Alabama’s One-Man Pension Show

He’s not the governor. He’s not a lawmaker. But thanks to the way he runs his state’s pension plans, David Bronner may be the most powerful man in Alabama.
BY ,  | MAY 2016

The office suite of David Bronner, head of the Retirement Systems of Alabama (RSA), rivals those of governors in much bigger and much richer states. Perched on the top corner of a building completed in 2008, Bronner’s spacious office is full of the framed photos, cartoons and assorted knick-knacks indicative of a long career in politics. A large rug in front of his desk prominently displays RSA’s circular logo. Bronner’s real trophy case, though, can be seen through his floor-to-ceiling windows and adjoining balcony: the panoramic view of downtown Montgomery, which shows just how much he has changed the skyline of this city of 200,000 people. Five mammoth concrete-and-glass buildings, much like the one his office occupies, stand nearby. The green-capped buildings are designed primarily to house state agencies, yet they’re outfitted with flourishes fit for big-city law firms, from fountains, marble, granite and towering lobbies to polished metal cauldrons at major entrances. Beyond them stands the city convention center and the adjoining hotel that Bronner also oversees.

Purchase Power: A Special Report on State Procurement

Procurement is at the heart of almost everything a government does. But states vary widely when it comes to how well they manage the things they buy.
BY  | FEBRUARY 17, 2016

Governments buy a lot of stuff. Every year, one out of every three dollars governments spend goes toward purchasing something -- from photo copier ink to new vehicle fleets -- to help provide services. This very large chunk of the budget would seem to make procurement the most obvious area to look for new ways to save taxpayer money. Yet for the billions spent every year in state procurement, many central offices have long remained mired in old techniques. They’ve been unable to take a big-picture view when it comes to spending, and they’ve only dabbled in using data and new technology for more efficient purchasing.

The examples of what can go wrong are many. Take Mississippi, which has a high reliance on no-bid contracts. In 2014, the commissioner of the Department of Corrections (DOC) resigned and became the subject of a federal investigation for allegedly taking $2 million in bribes in exchange for steering prison contracts to a former lawmaker. In Colorado, an audit last year found poor oversight of more than one-third of the contracts surveyed in the state’s health exchange. The lack of follow-through to make sure vendors were complying with contract requirements was partially responsible for more than $400,000 in questionable costs.

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The Evolving Job Description (and Requirements) of a CFO

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Chief financial officers used to be concerned with just balancing the books. But today’s CFOs have taken on a higher role.
BY  | FEBRUARY 2016

Kenneth Rust is a key player in redeveloping an old post office in downtown Portland, Ore. Denise Olson is pushing new technology to save Phoenix money on procurement. Jim Beard figured out how to update and expand Atlanta’s water and sewer systems while avoiding a scheduled rate hike.

These tasks require different kinds of know-how, but Rust, Olson and Beard all have the same job title: chief financial officer. It’s a position that has morphed in recent decades. Where CFOs were once primarily in charge of numbers -- making sure the books were balanced, bills paid and audits clean -- they now are called on to be strategists with an eye to developing the city’s economy. And where CFOs came to the job touting experience in a local or state finance department (and perhaps a stint as city controller as well), they now hail from more varied backgrounds. Just as in the private sector, many public enterprises are looking for CFOs with talents that include creative thinking, communication skills and long-range planning -- and for good reason. Today, just about everything a municipality does is either under the CFO’s purview or at least under his or her watchful eye. “Almost every major decision the city makes,” Beard says, “I get to be in the room.”

The Curious Case of Disappearing Corporate Taxes

Over the past two decades, corporations have doubled their profits but contributed increasingly less to state revenues. Where is all the money going?
BY  | JANUARY 2016

When Rick Snyder became governor of Michigan in 2011, his state had been on a 10-year economic slide -- businesses were leaving and so were people. Where the rest of the country saw growth in the first two-thirds of the 2000s, Michigan’s fiscal health was slip-sliding away.

Reversing a slide is difficult, and Michigan’s governor and legislators focused a good chunk of their turnaround efforts on taxes. They wanted to reform the tax code so that it would lure businesses and generate the revenue needed to underwrite the kind of quality services that make people want to live there. Snyder’s first step was to ask the legislature to slash business taxes. Within months, lawmakers repealed the unpopular and complicated Michigan Business Tax -- though businesses could opt to stay with parts of the old system and its arcane web of credits and rebates. That isn’t all the legislation did. The new tax law created a flat 6 percent tax that only certain types of corporations paid on their income. Talk about simplification: Nearly 100,000 businesses no longer had to file corporate returns.

Michigan has made economic progress since the 2011 tax reforms were passed. The population has stabilized, and the state ranks fifth in the country in job creation. Earlier this year, Michigan’s bond rating was upgraded, an affirmation of a more stable fiscal environment.

As Retirees Outnumber Employees, Pensions Seek Saviors

Desperate for more money, public pension systems have been making high-risk investments hoping for a higher profit. But they may ultimately cost taxpayers more.
BY  | OCTOBER 2015

The $300 billion California Public Employees’ Retirement System began showing its age this year: It started paying out more money to retirees than it gained in contributions and investments. In roughly 20 years, CalPERS’ retirees will outnumber active workers by a ratio of nearly 2-to-1 in some of its plans.

In fact, a lot of state and local pension systems are already showing their age. Back in the 1970s, the typical pension fund had four to five times more active employees than it had retirees. Today, that ratio has slipped to 1.5-to-1 and is falling.

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