Transcript :
Karen Pierog (
So Texas has taken steps over the last several years to improve funding of its big statewide public retirement systems and local plans in Houston and Dallas, like pension funds in other states. Systems in Texas enjoyed huge investment gains in 2021, which was followed by weak market performance in 2022. How are Texas funds weathering market volatility and our reforms adopted in the past helping to maintain healthy funded ratios. Our panelists are Melissa Dubowski, deputy Director of Finance with the City of Houston, Ajay Thomas, senior managing director and head of public finance at FHN Financial Capital Markets. And Stephen Doyle, associate Director of US Public Finance at S&P Global Ratings. Well, we're going to start with Stephen S&P. Just put out a report about how higher contributions improved Texas pension funds overall outlook. So why don't you talk about that?
Stephen Doyle (
Sure, Thanks Karen. And so like you mentioned a couple weeks ago, we published what we call our pension spotlight for Texas, and that included an overall improvement in outlook for pensions in Texas, largely because of legislative changes the past two sessions. So the theme of the piece is really positive changes from a legislative perspective potentially offset or somewhat offset by still remaining challenges from certain actuarial assumptions. And then of course, like we've heard with most sessions today, the macro climate and how interest rates inflation could potentially impact returns and increase contribution volatility going forward. But the big changes the past two legislative sessions, looking firstly at the two large statewide plans TRS and ERS in 2019, Senate bill 12 outlined increases over a six year period for TRS and then ERS in 2021. That session Senate Bill 3 21 in increased contributions to ERS state employees plan and also created what they call a cash balance plan, which has some components of a defined to benefit or benefits are defined to a degree, but also makes funding those benefits or understanding the liability more easily dissolved or more known on a year to year basis, which we view positively those two changes largely surrounding contribution increases are both positive, although we expect likely continued increases going forward to truly fund the liabilities. And then house Bill 3898, which came out of the 21 session, lowered the amortization period recommendation for the state for public pension funds from 40 years to 30 years. That's still above guidance that we have what we consider prudent of 20 years, but shows the state's proactive or reactive, if you will, changes in order to attempt to address pension liabilities. It also changes some of the logistics around submitting funding soundness plans to the pension review board. We do consider the pension review board somewhat unique for Texas and a positive given how it monitors the status and the health of public pension funds throughout the state. And so those are the large points in terms of the improved outlook for pensions. As far as local governments, county governments, certain special districts that participate in the state's agent, multiple employer plans, TMRS and TCDRS, the county and district retirement system plans, those liabilities are still relatively manageable for most issuers, at least rated issuers. And the liabilities versus budget size carrying charges versus the annual budget are still very affordable. So still minimal credit pressure there. And with those two plans, the actuarial assumptions just historically have been more conservative, which have helped those plans maintain more level funding, less contribution volatility and more easily absorbed costs for municipals counties and certain special districts. So also a positive there but not as much of a change versus our prior report a couple years ago. And then, like I mentioned at the outset, offset that with certain risks that we're seeing now TRS and ERS, while contributions have increased, the discount rate is an area that's still higher than our 6% guideline at 7%. The amortization length is still extended versus our 20 year guidelines, which could lead to contribution volatility and a growing liability, particularly when we're in an environment where returns are volatile from year to year. And so those are things that we're still watching for those two statewide plans. But with the 22 fiscal year, the contribution increases for TRS and ERS could already be seen with contributions very close to or at the ADC for the 22 fiscal year, which is a change from going back 10, 20 years nearly every year. There was a pretty large shortfall or a gap between the actuaries recommended contribution and what the statutory contribution was. And so that's a difference that we've already seen with the legislation passed. That's a positive, that's those plans up fairly well. And then we still see pressure with certain single employer plans. It's very isolated in our rated universe. Less than 5% of issuers have a single plan, most participate in one of the agent TMRS or TCDRS plans. But there are certain pockets of sometimes significant credit risk related to a lot of times firefighter plans, which are allowed under state law where you've got a pension board to make more political resistance to making changes reforms. And oftentimes those plans are guided by state law or enacted by state law where you have to go to the legislature to make any sort of change, which can be tedious and takes a while to get changes. So those are very isolated instances. The rating movement in recent history, outlook, change or downgrades have been related primarily to single employer plans, but those aren't terribly frequent. But somewhere we're still focusing on as isolated credit risk. So in summary, the report really highlights a lot of the work the state's done with new legislation to increase contributions, address liabilities more effectively. But we've still got certain areas, certain assumptions that could lead to contribution volatility, particularly with the macro climate and market return volatility we've seen the past couple of years, and then the isolated single employer plans that we still comment on and bake into those particular ratings.
