POWIP Piece of Work In Progress – Former Abode of Dan Collins

D-Day Public Pensions, Finance, and Unions 6June2011

We're not all about dick jokes and bitching about pretty people around here.

Well, not only.

WHERE ARE THE GOONS OF YESTERYEAR

Glenn Reynolds notes that public union clerks don't make for the most intimidating union muscle. Ah, instead of good old-fashioned thuggery, they have to go to the more lawyerly fashion of unaccountable judges... until all of a sudden they are accountable. Funny how that happens.

But let's not let it go at that - Althouse asks if Reynolds is calling the Wisconsin public employees a bunch of sissies, and a commenter points out that he's contrasting the old image of union workers as blue-collar workers with little leverage versus cubicle warriors with huge political war chests.

PUBLIC FINANCE

Muni bond issuance down half compared to last year. And it's not because they don't need the money. I like this: "Restricting bond issuance, though, limits a government's ability to spend." "Though"?! That's the whole point, dude. The credit rating dropping, the interest rates increasing, this is a signal to drop the spending, doofus. Yes, I understand the concern about infrastruture, but I bet there's quite a bit of wiggle room in the operational budget from which cash can be wrestled.

"Fun" interactive graphic: sovereign debt contagion. I recommend putting your cursor on the U.S. first and seeing who's exposed to our debt... and see that the risk isn't reciprocated. Bwa ha ha ha. Suckers.

Ireland has lessons for Obama? Silly Richard Wolf. Obama learn something from an entity outside himself? Surely you joke.

By the way, the euro zone hasn't really had its crisis yet.

CALIFORNIA

Liberal-vs-liberal in pension smackdown of the year! San Francisco treat. I call it just deserts.

A councilman who has cutting pensions as a top priority announces his run for San Diego mayor. Oddly, this is a game of Name That Party! It's odd, because pretty much every other politician has his party named in the article. Why not this guy? By the way, he's a Republican.

Special asst to governor (no, not the one dealing with women issues): you know what really helps prevent pension crises? Actually putting adequate money in the pension funds. It works wonders.

COLORADO

Denver could raise retirement age to 60 for city workers. Oh, the humanity!

More on the same.... and scroll to the bottom for a lovely quote from the council president saying that one shouldn't mess with a successful pension system... after all, they need to attract employees. Employees that have lots of options for DB pensions with a retirement age of 55, apparently.

CONNECTICUT

Bridgeport isn't doing so hot. They're asking for permission to make only a $7 million contribution, when the calculated required contribution is $13.5M....and they really would have to pay $24M to make the fund whole. This is how trouble can start.

ILLINOIS

So after the massive fake-out from the state legislature that they were actually doing something about pensions, it's time to regroup and consider the options. It has been noted by various parties that one really big problem is that contributions to the fund have been way too low for the level of benefits being promised. For a fun look at history (sorry this isn't pretty, but the numbers are inherently ugly) - here are the fundedness ratios (total assets / total liabilities) for various pension plans for the past 10 fiscal years:

System, FY2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010

Teachers’ Retirement System, 59.5, 52, 49.3, 61.9, 60.8, 62, 63.8, 56, 39.1, 40.5

State Employees’ Retirement System , 65.8, 53.7, 42.6, 54.2, 54.4, 52.2, 54.2, 46.1, 33.9, 31.4

State Universities Retirement System, 72.1, 58.9, 53.9, 66, 65.6, 65.4, 68.4, 58.5, 41.9, 40.2

Judges’ Retirement System, 40.7, 33.7, 30.7, 46.2, 45.7, 46.4, 48.4, 42, 31.2, 28.8

General Assembly Retirement System, 34.9, 29.3, 25.4, 40.1, 39.1, 37.1, 37.6, 32, 22.7, 21.7

All systems, 63.1, 53.5, 48.6, 60.9, 60.3, 60.5, 62.6, 54.3, 38.5, 38.3

[Take a gander at GARS: that's the politicians' pension... now I've got an idea to reduce the state's liabilities....and maybe here's a different way to give them an incentive to do their damn jobs. People are unimpressed by the inaction.]

The Illinois pols' idea of a responsible bet: casinos for Chicago. Double down! Double down!

NEW YORK

Oh, a kerfuffle has poofed in NYC. The Comptroller, who once upon a time claimed to be an actuary (though I can find no record of his ever having had credentials.... I could be wrong, though), has a convenient little report saying that the city pension costs are going to dramatically drop... as a percentage of the city budget. And how does that work out in absolute amount, Mr. Liu? Needless to say, Bloomberg is pissed, because this is taking away negotiation leverage from him....well, if this is at all legitimate.

I haven't read the report itself yet, so I will leave comments on it til a later date. Here's the press release, here's the summary, and here's the full report. People will get hung up on the fund return assumptions (and sure, they should), but I'm more concerned about liability assumptions (so that will take me a while, and I probably don't have enough info to figure out if it's reasonable). But let's see the assumption of the denominator....

To quote the press release:

1.City pension costs will increase nominally through FY 2016, after which they will decline as a percentage of the City’s expenditures and revenues.

Note: In FY 2012, pension cost is $7.3 billion or 11.1 percent of the City budget. By FY 2016, pension cost will rise to $8.3 billion or 11.4 percent of the city budget. The increase in pension cost through 2016 would not be materially impacted by new benefit changes or tiers that are applicable only to new employees

So, basically, there's a projected $1B increase in annual costs projected in a 5 year period. That's quite a bit, don't you think? Almost a 14% increase. So to keep the percentage of the city budget about level, it requires the city budget increasing by the same rate.

And hey, what are the costs as a percentage of salary?

3.The primary reason for declining pension costs is the phasing-in of new employees whose benefits are significantly lower than those offered to municipal workers in the past. Police and Fire Pension Funds will experience the most significant costs decreases over the next 30 years.
■Police will decrease from 65.1 percent of salary in FY 2010 to between 39.2 to 33.4 percent of salary in FY 2040.
■Fire will decrease from 83.1 percent of salary in FY 2010 to between 46.6 to 41.5 percent of salary in FY 2040.

Yeah.... that still sounds pretty high. That's just the pension cost. How much do you put away in your 401(k)? I'm thinking it's not 40% of your gross salary.

RHODE ISLAND

Moody's downgrades R.I. debt based on pension cost issues.

A little bit of history behind Providence's cushy retirement benefits that have all of a sudden become unsupportable. Except it was really 30 years in the making, not something that "just happened".

In particular, there are these nice disability pensions that it seems some rather non-disabled people are collecting.

TENNESSEE

Governor signs bills that squashes collective bargaining for teachers

UTAH

The state wins an award for facing reality. [Yes, it's all politics.]

WASHINGTON

Gentlemen, start your lawyers! Unions look to sue over COLA-removal law.

WISCONSIN

The benefits battle continues, this time with the public safety workers [usually considered untouchable]