Thursday, August 22, 2019
Hawai'i Free Press

Current Articles | Archives

Wednesday, May 15, 2019
JP Morgan Report Highlights Hawaii Pension Problems
By Selected News Articles @ 3:54 AM :: 1573 Views :: Hawaii State Government, Hawaii Statistics, Labor

JP Morgan Report Highlights Connecticut Pension Problems

by Marc E Fitch, Yankee Institute, May 14, 2019

Connecticut would have to pay 35 percent of its total revenue for the next 30 years to cover all its retirement obligations to state employees and teachers, according to a report released by JP Morgan.

That figure is much higher than the 23 percent Connecticut is currently paying, as listed in JP Morgan’s 2018 ARC and the Covenants, an annual report that examines state pension and retiree healthcare liabilities. ARC refers to the Annual Required Contribution the state has to make in order to fund pensions and retirement benefits.

The potential solutions raised in the report highlight Connecticut’s catch-22 when it comes to unfunded retirement benefits: increase revenue by 12 percent, increase employee contributions by 408 percent, or see a 10.5 percent investment return every year.

Author of the report Michael Cemblast writes the increased tax revenue would have to be used solely for the unfunded liabilities and that he considers consistent double-digit returns “practically unachievable.”

State employees currently contribute between 3 and 6 percent of their pay toward pensions depending on their retirement plan, with an additional 3 percent for their first 10 years of employment toward retiree health benefits. 

Teachers contribute 8.25 percent of pay toward their pension and health benefits but are ineligible for social security.

Connecticut was fourth behind Illinois, New Jersey and Hawaii for how much of its total revenue would be required to pay off its unfunded retirement liabilities over the next 30 years.

JP Morgan’s figures were based on 2017 State Annual Financial Reports. The report assumes a 6 percent investment return on pension and other post-employment benefits investments. 

Connecticut currently assumes a 6.9 percent return for its State Employee Retirement System and an 8 percent return for its Teachers Retirement System – the largest two pension funds causing Connecticut the most budgetary problems.

JP Morgan’s calculations indicate Connecticut’s pension funding ratio is only 35 percent, lower than the state’s reported 41 percent.

However, this assumes that states like IL, CT and HI continue allocate 20% – 25% of state revenues to underfunded plans; this may not be feasible forever, given competing needs related to public services, infrastructure and education.

Michael Cemblast, ARC and the Convenants

Cemblast notes his figures assume that “states like IL, CT and HI continue to allocate 20%-25% of state revenues to underfunded plans; this may not be feasible forever, given competing needs related to public services, infrastructure and education. There’s also the risk of market volatility that depresses funding ratios, which would raise ARC payments further.”

Connecticut pensions and retirement health benefits are part of Connecticut’s growing “fixed costs” which make up 53 percent of the budget and have begun to crowd out other state spending. Fringe benefit costs for employees are set to grow $544 million over the next two years largely due to the cost of underfunded retirement benefits.

Connecticut faces a budgetary shortfall this biennium, which has drawn proposals from Gov. Ned Lamont and lawmakers to expand the state sales tax, increase the capital gains tax and continue taxing hospitals.

Cemblast wrote that he believes bankruptcy legislation should be expanded to include states. 

“There was a sense that the US should use the Promesa legislation for Puerto Rico as a dry run for creating state-level bankruptcy rules, just in case,” Cemblast wrote. “I think the expansion of Chapter 9 legislation for states makes sense, and I’m not the only one.”

Congress crafted legislation to allow Puerto Rico to declare bankruptcy in 2014 and placed the nation under the control of a panel of financial experts to restructure the finances of the country.

Recently, famed investor Warren Buffet warned companies to stay away from states with massive pension liabilities as the states will face increasing financial trouble.

Links

TEXT "follow HawaiiFreePress" to 40404

Register to Vote

2aHawaii

808 Silent Majority

808 State Update AM940

ABCDEFG Blog

ACA Signups Hawaii

ACCE

Affordable Hawaii Coalition

ALEC

Alliance Defending Freedom

Aloha Conservative Alliance

Aloha Life Advocates

Aloha Pregnancy Care Center

American Council of Trustees and Alumni

American Mothers of Hawaii

AMVETS-Hawaii

AntiPlanner

Antonio Gramsci Reading List

A Place for Women in Waipio

Audit The Rail

Ballotpedia Hawaii

Better Hawaii 

Blaisdell Memorial Project

Broken Trust

CAFR Hawaii

Castaway Conservative

Children's Alliance Hawaii

Children's Rights Institute

Christian Homeschoolers of Hawaii

Citizens for Recall

Cliff Slater's Second Opinion

Coffee Break

Conservative Forum for Hawaii

CSIS Pacific Forum

DAR Hawaii

DeedySupport.com

DVids Hawaii

E Hana Kakou Kelii Akina

E Māua Ola i Moku o Keawe

Farmers For Choice Hawaii

FIRE

Fix Oahu!

