Sunday Chillin’ Public Pensions, Finance, and Unions 22May2011

Sippin’ on tea, the kids watching Dangermouse….got a little too much sun yesterday which doesn’t mesh well with someone as pale as I.

Yeah, I’m logy.

But these posts pretty much write themselves, don’t they?


Greek bonds downgraded (warning: NYT link), and not by a little — Fitch dropped them down three notches, which is a rather large movement. Sure, they were already in the junk range, but still. Things aren’t going well there, and for all the whining over DSK’s troubles being behind this — no. Greek’s clusterfark (attendant with pro-sucking-on-govt-teat-“anarchists”) has nothing to do with Mr. Strauss-Kahn’s belt issues, for all we’d like to say “entitlement” yadda yadda yadda. Even without DSK, this crap would have happened.

Reality hits Spain as well, as its social welfare system is unsustainable. I find it interesting how Socialists are in charge when the culmination of their systems have hit a demographic wall….and people get sour as the promises can’t be fulfilled. Can get dangerous as other populists try to ramp up the promises, which are still undeliverable, sorry. You can’t create 30-year-olds from thin air. Except in sci-fi novels.

Let’s not get too uppity about European social welfare programs. Ignoring the whole “adult baby” brouhaha this week, there’s something more structural awry given we are paying benefits for dead people in significant amounts.

From the WSJ, Jason Zweig writes why holders of U.S. Treasury bonds should be concerned about the possibility of different kinds of default. I think everyone is going to get a lesson in what structural default, technical default, outright default, etc. are in very short order. Bondholders should already know about this, but I’m sorry to say that those holding government bonds are not necessarily the most sophisticated of investors.

Uncertainty is what makes muni bond buyers bonkers

Joe Mysak calls Meredith Whitney to task about the very specific predictions she made re: municipal bonds, as Whitney goes to the pages of the WSJ to remind people that the muni armageddon is still to come, and that, yes, there are many ways to default. Going back to Mysak, I’m pulling this quote:

In the modern era, there is little to suggest that serious public officials will shirk their duty to bondholders.

AH HA HA HA. “serious public offiials” Owie. Oh my side. Yeah. Serious public officials. You mean the ones who fashioned the back-DROP benefits? Those serious public officials? The ones who “funded” the plans with pension obligation bonds? Are those the serious public officials we’re talking about? Do tell.


Right-to-work to make inroads into New England?

Unions remind Dems who’s the boss. Or they hope they do. Dems may realize the unions are outnumbered by other voters at this point in history. But hey, cutting off the money can hurt.

How do unions affect state budgets? The duh conclusion:

“The main differences between public and private sector come from economics,” said Norcross. “Private sector unions can raise their wages, but not their employment. By contrast, public sector unions can increase both wage and employment outcomes.”

Well, yeah, in the short run. But when fiscal reality hits, you can get a massive readjustment of those outcomes, as in Costa Mesa, California. Recently, after looking into a budget abyss, the city council laid off nearly half the current city workforce and outsourced their functions. And note, that doesn’t mean a 1-to-1 replacement of jobs. And definitely not necessarily a replacement with a union job. Funny how assumptions can get altered in a hurry when reality hits and the money runs out. Rent-seekers have to be careful, otherwise they create their own destruction.


U.S. Postal Service warns of potential default on retiree obligations

After all the fun beating up on state workers and their benefits, it’s the federal workers’ turn to become punching bags! And then a guy whose main constituents are federal workers objects! Shocker! Another shocker: federal employees aren’t happy about it. I like how people mention that cutting benefits will make government jobs less attractive, as if that’s a bad thing.

National teachers union realizes that spiking and double-dipping makes them (and DB pensions) look bad, so they say that it should be looked into.


Finally. Pensioners in bankrupt Prichard have gone almost 2 years without payments, and there may be a deal on the table. They will probably never get their full promised benefits, but at least it’s not zero.


The Golden State Blues: George Will on how it fell apart in California

Request for investigation into disability pensions in that cesspit of government corruption, Bell, Calif.

It’s going to be an interesting November in San Fran as Mayor Ed Lee says he’s putting a pension reform proposal on the ballot with or without union agreement. Other groups have their own competing proposals they intend to get on the ballot.

Capitola working on lowering pension costs ahead of contract negotiations in 2012. Watsonville looking at its own costs. Ventura County has some eye-popping numbers itself. It’s like it’s some sort of widespread problem or something.

