Glen Brown on smoothing. 

-Glen Brown
Illinois adopted asset smoothing (Senate Bill 1292 in 2011) to determine the actuarial value of its plan assets. The asset smoothing method uses expected returns on the asset mix and averages both past and anticipated asset values, generally over a period of five years.
Consider the State of Illinois’ consistent underfunding of its annually-required contributions to the pension plans, the transferring of the state’s “normal costs” to the public pensions, the inadequate revenue growth for the long-term costs of public pension benefits, the unfunded pension liabilities and funded ratios, the historical rates of return, amortization periods, discount rates and inflation rates, and the state’s current flat-rate tax system and budget practices, to name just a few. They still need to be addressed.
Consider that the long-term consequences of legislative policy decisions are also based upon preferred and changeable data, that public pensions carry liabilities into perpetuity, and that the immediate effects of any legislation passed will affect primarily middle-class citizens who are victims of an imperfect fact-finding and decision-making processes.
We would agree that claims are considered effective when supported by sufficient, accurate, and relevant evidence; however, will Illinois legislators and the governor agree about evidence and solutions for the state’s public pensions’ unfunded and future liabilities? The answer is NO. The governor and legislators of the State of Illinois will not focus upon solving the state’s revenue and debt problems so that they can decisively commit to a responsible funding for all of the state’s debts.

2 Replies to “Glen Brown on smoothing. ”

  1. From the Teachers Retirement System of Illinois, October 2016:

    “‘By any measure, $4.56 billion is a lot of money, but that amount is a direct product of the perpetual underfunding of TRS by state government over the last 76 years,’ said TRS Executive Director Dick Ingram. ‘Illinois is reaping what it sowed. Decades of inadequate contributions for TRS mean that now – when investment returns are not robust – big contributions must be made to secure the retirement promises made to generations of teachers.’

    “Of the $4.56 billion state contribution for FY 2018, only $974 million is needed to pay the anticipated annual cost of TRS pensions during the year. The remaining $3.59 billion in the contribution is dedicated to help pay off the System’s $71.4 billion unfunded liability.

    “‘Most of the FY 2018 contribution is a self-inflicted wound,’ Ingram added. ‘That money could be spent on other priorities today if the State of Illinois had fully met its obligations in the past.’”

  2. Hey Fred,
    May be of interest. After reading this even I
    am beginning to sense a theme. There is not enough $ in NY, NJ, Conn, Kan or Ill, but we want more don’t we??

    Winter is coming for the North.

    Last year, three states in the Northeast — New Jersey, New York and Connecticut — landed in the top five places people were moving out of fastest, according to 2017 data from United Van Lines. (The other two states on the list were Illinois and Kansas.) And data from Pew Charitable Trusts found that while people are all about moving to the South (their population grew by nearly 1.4 million people from 2014 to 2015) and the West (866,000 more people), the population growth in the Northeast is “sluggish.”

    The Northeastern exodus is particularly acute in many big cities like New York City. Since 2010, more than 1 million people have moved from the New York area — which includes parts of New Jersey, Connecticut and Long Island — to other parts of the country.

    So why are so many Northerners packing their bags?

    The insanely high cost
    Data released on Wednesday by personal finance site GoBankingRates.com reveals that the No. 1 financial fear of people who live in the Northeast is that they will have to live in debt forever; the Northeast is the only region of the country that ranked this as No. 1. (The other regions put retirement as their No. 1.)

    And no wonder they’re worried. The cost of living across the region is among the highest in the nation and three of the five most expensive states or districts in the country (New York, Washington, DC, Massachusetts) are in the area. (The other two states are Hawaii and California.) Having to spend so much just to get by can make getting out of debt seem much harder. And housing costs and taxes in many of these states are also sky-high.

    The horrendous weather
    We told you winter was coming to the North — and it’s so bad that many people are leaving the Northeast in search of better weather. Indeed, the largest migration between states is from New York to Florida, according to data from the Census Bureau. And simple looks at recent winters in the Northeast explain why. For example, in 2015, Boston had its snowiest winter on record and New York City had one of its snowiest blizzards on record in 2016.

    Just ask Karen Lanovi, a lifelong New Yorker who says she “left for better weather,” moving to central Florida 12 years ago. “It has proven a great decision for my husband, myself and our three children. We for the most part have a better life,” she says. The same reasons drove tech entrepreneur Jaimyn Chang out of the Northeast to Austin; he says he was “sick of the ridiculous snowy winters and bone-chilling temperatures” and “ the constant seemingly endless gray overcast days.”

    The jobs
    Many companies are setting up shop in warm and less expensive places, which means that people pondering getting out of the Northeast can now find work. Texas, for example, has seen massive job growth since the recession — and some of these jobs are in fields you wouldn’t normally think of as being in Texas. For example, tech: Google, Apple, Dropbox and Oracle all recently built or expanded offices in Austin, along with many others.

    FILE

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