Administration July 12, 2013

Ill. Lawmakers’ Pay Suspended Until Pension Reform Agreed

July 12, 2013 (PLANSPONSOR.com) – Illinois Governor Pat Quinn suspended pay for state legislators until they pass public employee pension reform.
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“They’re not going to get paid until they get the pension reform accomplished,” Quinn said in a press conference, according to CNN. The governor defended his action by saying he is authorized by the state constitution to veto any bill or line item.

Quinn also will receive no pay until the matter is over. He has ordered the state comptroller to withhold his salary. “I’ve tried everything in the book to get [the legislature’s] attention,” Quinn said, referring to normal workers who do not get paid until after their work is done, CNN reported.

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In May, a comprehensive pension reform bill narrowly passed the Illinois House of Representatives and was sent to the state Senate, but senators had previously voted against many of the reforms (see “Pension Reform Bill Heads to Illinois Senate”). According to a Pew report last year, Connecticut, Illinois, Kentucky and Rhode Island have the worst-funded pensions among the states; all were less than 55% funded in 2010 (see “Funding Gap Widens for State Pensions”).

Investing July 12, 2013

June Worst Month on Record for Bond Funds

July 12, 2013 (PLANSPONSOR.com) – Investors withdrew $43.8 billion from taxable-bond funds and $16.4 billion from municipal-bond funds, making June the worst month on record for bond funds in terms of total outflows.
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According to Morningstar’s report on mutual fund flows, long-term funds overall shed $47.3 billion, the largest monthly outflow since $105.6 billion in October 2008. Morningstar estimates net flows by computing the change in assets not explained by the performance of the fund.

Intermediate-term bond funds lost $24.4 billion in June, dragged down by outflows of $9.6 billion from PIMCO Total Return. DoubleLine Total Return saw redemptions of $1.2 billion, its first monthly outflow. Other weak-performing bond categories included long government, emerging-markets bond and inflation-protected bond.

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Not all fixed-income categories suffered in June and the year-to-date period. Bank-loan funds have collected more assets than any other category in 2013, and nontraditional bond has come in third. International-equity and alternative funds had net inflows in June.

At the firm level, PIMCO led outflows, with redemptions of $14.5 billion, followed by Fidelity with $5.1 billion. Vanguard saw its first firm-level outflows, including money market  and exchanged-traded funds (ETFs), in nearly 20 years. MFS topped all providers with inflows of $1.4 billion.

To view the complete report, visit http://www.global.morningstar.com/juneflows13. For more information about Morningstar Asset Flows, visit http://global.morningstar.com/assetflows.

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