Follow the Money Hawaii

Frank in Hawaii

Front Page Magazine

Frontline: The Fixers

Genetic Literacy Project

Get Off Your Butts!

God, Freedom, America

Grassroot Institute

Habele.org

Hawaii Aganst Assisted Suicide

Hawaii Aquarium Fish Report

Hawaii Aviation Preservation Society

Hawaii Catholic TV

Hawaii Christian Coalition

Hawaii Cigar Association

Hawaii Coalition Against Legalized Gambling

Hawaii ConCon Info

Hawaii Credit Union Watch

Hawaii Crime Victims' Rights

Hawaii Crop Improvement Association

Hawaii Debt Clock

Hawaii Defending Marriage

Hawaii Defense Foundation

Hawaii Families for Educational Choice

Hawaii Family Advocates

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federalist Society

Hawaii Federation of Republican Women

Hawaii Firearm Community

Hawaii Fishermen's Alliance

Hawaii Future Project

Hawaii Gathering of Eagles

Hawaii History Blog

Hawaii Homeschool Association

Hawaii Jihadi Trial

Hawaii March for Life

Hawaii Meth Project

Hawaii's Partnership for Appropriate & Compassionate Care

Hawaii Public Charter School Network

Hawaii Rifle Association

Hawaii Right to Life -- Big Island

Hawaii Right to Life -- Oahu

Hawaii Shield Law Coalition

Hawaii Shippers Council

Hawaii Smokers Alliance

Hawaii State Data Lab

Hawaii Together

Heritage Foundation

HI Coalition Against Legalized Gambling

HIEC.Coop 

HiFiCo

Hiram Fong Papers

Homeschool Legal Defense Hawaii

Honolulu Homeless Crisis

Honolulu Navy League

Honolulu Traffic

Horns of Jericho Blog

House Minority Blog

House Republican Caucus YouTube

HPACC

Hump Day Report

I Vote Hawaii

If Hawaii News

Imua TMT

Inouye-Kwock, NYT 1992

Inside the Nature Conservancy

Inverse Condemnation

Investigative Project on Terrorism

Iowa Meets Maui

Jackson v Abercrombie

Jihad Watch

Judgepedia Hawaii

July 4 in Hawaii

Kahle v New Hope

Kakaako Cares

Kau TEA Party

Kauai Co GOP

Keep Hawaii's Heroes

KeyWiki

Land and Power in Hawaii

Legislative Committee Analysis Tool

Lessons in Firearm Education

Lingle Years

Malulani Foundation

Managed Care Matters -- Hawaii

Malama Pregnancy Center of Maui

Mauna Kea Recreational Users Group

MentalIllnessPolicy.org

Middle East Forum--The Legal Project

Mililani Conservatives for Change

Military Home Educators' Network Oahu

Missile Defense Advocacy

MIS Veterans Hawaii

Muslim Brotherhood in America

NAMI Hawaii

NARTH

Natatorium.org

National Christian Foundation Hawaii

National Parents Org Hawaii

National Wind Watch

New Zeal

NFIB Hawaii News

No GMO Means No Aloha

Northwest Economic Policy Seminar

Not Dead Yet, Hawaii

Now What I Really Think

NRA-ILA Hawaii

Oahu Alternative Transport

ObamaCare Abortion Hawaii

Obookiah

OHA Lies

Opt Out Today

OurFutureHawaii.com

Pacific Aviation Museum

Patients Rights Council Hawaii

PEACE Hawaii

People vs Machine

Pritchett Cartoons 

Pro-GMO Hawaii

P.U.E.O.

RailRipoff.com

Rental by Owner Awareness Assn

Republican Party -- Hawaii State

Research Institute for Hawaii USA

Rick Hamada Show

RJ Rummel

Robotics Organizing Committee

Salvage The Rail

Save the Plastic Bag

School Choice in Hawaii

SenatorFong.com

SIFE Remington

SIFE W. Oahu 

Sink the Jones Act

Smart About Marijuana--Hawaii

St Marianne Cope

State Budget Solutions Hawaii

State Policy Network

Statehood for Guam

Tax Foundation of Hawaii

The Harriet Tubman Agenda

The Long War Journal

The Real Hanabusa

Time Out Honolulu

Truth About Trade & Technology - Hawaii

UCC Truths

Union Members Know Your Rights

US Tax Foundation Hawaii Info

Valor in the Pacific

VAREP Honolulu

Waagey.org

West Maui Taxpayers Association

What Natalie Thinks

Whole Life Hawaii

Yes2TMT