The New York Times has been running a series of article dealing with the financial challenges facing local and state governments. They make for interesting reading as they point out some of dangers facing us. Fortunately, Washington State’s pension system remains in good health.  See the full article for reviews of this series and links to the articles.

On May 7th Matt Smith, the Washington State Actuary presented a review of the status of the LEOFF 1 Pension Plan at the the Washington State LEOFF 1 Education Association Conference. We were disappointed beause our schedule did not permit us to remain for the last day of this conference and Matt's presentation.  It turns out we did not miss much.

This is a general article about pension funding that was produced by Boston College.  It really does not apply to LEOFF 1, at least not specifically but the article does provide a good deal of in-depth pension funding information for those who are interested in following the issue.

The Government Accounting Office (GAO) on March 2, 2010 published an updated report to Congress titled State and Local Governments' Fiscal Outlook. In summary it states: Fiscal sustainability presents a national challenge shared by all levels of government. Since 2007, GAO has published longterm fiscal simulations for the state and local government sector. These simulations show that, like the federal government, the state and local government sector faces persistent and long-term fiscal pressures. Using the Bureau of Economic Analysis's National Income and Product Accounts (NIPA) as the primary data source, GAO's model projects the level of receipts and expenditures for the sector until 2060 based on current and historical spending and revenue patterns.

Since 2007, investment losses and the weakness of state and local government revenues have produced extraordinary stress for public retirement funds in the United States. This stress magnified the funding issues retirement funds encountered because of the recession at the turn of the century.

The vast financial losses and uncertainty during the last year have forced all generations to reassess the funding, timing, and purpose of retirement. At this pivotal moment, Age Wave launched Retirement at the Tipping Point: The Year That Changed Everything™, a landmark national study conducted by leading research firm Harris Interactive.

The Public Fund Survey is an online compendium of key characteristics of the nation's largest public retirement systems and is sponsored by the National Association of State Retirement Administrators and the National Council on Teacher Retirement for the purpose of increasing knowledge and understanding of the public pension community.

NASRA Releases Results from National Survey of Public Pension

Public pension funding levels have declined according to this year’s Public Fund Survey, an annual overview of public pension plan financing, membership and design. This year's summary is the first following the sharp drop in global investment markets that occurred in 2008. The survey is an online compendium of key characteristics of the nation's largest public retirement systems and is sponsored by the National Association of State Retirement Administrators (NASRA) and the National Council on Teacher Retirement.

According to the report, the 2008 fall in pension asset values has caused aggregate public pension funding levels to move downward from 86.7 percent in FY 2007 to 85.3 percent in FY 2008. Because public pension actuarial methods are designed to temper the effect of market volatility, public pensions will recognize the investment losses incurred in 2008 over several years. During this recognition period, funding levels are expected to decline, although losses may be partially offset with investment gains.

The author anticipates that future funding levels will also be influenced to the extent sponsoring state and local governments consider adjustments to benefit levels and financing arrangements, such as reduced benefits for future hires, reduced future accruals, and/or higher contributions for both employers and employees.

View the entire report by clicking here.

A lot of folks have seen doom and gloom in the recession we just past through.  I thought it was important to get a historical perspective on this issue.  We have had worse times that the last recession.  We may have more.  But the bottom line is how things have done in the long term.  The table in this article shows the historical rate of return on pension investments.

This article shows the projected payouts from the LEOFF 1 Pension system.  Did you know the system is still in surplus?  The surplus is still in excess of $400 million and the stock market continues to climb.  As of November 23rd, the DOW closed at 10,450.95 and was up 132 points today.  See the full article for details.