In following up on some of my earlier concerns about proposals for reducing Minneapolis's pension liabilities, I've been reading the report put together by the Blue Ribbon Commission, which can be found on the city's web site at:
http://www.ci.minneapolis.mn.us/finance/docs/PensionBlueCommReport1004.pdf As you might guess, there's a fair amount of interesting info provided. One thing that might be of interest to folks who don't live in Minneapolis is the levels of state aid provided to each fund, which is detailed on pages 16-17 of the report. The various state aids total approximately $20 million a year. In other words, it's not just a Minneapolis taxpayer problem and we should all be concerned about this, regardless of our place of residence. One interesting quirk in the MPRA fund is that state aids are reduced whenever a "13th check" is paid out. So for Minneapolis taxpayers, there's a double-whammy. Given that the MPRA fund was only 65% funded in 2003, any "13th check" payouts are going to significantly hinder efforts to build up the fund and reduce pension liabilities as well as reduce state aid payments intended to offset liabilities. And because taxpayers are on the hook for liabilities, MPRA (and MFRA, for that matter) has no incentive to invest prudently, instead, they can go for the big 13th check payoff each year and if they fall short, we get to make up the difference. This is detailed on pages 21-22 of the report. Of particular interest might be comparing the table showing percent of liabilities funded on page 16 to the table showing 13th check payouts on page 22. MPRA members picked up about $6,000 per person while their fund lost 20% of its value from 1999-2001. MFRA members picked up over $35,000 per person while their fund lost 22% of it's value from 1999-2002. So while the stock market slumped the past few years, MPRA and MFRA chose to take advantage of the 5-year return averages and get their 13th check rather than be prudent and shore up the fund in the face of a recession. No wonder the State Auditor's office has problems with how MPRA and MFRA define "fiduciary duties" among other things. This is detailed in several appendices to the report. I personally agree with the city and the State Auditor's office that "fiduciary responsibility" means maintaining the long-term solvency of the fund, not going for the biggest 13th check possible. MERF, to their credit, has not engaged in this practice. Their problems are more due to the increased rate of retirements that have taken place in recent years and this "liquidity triggers" business that requires the city to fully fund retirements as they occur. I haven't been able to figure out why that requirement exists, but it seems unnecessary. After reading this report and the State Auditor's comments to MPRA and MFRA, I think our city leaders are totally on the right track in seeking to transfer these funds to the State Board of Investment as a permanent solution to the problems these funds have. The MPRA bill that the city rejected may have saved some money in the short term, but it was not a long-term solution. It does nothing to improve investment or benefits management and it does nothing to improve fiduciary responsibility. The other factor to keep in mind is that these are small funds as far as membership. MFRA has only 690 members. MPRA has 959 members. As these folks pass on and the memberships continue to dwindle, it will not be cost-effective in the long term to keep these funds separate. If Rep. Kahn is right that nobody from the Minneapolis delegation is willing to carry the recommendations from the Blue Ribbon Commission to the Legislature, I surely hope some of them will reconsider their positions and weigh whether the interests of several hundred members of MFRA and MPRA outweigh the interests of the thousands of Minneapolis residents they are supposed to represent. I commend Mayor Rybak and the City Council members who are seeking to solve this problem now instead of just pushing it off on future city leaders. I'm glad my council member, Paul Ostrow, is part of that group that is demonstrating true leadership rather than political expediency. Mark Snyder Windom Park REMINDERS: 1. Think a member has violated the rules? Email the list manager at [EMAIL PROTECTED] before continuing it on the list. 2. Don't feed the troll! Ignore obvious flame-bait. For state and national discussions see: http://e-democracy.org/discuss.html For external forums, see: http://e-democracy.org/mninteract ________________________________ Minneapolis Issues Forum - A City-focused Civic Discussion - Mn E-Democracy Post messages to: mailto:[email protected] Subscribe, Un-subscribe, etc. at: http://e-democracy.org/mpls