Karen Pierog (
Great. So speaking of reforms, Houston had in 2017 got the legislature to approve reforms to its pension plans, which were not doing so great, and also allowed the issuance of pension bonds. So Melissa, how's that been working out?
Melissa Dubowski (
Thank you. Definitely we've seen the fruits of our labor, those pension reforms back in 2017. It was a big joint effort between, of course the administration, the city controller's office was a huge advocate for us as well in getting the pension situation at our control. The business community in Houston, and of course the legislature, like Stephen mentioned, our pension plans are controlled by the state. It's all in state statute. So for those changes we had to go through the legislative process, which certainly was not easy, but we were able to get a lot of shared sacrifice was our phrase back then and move those important reforms forward. So, part of what you mentioned was the issuance of the 1 billion of pension obligation bonds, which I know there's sort of a viewpoint out there of well, you're just sort of exchanging one debt for another, right? And if it's not timed right, you might be issuing pubs at a too high of a rate compared to your rate of return that the plans need to get. And I guess in our case, we were fortunate that we were able to negotiate 2 billion of benefit reductions in exchange for a billion dollars of bond proceeds to the plans. The interest rate environment was a little bit different then than it is now. So we were able to issue those bonds at around sub 4% and since that time the plans have had a return of about almost 8%. So everything's on track so far with that, which has been great. We've seen a really big reduction in the unfunded liability pre reform. It was around 8 billion now it's around 2 billion for our three plans between the Muni police and fire plans. And I guess kind of speaking to the market volatility, 2021 obviously was a great year for all three of our plans. 2022, again, not so much, but part of the reforms was doing five year smoothing of those asset returns. So you know, don't see these wild jumps in the city's contribution rate when you might have a bad year in terms of returns. Part of the reforms also set up a cost corridor mechanism so that again, the city's contribution rate can't jump more than 5% of pay from that midpoint that was established, which has been really important for, I know you heard the city controller talk earlier this morning about, and charice as well, the deputy controller about budgetary pressures that not just Houston, but everyone has. And so that's been something that's been really important for our long-term planning in terms of our budget and fully funding the pensions. So part of the reforms we're also funding the full actuarily determined contribution every year. So that's something that we're able to do and able to do affordably post 2017.
Karen Pierog (
Great. Okay. So obviously Houston did this massive 1 billion pension obligation bond, but really in recent years there haven't been a lot of pension bonds issued in Texas. Ajay, what is the outlook for pension bonds right now?
Ajay Thomas (
Thanks Karen. Well, I think part of Melissa, what she is trying to frame for you all is that Houston is really the model for how you want to approach any pension bond issuance as part of a strategy to try to improve your funding solution. Because in isolation on its own, it's not necessarily the silver bullet that's going to fix your problem. And there are potential market risks and other funding risks that come with issuing that the pension bonds as part of your debt strategy to correct the problem. I think looking at it the way the city of Houston did and as she is a comprehensive part of a comprehensive solution and where you have benefit reductions, you have multiple stakeholders that come into agreement about how to approach the situation is the way to go. And that's where you've seen when pension bonds have been issued, the success rate be really high as part of a funding solution to get to some agreeable amount of funding status, not necessarily a hundred percent. I think what we're under the misnomer of is that a lot of these assumptions when they talk about the assumed investment rate of return and such has been done a long time ago in where the market was very different. It was much more predictable, it was much more attuned to being forecasted, which we're in a very dynamic market environment today and where the market is going to be volatile for the foreseeable future. And so returns, as you make that decision to invest in pension bonds as a part of the strategy, you're not going to see that year over year success as opposed to when you're using a five year smoothing method or for the duration, the final maturity is when you can take the look back and see whether that was effective or not. So you have to think about it like that. To go directly to your question, I think when you look at Texas, Texas has always been conservative by nature in terms of its, and I say conservative with a small sea in terms of its debt issuance strategy. So pension bonds is something that is not first of top of mind for any issuer to really address that situation because I think if you are an issuer, which I've been in the past, you do realize that while the aspirational goal is to always be as fully funded as you can and to make sure you are meeting clearly the contract you've made with your employees or your public safety personnel, it is a very dynamic and fluid situation. You're over a year as your payroll and your employment base changes. And so I think we've had the benefit in Texas of also enjoying