D.C. Memo: State pension plans safe from market chaos, officials say

WASHINGTON – As owners of 401(k) plans and Individual Retirement Accounts (IRAs) worry about the impact of President Donald Trump’s tariff policies on their retirement money, Minnesota’s state workers are fretting about their pensions. 

Jill Schurtz, the chief investment officer for the Minnesota State Board of Investment, an independent agency tasked with trying to grow the $96 billion state fund that finances pensions for teachers and state employees, says she’s aware of concerns.

But she said there is nothing to worry about.

Schurtz said the state’s pension fund is “large enough to bear the brunt of a market crisis.”

She also says the fund’s diversity has shielded it from sharp downturns. Schurtz said 50% of the fund is invested in equities, or stocks; 25% is invested in “fixed income” securities like bonds, certificates of deposit and Treasury bills; and the remaining 25% is used to fund private investment markets.

“We can pay benefits, no matter what the (economic) weather is,” Schurtz said.

That said, the fund, which has averaged returns of about 8% a year over the last decade, was flat — meaning it did not lose or make money — in the first three months of this year. 

And Schurtz said there is no final, official accounting yet for how the fund performed in April, when the big dives in the market occurred after Trump announced his April 2 “Liberation Day” tariffs.

Still, Schurtz is taking the long view, noting that the stock market always recovers from a slump and its historic trajectory is up.

The fund pays $240 million-$250 million in benefits to retirees every month, above and beyond what it collects in contributions. So, it has to grow.

And it did, by $23 billion in the past five years, Schurtz said.

But Mark Haveman, executive director for the Minnesota Center for Fiscal Excellence, a nonprofit that conducts research on education and fiscal issues, said at least one of the state’s pension plans — the one for teachers — is underfunded and that a downturn in the market will only make things worse.

“These plans are used to volatile markets and one bad year in itself would not be a problem,” Haveman said. “But if you are already underfunded, a bad year is going to hurt.”

State Auditor Julie Blaha, a member of the State Board of Investments and a former middle school math teacher who will retire with teacher and public employee pensions, said the first thing a state employee asks her when they happen to meet is, “How are things with the pension plan?”

Echoing Schurtz, Blaha tells them their retirement fund is fine because of its size, diversity and long-range planning. “That’s the benefit of having a pension instead of a personal retirement account,” Blaha said. “I feel lucky to have a pension right now.”

Yet Blaha said she’s concerned about the majority of Americans who don’t. 

According to the Congressional Research Service, about 12 million American workers had pensions in 2020, while more than 85 million depended on 401(k)s as their main retirement plan.

She said these individual investors “can’t withstand the uncertainty (in the stock market) forever.”

Klobuchar scores a win

While the last Congress was considered a “do-nothing” legislature because extreme partisanship led to few accomplishments, this Congress has been even less productive.

But that hasn’t stopped Sen. Amy Klobuchar, D-Minn., from notching another legislative win.

In partnership with Sen. Ted Cruz, R-Texas, Klobuchar introduced a bill that criminalizes explicit deepfakes and revenge pornography.

The “Take it Down Act” also requires social media platforms to implement procedures to remove this content.

The Senate approved the bill in February and the House approved the bill this week. It now goes to the White House, where First Lady Melania Trump is a champion of the legislation.

At a virtual press conference Thursday, Klobuchar said explicit deepfakes and revenge porn “ruins reputations and shatters lives” and that as many as one out of 12 Americans may fall victim to these online attacks.

Klobuchar’s bill imposes three-year sentences for perpetrators of deepfake porn that involves minors and two-year sentences for those who produce deepfakes and revenge porn that involve adult victims. It also gives social media platforms two years to establish methods to take down deepfakes and revenge porn.

Meanwhile, Molly Kelley of Otsego said she was one of 85 women victimized by deepfake porn by a family friend who captured her image on Facebook.

“When people think of deepfake porn, they are thinking of celebrities like Taylor Swift,” Kelley said. “But it can happen to anyone.”

She called the “Take it Down Act” a “lifeline” for victims of deepfake abuse.

In other news:

▪️Matthew Blake wrote about partisan differences over an education funding bill that are threatening to unravel a power sharing agreement in the state Legislature.
▪️A story this week looks at behind-the-scenes efforts to press the University of Minnesota to join other colleges in defending themselves from and pushing back against Trump administration attacks on their schools.
▪️Winter Keefer wrote that the Minneapolis Police Department has implemented new, encrypted scanners that bar the public from listening on police calls.
▪️And Rep. Angie Craig, D-2nd District, finally announced her intent to run for retiring Sen. Tina Smith’s seat.

Your questions and comments

A reader weighed in on what’s becoming a very interesting Democratic primary race for retiring Sen. Tina Smith’s seat, with Rep. Angie Craig, Lt. Gov. Peggy Flanagan and former state Sen. Melisa López Franzen in the race.

“May the best woman win,” the reader wrote. “I can support any of the three candidates in the general election. Progressives and moderates are going to disagree — so what. I am happy with the 90% of what they agree on. At this point, Walz getting in the race is unnecessary. Another term as governor works for me.”

Editor’s note: This story has been updated with the correct first name of Mark Haveman in paragraph 12.

Please keep your comments, and any questions, coming. I’ll try my best to respond. Contact me at aradelat@minnpost.com.