The MBTA Retirement Fund’s growing liabilities have climbed past $2.91 billion, more than double the $1.45 billion it had in assets.

MBTA facing a financial trainwreck?
A famous Lévy and Sons photo

– News from elsewhere covered by Quincy Quarry News.

MBTA’s long-struggling pension fund falls into “the danger zone.”

The MBTA’s pension system is less than 50 percent funded for the first time in at least three decades, deepening concerns over the long-troubled fund as it mulls handing some financial control to the state, reports the Boston broadsheet.

At the close of last year, the MBTA Retirement Fund’s liabilities climbed past $2.91 billion, more than double the $1.45 billion it reported in assets, according to several documents the fund quietly posted to its website.

In turn, this imbalance means the system is just 49.7% funded.

Look out below!
A barrons.com graphic

A fund spokesman said Friday he did not know if it’s ever been that low in a single year; however, it is at least the first time it’s fallen below 50 percent since at least 1987, according to public records available online.

For comparison, just five of the 50 state pension funds around the country were funded at less than 50 percent by the end of 2017, according to The Pew Charitable Trusts.

“That’s the danger zone,” said Mark T. Williams, a Boston University professor who has closely tracked the fund as it has continually paid out more than more than it has both brought in and seen in the way of returns on its investments … (Y)ou can’t continue paying the benefits that you’re paying because you’re going to drain the overall pension, and you’re not going to meet the obligation of future retirees.  It’s hard to recover.”

 

The T pension fund’s gloomy financial picture darkened in 2018, thanks in part to a struggling financial market.  The fund reported a negative 3.08 percent return – far below its 7.5 percent target – and which partially caused its unfunded liability to blow past $1.46 billion.

Soon also looking at a financial “haircut?”
Image via social media

The only arguable good news is that the funded level of the City of Quincy’s pension fund has been stuck in the mid-40’s funded range since 2010, roughly ten percent worse off than the T’s pension fund.

Even more troubling for Quincy taxpayers who are on the hook to bail out the City of Quincy’s employee pension fund is how they will likely learn of an even more troubling loss in the value of its Quincy retirement fund portfolio during 2018 this coming September given the impending release of a comprehensive quadrennial audit by the State’s Public Employee Retirement Administration Commission.

The latest data for the MBTA are far from the first sign of trouble at the fund.

Officials reported earlier this year that the fund took a $151 million hit in 2018, and Governor Charlie Baker said as early as 2016 that the MBTA retirement system was in a “free fall.”  The following year, a T report concluded the system would need $1 billion in additional taxpayer funding over the next 18 years if it is to pay retirees as promised and remain solvent.

The MBTA’s pension fund is less underwater than the City of Quincy’s
A stock image

Even so, Steve Crawford, a MBTA pension fund spokesman, said officials view the system’s level of funding over five years, not one, where he said it’s slightly better at 53 percent.  But even in that context, records show that its funding level is at the lowest since at least the late 1980’s.

Crawford also argued that the fund is “back on track” this year, when it reported a 9.9 percent net return through the end of April, and is benefiting from “the assistance of greater contributions by members and the authority.

“We are confident the long-term health of the fund is good,” Crawford added..

What goes up also goes down …
Image via The Travel Channel

Even so, it is only far to note that a strong four months long stock market run up can just as quickly be wiped out.

Brian Shortsleeve, a former MBTA general manager who now sits on the agency’s control board, said the new data should be a wake-up call.

“The MBTA pension [fund] is in crisis. Its financial condition is getting worse, not better,” he said.

For example, the fund’s pension obligations have continued to climb, jumping more than $340 million in the last three years.

An impending explosion
A stock image

“The newest valuation reinforces the findings of every recent analysis and report, all of which have warned of the fund’s deteriorating condition,” said Joe Pesaturo, a T spokesman.  “This is why MBTA management and the control board have been calling for more transparency at the fund since 2015.”

Source: The long-struggling MBTA pension fund is in ‘the danger zone’ – The Boston Globe

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