part of the economic miracle that is Texas. And so we've had issuers who have had the benefit over the last several years of having more revenue, tax revenue, more fee-based revenue to work from. And so where they can, as part of a percentage of their overall budget, it is less impactful as you might see outside the state of Texas. I think when you look at pension bonds being issued here now, it's very market dictated. So I think that, as Melissa pointed out, they timed it just right in the city of Houston in terms of when to access the market. I think we've had several issuers that have benefited from that, even some that have been members of TMRS who when they looked at their contribution, they elected to go ahead and even pledge their geo credit in order to issue pension bonds into the marketplace because it was, the market just dictated that it made the most sense when you looked at where treasury rates are, where these are taxable instruments. So you used treasuries as your benchmark and you at where rates were in those treasury, in the treasury market 24 months ago compared to where they are today. Clearly that was a good time to issue and you sort of hit the right sweet spot. Today, you're going to see much less interest in issuing pension bonds just given where those fixed final rates would be on the debt that you're issuing versus what your assumed rate is. You really do need that widespread between the two in order to really benefit from any really pension bond strategy. So until you see the market and the Fed elect to mute its interest rate hiking strategy and the worm turns, if you will, and we start cutting interest rates again, and you might see the treasury market start to trickle back down in the yields that are being offered. I think for the most part you'll see very limited issuance of pension bonds here in the state of Texas just based on where pension plans are and some of the legislative changes that Steven and all talked about and addressed. I think most pension plans are in sort of benefit management and ongoing funding management strategy as opposed to leaning on debt to really cure up that unfunded status right now.
Karen Pierog (
And also that there's not that many single employer plans. Right?
Stephen Doyle (
Yeah. One of the benefits for Texas in terms of POB issuance, it's never going to be a state like California, Arizona with that sort of volume of issuance, largely because most local issuers are in a pretty good position pension wise in terms of their liability, their annual cost. But where we see them is the single employer plans, and I'll say before any more detail, we don't have a house view at S and P on POB's, good or bad. I know a lot of people think off the cuff that it's a negative initially, but we don't have a house view. It's a case by case situation, why it's being done, how it's being carried out, how risks are incorporated into the issuance with reserve monies and so forth. But we don't expect an uptick in issuance. We expect what was already pretty low for Texas to be even lower with rates this high. It's simply a less opportunistic right now like Ajay hinted at. And so I do think an interesting area to watch though with House Bill 3839, the lowering of the amortization period from 40 years to 30 years, if that does push those issuers that have single employer plans to consider POB's maybe more seriously in order to meet that requirement over the next year and a half by 2025. So that's something to watch. Melissa hinted at the time market timing risk. That's something that is interesting to see play out. We don't have as much evidence in Texas to look at, but with the way the market has been up and down, so for instance you issued POB's took those proceeds, purchased assets in 2021, and then 2022 hits and there's a 20% pullback in the market, you're immediately in a bad spot. And so I think with the uncertainty in the market right now return wise, that's in addition to inflation potential consideration for issuing a POB at this point. But we expect issuance to remain pretty suppressed with interest rates as high as they are, they are now. But their main story or the big story over time has been that there just aren't as many scenarios in Texas where POB's would be beneficial given that pressure is typically with single employer plans which are limited statewide.
Karen Pierog (
Alright, so going back to Melissa, you had a very good month of March from your best friend, the Texas Supreme Court.
Melissa Dubowski (
We don't often get to say that.
Karen Pierog (
Why don't you tell the audience what present they gave you twice a few and what might lurk in the future.
Melissa Dubowski (
Yeah, sure. So since 2017, I mentioned a lot of shared sacrifice. So the police and the Muni plans were together with the city in agreeing to those benefit reductions in exchange for those bond proceeds to boost the funded status of their plans. But the firefighter pension board was not playing nice in the sandbox with us and they ended up suing the state, sorry, the city claiming that the pension reforms were unconstitutional. So that went all the way up to the Supreme Court. Well, the Texas Supreme Court declined to hear that case. So that sort of reaffirms us and makes us feel a lot more stable in terms of our financial footing for sure. And then the other hot topic also related to firefighters on their pay parity proposition that happened in 2018 and that they sought to tie their pay with police pay and that was struck down by the Texas Supreme Court as well this month. So lots of news with the firefighters in the city of Houston right now.
Karen Pierog (
But they're trying something legislature, right?