Steven Greenhut says yeah, it’s kind of a widespread problem. And while it may look puny compared to the state budget, it’s outsize for local budgets.

Seeking to cut down on pension spiking


So there’s a lot of politicking going on in Illinois re: pension reforms. And, surprise surprise, there are dirty tricks. Some stuff on the actual bill under consideration.

Rahm was sworn in as Chicago’s non-Daley mayor. Can he deal with the fiscal issues, and the pension problem in particular?

Consultant says retirees should pay more for their health benefits.


Pension reform bill goes to governor, but questions linger about to what limits reform can be taken.


Emergency financial manager’s blanket powers in Benton Harbor bring spotlight and cries of oppression…. oppression of the fiscally inept. Poor babies.

Detroit Mayor Bing proclaims that there are savings in pension contributions because they changed the smoothing period for actuarial losses…. but no. No there aren’t. Changing the method of funding the pensions doesn’t change the cost of the pensions. You have to change the actual pension benefits to change their costs.


Minneapolis pension tension - two closed funds taking an outsize portion of the city budget, and an attempt to fold them into state funds. Minneapolis contribution to these funds would drop a great deal if this occurred.


Negotiations on pension reforms continue. Both groups agree that public employees should work longer, contribute more to pensions, and for most plans, receive lower benefits. They’re just wrangling over details now.


Will Cuomo truly fix pensions? Let’s ask Magic 8 Ball: My sources say no. Changing stuff for new hires does really nothing other than prevent problems from getting worse by too much.

Well, DiNapoli goes for some low-hanging fruit, preventing double-dipping, but that’s not really going to save a bunch of money. But double-dipping doesn’t make for good PR.

In pensions corruption news, Liberal Party ex-boss Ray Harding avoids jail time.


A proposal to yank the pensions of corrupt pols — I say let’s be proactive. No pensions for any pols.


Pension reform bill signed by governor


Pittsburgh may have gotten over their math problems, but they still have huge fundedness issues with their pension plan and are trying to avoid being taken over by the state. Still. At some point, you’d think they’d just give up.


Something to look forward to: a report to be released on Monday by the state treasurer on just how much Rhode Island pension systems suck (just being a psychic here). A think tank already has put out its own report on the suckitude.

How much do they suck? The per capita debt is $30K.


Legislature passes bill to curb teachers unions, stripping them of most collective bargaining rights.

About Meep
Meep is a member of the Irish Catholic mafia, having a suspiciously high number of green-eyed, red-haired friends. While she doesn’t have red hair herself [except when she goes into the sun (rare for any vampire)], she does have green eyes. She’s a raving Papist and is a life actuary on the side [i.e., she counts dead people]. An amateur pain-in-the-ass [willing to go pro!], she likes covering retirement, mortality, math, and education issues.

3 Comments on Sunday Chillin’ Public Pensions, Finance, and Unions 22May2011

  1. You seem to be making light of Joe Mysak’s comment about having faith that public officials doing right by their bond holders? Several paragraphs later then cite many examples of public officials doing exactly what Mysak said they’d do? All the political actions to balance budgets, reform public employee pensions are all actions being taken to be able to pay municipal debt whether at the state of local level. It was precisely this fact that is being played out all over the country that Meredith Whitney missed in her hysterical prediction and that factor — as Mysak points out — is and will continue to prove her wrong.

    Think about it, if Vallejo had another chance to vote on default knowing how devastating it would be for their city, would they vote to default? I think not. Especially now that they have to be on 5 years “good behavior” before they will even be considered as worthy of municipal indebtedness. Talk about a sure route to municipal extinction! And for the citizens in the boundaries of the previous city of Vallejo, do you think they like the service they’re getting from the County? I bet not…

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    • I am making light of “serious public officials” who can’t have been particularly serious when they took on particular liabilities that made municipal bond default more likely.

      The municipalities that extended themselves doing wacky things are the ones that I’d keep an eye on for doing further wacky things. That’s all.

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  2. Irish mob members like yourself and my wife have to watch that sun business early in the season. But the temptation was too great to get out and stroll on the beach Saturday.

    It’ll be interesting to see if Cuomo can accomplish anything real here in NY. He doesn’t seem to be getting any flak regarding his efforts, but it could be due to his affiliation-as a good Italian Catholic boy :)

    Or maybe as a “D”, who can really be sure…

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