C.T. Marhula: Fully Fund State Pensions

There was an excellent article recently (writer, Helmut Schmidt) on problems and proposals regarding the teacher’s retirement fund.  While many SAB readers may prefer a defined contribution plan; I remain a strong supporter of defined benefit pension plans.

[mks_pullquote align=”right” width=”300″ size=”24″ bg_color=”#000000″ txt_color=”#ffffff”]”First, the problems in North Dakota are not like Detroit or New Jersey, where both parties raided the pension funds for improper purposes.  The main reason for the North Dakota shortfall is a combination of the Great Recession and legislative naivety in trusting consultants.  This will not be repeated in the future.”[/mks_pullquote]

First, the problems in North Dakota are not like Detroit or New Jersey, where both parties raided the pension funds for improper purposes.  The main reason for the North Dakota shortfall is a combination of the Great Recession and legislative naivety in trusting consultants.  This will not be repeated in the future.

A fix can lower property taxes and increase take home pay for teachers.  I do think the state should fund any additional costs over the 2008 rates.  In exchange, school districts MUST pass on 100% of this savings and 100% of the 50 mill buy down to the taxpayers.

In Grand Forks, the District kept over 8 mills of the buy down, and changed insurance plans so many teachers have less take home pay than the previous year.  The result, Larry Nyblahd was selected as North Dakota’s “Superintendent of the Year.”  You can’t make this stuff up.  He may be the leading candidate for the SBHE’s Chancellor position.

While I sure he is a decent person, Fargo Board member Jim Johnson’s comments in the article were scary.  He claimed the fund problems were caused by, “more people retiring, retirement payments increased because lots of money, and retirees are living longer.”

Sadly, he is wrong on ever count.  Each age cohort is accounted for in the formulas.  How did the “kitty have so much money in it” and at the same time be only 70% funded?  Life expectancy is also in the formula.   This is an easy actuarial formula to allow correct long term funding over a 30 year smoothing.  Johnson should be embarrassed to raise the issues he did.  Maybe he learned his math using Common Core.

Johnson actually suggests the answer might be lowering the funding requirement to 75%.  Wow!  I wonder if he makes this recommendation to his clients.   “Trust me, I have 75% of your money.”  (Johnson’s school board bio list his profession as Vice-President of a financial consultant group).

While Jesus was able to feed everyone on 5 loaves of bread and 2 fish; I don’t think  He is inclined to bail out North Dakota’s fund.  Get some adults at the table.  Fund it to 100%.