Melissa Dubowski (
Yes, so there is a house bill that passed out of committee last week that is seeking to roll back portions of the reforms, definitely not taking it back to the pre reform landscape, but there is a bill and they, they've tried in previous sessions as well to get things passed that would give them some of those benefits back.
Karen Pierog (
Okay.
Melissa Dubowski (
Time will tell.
Karen Pierog (
Speaking of the legislature, which where we saw over 8,000 bills introduced, why? Okay. But there are several pension related bills out there, you know, want to talk about some of them, Stephen.
Stephen Doyle (
Yeah, we're not seeing anything terribly worrisome. I think the biggest things to watch are the Teacher Cola related bills as a house version, a senate version that propose cola is at different rates, different time periods that we're watching. I think overall though, doesn't seem like it'll be a big credit pressure or a huge impact to the liability given that there's appears to be identified funding sources, I'll say HB 600, the house version, they include contribution increases to cover the colas highlighted in that proposal as where the SB 10 includes the use of surplus from the budget or from the fiscal year. So that potentially could lead to down the road more pressure identifying that funding source there, but generally not seeing anything that is terribly meaningful, especially in comparison to some of the prior panels that we've had with a lot of the activity at the session so far. But those are two things that we've identified to keep an eye on. Nothing seems to be significant though there.
Karen Pierog (
How about you Ajay?
Ajay Thomas (
Yeah, I would agree with what Stephen's assessment is of where the current landscape is. I do think one thing we're keeping a close eye on is just the ongoing discussion in the state politically about their views about ESG and sort of investments related to that. Now while we take no view about what the politics behind that is and how that goes, I think from a financial perspective, you know, had the twin sell off of equities and bonds in 22, that in 2022 that really was a real problem for pension investments with rising rates, inflation, corporate earnings now beginning to soften some of the indicators in the economy showing that we might be heading toward possibly a recession. I think alternative investments have been a big strategy for a lot of pension, pension investment managers and officers to try to build or boost what the returns are. And quite frankly, with the private equity and some of the infrastructure related investments that are out there that are potential for pension plans to be part of, some of that is quite frankly designated and earmarked as ESG related. And so I think with some of the federal incentive programs that came from the inflation reduction act and such that you're going to see some of that start really taking and taking effect and germinating around the country, that will be possibly something that will be more of a constraint or a challenge. I think as states, certain states decide or elect that they're going to either forcibly divest from any ESG type investments or not work with certain funds because they have an ESG focus that could just create more of a challenge or a constraint for where they can go with investments. I mean, what we are seeing in the marketplace overall is there's now an ongoing sort of brewing discussion about credit is tightening in the marketplace. And so liquidity is becoming a concern overall. So as you start hearing that drumbeat more and more in, and you're looking for potential investors, because some investors might say, we have so much in funds that, but they're specifically earmarked for ESG type investing strategies, they're going to make elective decisions based on where they can put that capital to work. And same thing on the other side for pension plans that are investing in real assets out there, as you see more and more of a catalyst or a need for a strategy to have sort of an ESG focus on whether that's building real tangible infrastructure or taking a certain view about certain things that they're going to support for climate change or whatever the case might be, it is just going to be more of a, and another issue you have to deal with in order to boost the returns in these pension systems in pension plan. So that's something just to keep an eye on that we're just carefully watching and have an interest in seeing just how that evolves.
Karen Pierog (
Yeah, well I don't think that the whole divestment that's coming that came from Senate Bill 13 in the last session is just beginning. But Stephen, is there any concern about investment losses due to divestment, kind of forced divestment?
Stephen Doyle (
While I can't comment specifically, I mean we'll still evaluate pensions the same way. If there is any impact, it'll be reflected eventually and some number that we pull from the audit as if with any investment decision if something goes awry or not as planned, there will be an impact somewhere. And so we'll continue to evaluate the total liability, how that impacts budgetary performance, how an issuer deals with their pension liabilities, if that's prudent or if there's decision making that leads to what we would consider growing liabilities or a lack of addressing the liability in a meaningful time period. I think that the impact of those changes, while probably not quantifiable, even if you wanted to attempt that eventually will be reflected somewhere. It'll be hard to tie it to that, but I can't say specifically that there will be a credit concern or not, but if there is some sort of outcome, it'll be shown in the market. Returns of those plans are somewhere in the actuarial numbers.
Karen Pierog (
So the SB 13 only applied to the statewide plans. But Melissa, is there any concern that they might start making, expanding this to the single employer plans like yours?
