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Overview</title></head><body>
<blockquote type="cite" cite>Visionaries:</blockquote>
<div><br>
<br>
</div>
<div>During the last Legislative Session there were rumors that
several legislators</div>
<div>wanted to make changes in the PERSI Program. PERSI
Director, Donald Drum,</div>
<div>told me about three weeks ago that Rep. Jeff Thompson of Idaho
Falls plans to</div>
<div>introduce legislation that would make the Idaho program similar
to that of the</div>
<div>Utah retirement program.</div>
<div><br></div>
<div>I've included a letter that Director Drum sent out to all
legislators about</div>
<div>the Utah program. He will be touring Idaho during the next
several months</div>
<div>and talking to legislators. PERSI ranks as either ! or 2
nationally at the</div>
<div>top of similar type retirement programs. My overview
of potential changes</div>
<div>to the program are simply a solution in search of a
problem.</div>
<div><br></div>
<div>If I get a call from Director Drum about a potential meeting here
in District</div>
<div>6 I'll work with other legislators and elected officials to set
up a public</div>
<div>meeting.</div>
<div><br></div>
<div>Rep. Tom Trail</div>
<div><br></div>
<blockquote type="cite" cite> </blockquote>
<blockquote type="cite" cite align="center"><img
src="cid:a06240803ca3159d76322@[192.168.153.198].1.0"
alt="image003 189.jpg" width="240" height="126"></blockquote>
<blockquote type="cite" cite> </blockquote>
<blockquote type="cite" cite>
</blockquote>
<blockquote type="cite" cite> </blockquote>
<blockquote type="cite" cite>June 27, 2011</blockquote>
<blockquote type="cite" cite> </blockquote>
<blockquote type="cite" cite>Dear Legislator:</blockquote>
<blockquote type="cite" cite> </blockquote>
<blockquote type="cite" cite>As promised in my last letter, enclosed
is the report prepared by PERSI comparing Idaho to the Utah model.
This comparison report was prepared after conducting extensive
research on the URS fund, its history, how it differs from PERSI, and
the reason it needed to change. (As a private organization, Utah is
not subject to Freedom of Information Act disclosures, so a complete
comparison was not possible.)</blockquote>
<blockquote type="cite" cite> </blockquote>
<blockquote type="cite" cite>Our goal is to provide a useful
comparison to Idaho legislators as Idaho considers if any changes are
needed to the PERSI fund. Some key points included in the report
are listed below.</blockquote>
<blockquote type="cite" cite> </blockquote>
<blockquote type="cite" cite>The numbers for Utah's system were
obtained from actuarial reports requested by Senator Liljenquist and
from presentation materials created by the Senator. PERSI's
actuaries duplicated the Utah scenarios for Idaho using PERSI data and
identical projections.</blockquote>
<blockquote type="cite" cite> </blockquote>
<blockquote type="cite" cite>· Funding
projections using baseline return of 7.75% annually showed that Utah
(URS) would be required to raise employer contribution rates to 23.1%
by 2016. The same projection for PERSI showed employer
contribution rates at 11.6% in 2016. Current year returns would lower
this projected rate. (Charts on page 7 of report)</blockquote>
<blockquote type="cite" cite> </blockquote>
<blockquote type="cite" cite>· Also
using a set return rate of 7.75% URS projected funding ratio drops to
70.5% in 2013 and their UAAL increases to more than $6 billion.
By 2050 URS's funding status was projected to drop to 0%. The
same projection for PERSI has a funding level in 2013 of 83.7% (<i>IF
return were no higher than 7.75%. Currently Idaho is almost 90%
funded</i>) and the UAAL continues to decrease. Using the
projections and 2010 data, by 2050 PERSI's projected funding status
would be almost 120%. This would be even higher if we consider FY11
returns. (Charts on page 6 of report)</blockquote>
<blockquote type="cite" cite> </blockquote>
<blockquote type="cite" cite>· URS
uses a 5 year smoothing process to limit the effect market volatility
has on the funding status. PERSI is one of 2 systems that do not
use smoothing. In 2010 PERSI reported a funding level of 78.9%.
URS reported a level of 85.7%<u> actuarial</u> return. In our
estimation their true funding level at the end of 2010 was only 75%.
URS's funding status will continue to drop for the next 3 years to
recover from 2008 losses. (Further details on page 3 of
report)</blockquote>
<blockquote type="cite" cite> </blockquote>
<blockquote type="cite" cite>· URS
employees do not contribute to their retirement fund. Although
employer rates appear to be locked in at 10% they are actually at 14%
and will most likely continue to rise until the UAAL has been
eliminated. (Pages 2 and 5 of report)</blockquote>
<blockquote type="cite" cite> </blockquote>
<blockquote type="cite" cite>I also wanted to mention there was a
delay in the release of the<i> Sensible Solutions, Model Public
Pension Funding Practices: Lessons from Six Well-Funded Systems</i>,
which I cited in my last communiqué. The new release date is
June 29, 2011. PERSI will add a link to the report on its
website (<a href="http://www.persi.idaho.gov">www.persi.idaho.gov</a>)
when it becomes available.</blockquote>
<blockquote type="cite" cite> </blockquote>
<blockquote type="cite" cite>In the coming weeks, I will begin
traveling throughout the state to meet with legislators, employers and
constituency groups. You may receive a call from my assistant to
arrange a convenient time for us to meet so we can discuss in detail
the information I've been providing. If you do not hear from
us soon, please feel free to contact me and I will accommodate your
schedule as best I can. My goal is to continue providing
information that will be useful to you. If you have any specific
topic/questions I have not covered please let me know and we will be
happy to develop the information for you. As always, if you have
questions about these reports or the earlier ones, please give me a
call.</blockquote>
<blockquote type="cite" cite> </blockquote>
<blockquote type="cite" cite>Best regards,</blockquote>
<blockquote type="cite" cite>Don Drum</blockquote>
<blockquote type="cite" cite>Executive Director</blockquote>
<blockquote type="cite" cite> </blockquote>
<blockquote type="cite" cite>Enc.</blockquote>
<blockquote type="cite" cite> </blockquote>
<blockquote type="cite" cite><b>A hard copy of this letter and
report have been mailed to you.</b></blockquote>
<blockquote type="cite" cite> </blockquote>
<blockquote type="cite" cite> </blockquote>
<blockquote type="cite" cite> </blockquote>
<blockquote type="cite" cite><i><b>CONFIDENTIALITY
STATEMENT:</b></i> This electronic message contains information
from the Public Employee Retirement System of Idaho (PERSI) and may
contain information that is confidential or privileged under law. The
information is intended solely for the use of the individual(s)
or entity(ies) named above. If you have received this
e-mail in error, any use, dissemination or copying is strictly
prohibited. If you have received this electronic message in
error, please notify the sender immediately by reply email or at the
telephone number contained herein and immediately delete this
message. Thank you.</blockquote>
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<div><br></div>
<div><br></div>
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<div>Dr. Tom Trail<br>
International Trails<br>
1375 Mt. View Rd.<br>
Moscow, Id. 83843<br>
Tel: (208) 882-6077<br>
Fax: (208) 882-0896<br>
e mail ttrail@moscow.com</div>
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