States $3 trillion in Pension Obligation Debt

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..........................Joshua Rauh, an economist at Northwestern University, and Robert Novy-Marx of the University of Chicago, recently recalculated the value of the 50 states’ pension obligations the way the bond markets value debt. They put the number at $5.17 trillion.

After the $1.94 trillion set aside in state pension funds was subtracted, there was a gap of $3.23 trillion — more than three times the amount the states owe their bondholders.

“When you see that, you recognize that states are in trouble even more than we recognize,” Mr. Rauh said.

With bond payments and pension contributions consuming big chunks of state budgets, Mr. Rauh said, some states were already falling behind on unsecured debts, like bills from vendors. “Those are debts, too,” he said.................

http://www.nytimes.com/2010/03/30/business/economy/30states.html?bl

State to lever up in risk exposure

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Oregon may invest pension money in troubled-bank rescues

In a deal being pitched as a home-run investment opportunity for the state pension fund, Oregon's public pensioners may be about to buy stakes in several of the 700 troubled banks around the country that are wallowing in bad loans.

The deal's unusual structure and hefty fees raise concerns, particularly in light of the Oregon Investment Council's recent insistence that it would push for better terms, more transparency and better corporate governance from investment managers it does business with.

The transaction also provides a window into how Wall Street financiers are lining up to unwind the banking crisis that many helped create -- with high potential for another round of windfall profits for savvy investors.

The citizen's council that oversees the Oregon Public Employees Retirement Fund gave its approval last week -- subject to final fee negotiations -- to invest $100 million in a bank holding company being organized by Sageview Capital, whose partners bring deep experience in the world of leveraged buyouts.

http://www.oregonlive.com/business/index.ssf/2010/03/oregon_may_invest_pension_mone.html

Oregon PERS Unsustainable

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Climbing PERS expenses face Oregon pension board, agency budget writers

The cost of Oregon's Public Employees Retirement System is about to skyrocket to budget-busting levels.

As a result of PERS' $17 billion investment loss in 2008, every state agency, municipality and school district that participates in the system is staring at an average 50 percent increase in the base rates PERS charges to fund their employees' retirement benefits in 2011 and 2012.

http://www.oregonlive.com/business/index.ssf/2009/10/looking_down_the_barrel_of_per.html

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Oregon Public Pension in trouble 2011

Oregon's public pension fund down nearly 20% last year. Moving forward payments into the fund are scheduled to soar. With unemployment growing, tax revenues down where is the money going to come from?

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Payments to Oregon pension system to soar in 2011.

Oregon schools and governments are confronting a big increase in pension costs because of last year's meltdown in the financial markets.

The Public Employees Retirement System fund lost 27 percent of its value last year. The losses mean that the funded status of the system — the percentage of liabilities covered by the system's assets — declined from 98 percent at the end of 2007 to 71 percent at the end of 2008.

To help put the system's funded status back in balance, state and local government agencies, school districts and municipalities will have to devote a higher percentage of their payroll rates to pension obligations.

Contribution rates differ by employer. But systemwide, payroll rates to fund pensions will jump from an average of 4.7 percent of payroll to 13.1 percent starting July 1, 2011, according to a new report from the pension system's actuary.

News of the forthcoming increase comes at a time when government budgets are absorbing recession-related cuts.

http://www.kgw.com/sharedcontent/APStories/stories/D9B2GBO81.html

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