Melissa Dubowski (
So in addition to working at the city finance department, I'm a trustee of the police pension board, so it's definitely something that we're looking closely at. I mean that board first and foremost, the trustees are fiduciaries of that plan and certainly trying to meet that 7% of course every year, but over time and so chasing that return and what you need to do to meet that benchmark, any constraint on that is it's always a concern. So definitely monitoring all that legislation closely.
Karen Pierog (
Well, do you have a lot, I mean, you know, can point to that's that would be considered with a manager that is already on the list or anything in Texas?
Melissa Dubowski (
Well, like you said, it doesn't apply to the locals yet.
Karen Pierog (
I know, but it's like we know the names of the people on the list mean and I'm just wondering if it would cause a big problem.
Melissa Dubowski (
I mean the portfolio is definitely diversified for sure, but I mean, yeah, it's definitely something that would need to be looked at and the list is changing all the time too, right? So it's a bit dynamic from that standpoint.
Karen Pierog (
Okay. So how about on the other post-retirement benefits I your report? I think you touched upon that too. What are you guys saying about that?
Stephen Doyle (
Yeah, generally that's not a credit pressure for local governments. Technically for state law, those benefits can be reduced. While there's an obvious political resistance or challenge to doing that, it can be done. But we still don't see a huge pressure with OPEB costs given that they're on a PayGo basis. Rising medical costs can lead to volatility year to year certainly, but as a percentage of the budget, most local governments, it's a fairly manageable amount each year. Rising medical costs, like I mentioned, is something that we're monitoring. Also. Payroll growth rates is something that we're monitoring given Texas, we're growing here, so we don't have that issue, but we see a lot of states where payroll is actually coming down and how that compares to the growth rate percentage and planning for those costs, but generally not a credit concern and historically hasn't been outside of, again, similar to the single employer plans, there are isolated cases where we have cities, large cities across the state that do have fairly sizable OPEB obligations, but in general, not a significant credit pressure, manageable cost for most local governments in the state.
Karen Pierog (
And how's it going on the OPEB and with you, Melissa?
Melissa Dubowski (
Yeah, that's a topic of frequent conversation at the city frequently around the city council horseshoe as well. So we tackled the pensions in 2017. About two years ago we rolled out OFEB reform on benefit reductions. Like you said, it's not quite as hard to change that as it is pensions. We didn't have to go to the legislature for that. So we were able to implement some benefit reductions on that standpoint, reducing what the actuaries were projecting was going to be a 9 billion unfunded liability 30 years from now, cutting that in half. But it's definitely still a substantial liability. And so we're the latest hot topic of conversation right now that we've worked on. The benefits part is establishing or the thought of establishing a OPEB trust. So really trying to wrap our hands around that. We've gone through a procurement process to seek out some vendors to help us with that and are looking at a variety of scenarios. I mean, of course, trying to balance what's affordable, giving budgetary constraints. Of course you have to still fund the PayGo and how much can you afford to set aside for the future and grow that to in the future, offset your PayGo costs. So we have the actuaries working a lot, running a lot of scenarios. So definitely, definitely something we're working on.
Karen Pierog (
Okay. So any other topic or issues and pensions that you guys?
Ajay Thomas (
I think the one thing Karen, is you certainly have the feeling we've enjoyed a really long run in the state of Texas of benefiting from being a destination state and where we've had incredible growth in almost every community. You can name throughout the state and I'm sure Steven's perspective at S&P certainly what something we keep an eye on as well is just when does that changing dynamic eventually happen? Can it just infinitely just be the case that we are going to enjoy in a lot of our counties and cities double digit growth and have this type of dynamic economy that we have now? Hopefully that will be the case. There's nothing on the horizon as says it won't be, but it there's, when you're talking about pensions and post-employment benefits and such, I mean, I think as you look at an aging population and we are seeing, you saw with the pandemic, you saw a brief glimpse of that and sort of an acceleration of retirements coming out of our public professionals in the systems and a tougher environment to recruit new employees into public jobs. I think that's going to be something that down the road we certainly will be talking about more and more about just the overall health, structural health of these plans and what those assumptions going in the future will be to make sure that it continues to be on the path that it is now with all the changes that have been positive that have been made and what Texas communities and issuers are certainly benefiting from right now.
Karen Pierog (
Yeah, well I think that's a problem kind of nationwide, kind of the mismatch between how many current employees you have versus retirees and how do you figure that all out, how that's supposed to work.
