Pension reports get lawmakers' attention

3:34 PM, Aug 26, 2010   |    comments
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KARE 11's probe into under-funded public retirement plans grabbed the full attention of state lawmakers Thursday at the Capitol. The Legislative Commission on Pensions and Retirement met to receive a report from the Minnesota Taxpayers Association and to watch KARE-TV's stories timed with the release of the taxpayer group's study.

The panel, made up of Republican and Democratic lawmakers, oversees the government workers and teachers retirement funds and seeks to enact legislation involving benefits and management of the money.

The stories by KARE 11's Rick Kupchella called attention to a combined projected shortfall of $5 billion in the state's pension funds, plus another $1 billion in unfunded benefits in the Minneapolis Teachers retirement fund.

The Taxpayer Association's study was critical of the practice of using investment performance bonuses to calculate the base benefit for future years, rather than granting retirees one-time bonuses. Bonuses based on bull market years on Wall Street, the report argued, could not be sustained in leaner, bear market days.

The report also criticized aspects of the proposed bailout of the Minneapolis Teachers Fund by the statewide Teachers Retirement Association or TRA. In the words of the report the bailout "provides an excellent example of how politics, rather than pension principles, can drive pension decision making."

The tension created by the study and the KARE-TV reports was evident in the Commission's meeting room at the Capitol. Association executive Lynn Reed found himself on the hotseat for 90 minutes answering questions not only about the study's findings but about his group's decision to work with KARE-TV on the broadcast reports.

Reed made it clear to the Commission that his nonprofit group is nonpartisan and is not anti-tax or anti-government. He said taxpayers associations sprung up in the 1920's to help bridge the gap between the public and government, which by its very nature has grown more complex. Reed stressed his studies are not driven by the agendas of the groups that fund the studies, "We keep absolute independence from any funder. They'll have no say in the direction of the study, or the results," Reed stressed.

He added that his group is not anti- While admitting it's been a learning experience, and that members of the Commission are much more well versed on the issue, Reed said he was merely hoping to sound an alarm. "We're gonna be in trouble. And we need to look about that, look ahead and say are we going to keep a system that pays bonuses and adds them permanently to the base?"

Senator Geoff Michel, R-Edina, applauded the TV reports and the study tied to them. "We need to stop making promises that we can't keep. The State shouldn't do that, pensions shouldn't do that, Unions shouldn't do that," he said to Reed and fellow panel members.

Senator Larry Pogemiller, D - Minneapolis, appeared to be on a mission to set the record straight after being featured prominently in the broadcast reports because he's been on the Pensions Commission for 20 years and has been the chairman for the past year. "Can I tell you something?" Pogemiller told Reed, "I voted against the 89 bill. Some of the people throwing darts voted FOR it."

According to Lawrence Martin, who has been on the Commission staff for the past 33 years, 1989 was a watershed year for the government retirement plans because benefits were raised substantially.

1997 legislation raised the base payments again, while ratcheting the cost of living adjustment formula downward. Pogemiller suggested leadership on pension reform has been lacking from the Governor's office, prompting Senator Cal Larson, R - Fergus Falls, to echo a question posed by Rick Kupchella in Tueday night's report.

Larson said to Pogemiller, "Well a little leadership here would help too." That launched Pogemiller and Larson into one of several rounds of verbal sparring. Pogemiller: "I was not on the Commission or in the Legislature when you gave this, when you and others gave this post-retirement adjustment which is the criticism in this Channel 11 report. I wasn't even in the Legislature then. This year we have a bill to fix it. So, as soon as I became chair we're about to fix a mistake that you and your colleagues made prior to me being here. It takes 20 years to do that senator." Larson: "You take 20 years to correct that."

Pogemiller: "Senator, I've only been chairman for a year." Larson: "You've been on the commission." Pogemiller told the Taxpayers Association's Reed that the Senate passed a bill last year raising employee contributions in to the Public Employees Retirement Association or PERA, which should go far in making that plan solvent. Another bill pending this session would place a cap on those controversial post-retirement investment performance bonuses.

Pogemiller and Martin both pointed out those bonuses - for years in which returns on investment exceed 8.5% -- can't be paid out until the Post-Retirement Fund is solvent. And, they predict, that could be more than a decade. Pogemiller questioned the motives of the groups that paid for the study, including the Minneasota Association of Realtors and the National Industrial and Office Properties association.

At one point he said to Reed, "I think if your funders weren't so actively trying to trash the legislature and spent more time trying to be participants and trying to help deal with these difficult issues, we'd all be better off."

Senator Don Betzold, D - Fridley, questioned the timing of form e-mails from consitituents expressing outrage over the findings of the reports and the KARE-TV stories.

Reed said that wasn't the doing of his group. But the Realtor's Association's Glenn Dorfman told lawmakers his organization did send out an action alert prompting members to send e-mails expressing outrage. "I think it IS outrageous," Dorfman told the panel, "I think it's outrageous that the state fund TRA has done so well and most of the other state funds have done so well and most of the Minneapolis fund and the St Paul fund have not done so well. I think that's outrageous."

Dorfman said the Realtors Association backed the study because public needs to know about pension funding issues has lawmakers debate the best use of taxpayer money. "Everybody says we need more money. We can't raise taxes enough. There's no way we can raise taxes enough to solve all the needs we have. So if we have everything on the table, all the major items, they can compete with each other. That's it. That's the total deal." But when Reed told the panel more state investment is needed to save the funds from default it prompted Pogemiller to ask, "But one of your major funders just sat here and told us we're spending too much money on pensions. You just said we're not spending enough. Which is it?"

Reed answered, "Mr Chair, You're not spending enough." The shortfall in the Minneapolis Teachers fund, and the terms of the bailout deal, also sparked a mini-debate between Senators Pogemiller and Larson. Larson: "The rural teachers picking up half the cost of it is very disturbing. They're very unhappy about it." Pogemiller: "Senator Larson what would you like to do? What solution do you have?" Larson: "Maybe we should have a referendum by the teachers whether they want to accept it or not." Pogemiller: "So you're against fixing the Minneapolis fund? You voted for it last year to fix it." Larson: "Yes I did, we're getting more information now." But the discussion often turned to the Taxpayers Association's reports and the TV stories connected to them. "Overall I think Minnesota pension funds are in relatively decent shape," Pogemiller said to Reed, "An attempt to create panic among Minnesotans on pensions, I just don't think is a wise thing to do, because I don't think there's a need for panic."

Reed, thumbing through his 100 page report, replied, "I don't see a great deal of panic in this report." He said he couldn't speak for the television version of his report, but added, "We honestly were grateful for the exposure.

As a nonprofit who fills a niche that's difficult to fund. Good government and sound tax policy it's not the juiciest logo in the world."

After the meeting Pogemiller reiterated that most of the public pension funds are relatively sound, or on their way. He said he was optimistic bills will get out the Legislature this session addressing most of the issues raised by the Taxpayers Association. "We need to fix the one that's in deep trouble, the Minneapolis fund, but overall, Minnesotans should feel fairly confident that there's good management of their funds."

By John Croman, KARE-TV

Copyright KARE 11 News

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