in several other counties, including Albany, Onondoga and Westchester.

After transformation of Sudan, many US states still keep their money out
(Source: Bellingham Herald) Despite the recent changes in Sudan, human rights groups say it's not yet time to shift attention away from the country. While New Hampshire has reversed course on divestment many others [in the public sector] seem reluctant to change their laws at this time.

State appeals court denies FOIL request for names of NYC police pension recipients
(Source: Glen Falls Post A New York State Appellate Court has come out against a Freedom of Information Law (FOIL) request brought by the Empire Center for New York State Policy that sought the names of retired New York City police officers receiving pension benefits from the New York City Police Pension Fund. The Empire Center, which publishes salaries and compensation data for thousands of public employees in the state on its website, sought to include the names of the retired officers in its on-line catalogue.

US pension plan deficit at end-September reaches a post- World War II high, according to Mercer analysis
(Source: Mercer) The aggregate deficit in pension plans sponsored by S&P 1500 companies increased by $134 billion during September to $512 billion as of September 30, according to new figures from Mercer. Mercer believes that the end-of-month pension funding levels for the S&P 1500 are at a post-World War II low.



First pan-European Study on the Adoption of ESG Practices among Corporate Pension Funds Reveals that SRI is Becoming Mainstream

(Source: Eurosif) As European regulators prepare to launch new recommendations on sustainable and responsible investment, Eurosif’s 2011 Corporate Pension Funds & Sustainable Investment Study reveals that a majority of EU corporate pension funds are already taking steps towards integrating ESG factors in investment decisions.



At one time, when industrial age salaries in the private sector outpaced the salaries of government workers, the “difference” for an employee entering the workforce was often the promise of payments and benefits in retirement.  Labor unions also negotiated for more generous plans for government employees.  As government salaries caught up to many similar positions in the private sector, retirement promises were not usually cut back. 

The larger US states have one million or more public employees in their retirement systems (while still working) and millions more in post-retirement.  With the recent financial crisis, many of these public sector plans are under extreme pressure. 

What to do?  Cut back retiree benefits?  Levy special taxes on local public employers in the plan?  Raise general taxes?  Increase return on investment? Who is brave enough to step up and cut back benefits, especially for new employees? As the Baby Boom Generation (born 1946-1964) nears or reaches retirement age by the millions, the pressure will be on employers in both public and private sectors.  This Hot Topic section is sure to remain timely. We invite you to visit often as we update material on a daily basis.

This is just a sampling of the information in our Alert. Go here for the full text of this alert, and more information on Sustainability, and other Accountability related topics.