Stephen Doyle (
Yeah, I think as comptroller Hager mentioned earlier, this once in a lifetime surplus, I mean theoretically not going to come around again too often. I like the fact that there is the ability, as he mentioned, to address multiple pressures that the state is facing. One of those obviously through evidence is pensions, is shows the state's willingness to address those liabilities. Like with ERS, the cash balance plan, I mean that's a big change for every new employee of a state agency starting last September. And so I think that shows a positive diversion of the benefits that the state is seeing. And so hopefully that continues on the pension front.
Karen Pierog (
Okay. So do we have any questions out there? I cannot see anything because I have bright light in my face. There's no questions. Happy hour is even closer than you think.
Stephen Doyle (
Oh, there.
Audience Member 1 (
Thank you. Hi, my name is Vernon Middleton Lewis, I have a question for Melissa Debowski. How does interest rates affect the pension system as it relates to retirees for the city of Houston?
Melissa Dubowski (
Sure. So the investment rate of return that the plans are seeking, we talk a lot about Colas, especially with inflation being so high cost for retirees just to buy their basic everything they need going up. And part of the pension reforms was really trying to reign in those colas. So part of the reforms now is tying the cola that the retirees are getting to the plans rate of return, but using that sort of five year smoothing. So certainly their colas are not going to be 9% because that's kind of what got us into what we were in before. But definitely there's some provision for that there so that the retirees are definitely getting some cola to help them out because I know that's not a benefit of all plans statewide. So that's something that was really important. Thanks.
Karen Pierog (
Any other questions follow up?
Audience Member 1 (
Yeah, just Melissa, if you can just elaborate a little bit more on the initiatives the City of Houston is taking to address pension liabilities. So when Houston issued, you're effectively swapping pension liabilities with debt liabilities and then when you issued the debt, it was obviously was during the rising rate environment, so you know had to issue at a higher rate. So if you can just provide more color on that.
Melissa Dubowski (
Sure. And I hear you on swapping one liability for another. Certainly when you're looking at the city's net position, you see them both there on the same page. But one of the important things of the pension reform was getting the codifying it in state law, the benefit reductions in exchange for the pension obligation bond proceeds. So the actuarial calculations came out that the benefit reductions that we were able to negotiate through making future entrance, not eligible for drop plans, reigning in the colas, increasing their retirement eligibility age. There are a lot of changes in the plans. Those are some of them, but so those benefit reductions more than offset the cost of the pops. And I think, I guess on the interest rate point, maybe we did have a crystal ball, I don't know that year, but definitely we were able to issue at a much lower rate than the plans have been able to get back in returns.
Ajay Thomas (
Yeah, I think one of the things, another point to that question or answer to that question is the strategy to issue the pension bonds. So when you use it as part of the comprehensive solution, the city did the decision to issue pension bonds will also come into play about where are you and your funding level overall. So, once you get all the different concessions and adjustments and everything made, at some point they assume rate of return is what it is and that liability compounds at that, on paper it looks like an interest rate, it's going to compound at that. And so if you don't have enough sort of money in the system in order to make it up in sort of market returns, and if you look at what we were saying about the market right now, it is harder. It's getting harder to make those returns based on the money that's sort of in your system. So, the decision point for an issuer on whether to issue pension bonds is with an injection of cash that we don't really have sitting in an account off to the side. We really need a debt financed us. Yeah, we're swapping one soft liability for a hard one, but we now have budget predictability with the debt strategy and we are going to inject this much cash into the system in order to try to make up some of that market funding. So, you know, I heard the adage it takes money to make money. That's what part of that strategy is as well. We're a big advocate of if you're going to make the decision or election to issue pension bonds, don't do it just as a one shot budget sort of fix or in isolation. Do it as the city did as Melissa talked about, as part of a comprehensive plan with multiple stakeholders to look at it as a strategy of how do you fundamentally shore up your system going forward.
Melissa Dubowski (
I guess if I could add a little bit to that. So I mean, when you talk about an ongoing strategy to shore up the system going forward, the other part of the reforms were the city committing and it's in law that we have to pay the actual required amount every year. And so that's one thing that you're looking at, oh, this plan is 90% funded. Well that's great, but if you're not making the actuarially determined contribution every year, that funded ratio is going to start to drop over time. So making sure that we're keeping up with that to try to have that improvement in the funded ratio every year was critical to the plan as well.
Karen Pierog (
Any other questions or forever hold your peace? Okay. All right. Well thank you. The happy hour begins.