Financial resilience of municipal civil servants’ pension funds

Abstract

The objective of this study was to analyze the responses and the repetitive pattern of financial resilience which emerge within the civil servants’ pension funds (RPPS, in Portuguese) of local governments in Brazil. The analysis extends the traditional financial resilience approach discussing the emergence of vulnerability from the sponsor and RPPS interaction, often stimulated by the lock-in effect from the federal regulation, which constrains the space for transformative responses. Financial resilience is a concern usually applied to governments’ response to crises, but not for pension funds. However, the long-term objective of such funds when juxtaposed to short-term pressures conduce a paradoxical standpoint for fund’s managers absorbing the pressures. The impact of this article to the pension funds and the regulatory field is the proposition that the growing vulnerability of RPPS regimes comes from the insufficient governance belt protecting them, which would be a necessary and applicable remedy to any pension funds reform the country decides to take . It was applied a sequential mixed-method approach, starting by interviews with fund managers, actuarial consultants and representatives of the Ministry of Finance's Pension Secretariat (SPREV), to identify the usual responses to emerging financial pressures which affect the funds’ financial performance. Secondly, four from the identified typical responses were selected and analyzed through financial and accounting data to detect the response for about 1,8 thousand funds from 2014 to 2016. Based on the frequency of the adopted responses by each fund, it was proposed a recurrent financial resilience pattern, and how the managers’ responses vary according to the vulnerability provoked by the City Hall’s decisions. It was observed that the City Halls accommodate budgetary pressures failing to transfer or downsizing the contributions to the fund, increasing the fund’s vulnerability. The managers consequently respond subjoining the reserves to pay pensioners, reinforcing the fund’s vulnerability. Such response is a weak resilience pattern, which reinforces the funds’ vulnerability due to governance gaps and the lock-in effect proposed by Pike, Dawley & Tomaney (2010), which constrains the local agents’ capacity to perceive and find solutions more transformative and actives looking for financial sustainability.

Resiliência Financeira Governamental E Enfrentamento À Covid-19

“…Pela sua amplitude, a resiliência financeira não tem uma única definição, sendo normalmente retratada como resultado de uma variedade de dimensões (BARBERA et al, 2017;LIMA;AQUINO, 2019). Resumindo o que há de comum, Barbera et al (2017) e Raasch, Martins e Gomes (2018) afirmam que a resiliência se trata de a capacidade da organização diminuir riscos, se adaptar rapidamente a um choque e permanecer operando em condições adversas, tais como crises econômicas ou desastres ambientais.…”

“…No contexto das organizações públicas, Barbera et al (2017) indica que quando esses choques ou crises afetam as finanças de governos, a forma com que essas organizações reagem e se recuperam é chamada de resiliência financeira governamental. Essa característica se manifesta por dimensões internas e externas, dentre as quais estão: (i) a vulnerabilidade (nível de exposição a um choque), (ii) capacidade de antecipação (ferramentas e recursos para melhor identificar suas vulnerabilidades) e (iii) a capacidade de enfrentamento (habilidade de enfrentar os choques, seja amortecendo os efeitos, implementando mudanças incrementais ou radicais) (BARBERA et al, 2017;BATISTA;CRUZ, 2019), essa havendo uma interação entre todas elas (LIMA; AQUINO, 2019).…”

The actuarial science editorship of the Accounting & Finance Review: some general considerations

“…Souza (in press) delves deeper into the topic of his previous study, by building dynamic actuarial models, in contrast with the static models usually employed to calculate the required contribution rates. Lima and Aquino (2019) return to the topic of social security, but with a different focus. Employing a mixed methods approach, the authors study the financial resilience of the state and local civil servants pension plans.…”