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It was very helpful for me to put these boards together and give some perspective over time.
Three is in the lower left corner because our leaders picked it for our ROR (return on revenue) or DR (discount rate) in 1965. This is reasonable but will change dramatically to an extreme as you see and read on and now today we are second highest in the nation, outlier again.
1973 is important because one part of how to calculate public pensions went from average salary over career to average of high five salaries over career, a huge bump up for retirements.
Going back to the left to the 50s and 60s I know of no problems. The crescendo to huge problems following huge greed will be obvious.
In MN actuary = voodoo = deeply flawed and inaccurate
In MN actuary equals voodoo Voodoo is my word but the Rockefeller Institute of Government, a research arm of the State University of New York, says about defined benefit plans : public pension funding as “deeply flawed” and “inaccurate” This also has been pointed out by MCFE (Minnesota Center for Fiscal Excellence) over many years and I have read from many other sources.
MERF was our first pension bankruptcy in 1978 when it was closed to new members who went to another plan and the taxpayer bailouts started to make it strong enough to be merged into that plan. A business writer told me that he remembered MERF being a disaster. Pension monies were wasted on a speculative investment in a movie about the River Kwai. From everything I have read inept decisions lead to this mess. Here are a few quotes by the President of the Taxpayers league and a Minnesota legislature, Phil Krinkie. Politics in Minnesota 4/9/2010 Krinkie: Just another government bailout in Minnesota:
“The State of Minnesota has its own bailout bill. It’s a bill that would bail out the Minneapolis Employee Retirement Fund (MERF) to the tune of $694 million over 19 years. The question is why should the state spend $36.5 million a year for 19 years to bail out a group of former City of Minneapolis workers?” . . . “Even though the state has made annual contributions to MERF for more than 30 years, totally hundreds of millions of state taxpayer dollars, now the City of Minneapolis wants an additional $694 million bailout. It’s outrageous!” . . . The City of Minneapolis created this retirement funding disaster and the City should be responsible for cleaning up the mess not state taxpayers.”
Personally it is great to hear somebody who fights for taxpayers because it doesn’t happen much here in Minnesota.
Below is the Trifecta that weakened and later helped destroy 3 teacher pension plans.
Discount rate zooming from 3 in 1965 to 8.5 in 1989.
3 and then 6 major MN plans giving away many billions of dollars to retirees from extra investment gains, who already have wonderful retirements.
Increasing multipliers to increase retirements of those still working.
All 3 teacher plans were unhealthy before they weakened them even more and eventually were bankrupt.
From 1978 on for twenty years pension leaders watched as 100s of millions of taxpayer dollars were exploited to heal MERF prior to a merger.
I believe this is possibly why the leaders began a new and dramatic stage of greed and taxpayer abuse. Let’s look how 3 events coincided.
The discount rate is now a record high of 8.5 with Minnesota one of the nations leaders.
Three of our major plans out of 85 studied in Wisconsin, as discussed on article # 3 and #4, decided to weaken their funds more by giving retirees, who already have great retirements, even more money.
Our three teacher plans soon followed and all three would go bankrupt relatively soon. On top of this many plans increased their multipliers for future retirees. Our pension leaders seemed intent on damaging their plans so taxpayers are forced to step in as with MERF. This is a trifecta of damage done.
The job of a pension leader is to match benefits to assets. They failed their jobs on purpose and were warned along the way. This is unethical to help create, very possibly, elite pensions for public employees when most taxpayers, forced to pay billions extra, will never have the same benefit.
This trifecta led to blast off, my term for Minnesota separating itself from national averages and many plans having increasing debts, even with actuaries figuring it out. Also in this time was the TRA increasing its multiplier to 1.9 in what I call The Swindle when they took over MTRFA’s debt in the merger (bankruptcy) More on this later.
In the middle of this Moody downgraded the credit rating of Minneapolis due to pension liabilities (2013)
Bloomberg in 2017, just after all of this mess, made its famous assessment of Minnesota being 110 billion dollars in pension debt and because it is important for various reasons I will devote a full section to it later.
2018 is famous for a large pension overhaul when the legislature admitted that all plans would not be 100% funded between 2020 and 2032. The new date is 2048, a classic political move of pretend and extend or kick the can. 2031 is still the same for MERF I believe.
I just found out yesterday (January 2023) that our 7.5 DR or ROR is second highest in the nation. Minnesota can’t resist being an outlier. Remember that using a DR is called fraud for all private businesses in the U.S. Public institutions are allowed to and Minnesota seems to lead this deception for decades now.
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