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]
Three Day Hangover Public Pensions, Unions, and Finance Roundup 31May2011
Others had their weenie roasts. I'm eating pork barbecue.
That's the way we North Carolinians do it.
(If I can find where Stu hid it in the fridge)
PEOPLE ARE GETTING OLDER AND THAT MEANS STUFF
Such as some people get less productive as they get older, and (warning: NYT link) get demoted, and they don't like that. I agree that it's not just a matter of age... lots of people just don't keep up, period. I am appalled at people my age, which isn't even 40 yet, who act like they've got nothing new to learn, and then are shocked to find they're not exactly a hot property on the employment market. I think it's a lifelong temperament, not a generational or age thing.
The greying of Maryland and Hawaii.
GREECE
Just a matter of when and how, not if: what will happen when Greece defaults. Yes, a little short-term prognostication (I consider a two-year horizon to be short term, myself. Look, when I consider public finance, long term is at least 50 years.)
Breaking news: the Greeks are unhappy. Beware of any large wooden horses on the horizon.
The Greeks didn't appreciate being called lazy by the Germans. Though they are. Amusingly, the "lazy Americans" have the same retirement age as Germans, and far less paid vacation.
And yes, they threw another fit. Let me know when that makes money magically appear, guys. It didn't the prior dozen...twenty?... times.
OUR ILLUSTRIOUS PUBLIC SERVANTS
IRS employees committing tax fraud. Well, hey, you'd think they'd be the experts. So yay them, I guess.
News flash: public employees lack accountability. Well, knock me over with a feather. Well, let's check out a couple examples.
Corrupt Californian ex-official strikes a plea deal on a felony charge. Keeps his pension.
A shrink for Milwaukee County manages to retire with backDROP bennies under a cloud of suspicion. "You can't discipline me! I quit! And give me my retirement shtuff!"
And another person who retired before being charged with anything. Lesson: if you do something questionable, be sure you're close to a legit retirement age.
GENERAL PENSION ISSUES
Getting all actuarial-ish on you for a moment: does market value of liabilities make sense for public pensions? This is coming from Segal, an actuarial consulting firm that does public pension work. I agree that there's really no such thing as "MVL" for public pensions... if anything, public plans need far more conservative assumptions due to the number of parties with different interests who need to be protected from politicians (namely, the workers, bondholders, and taxpayers). I'm thinking Treasury rates minus a spread to use as the discount rates. This is for balance sheet valuation of the liabilities, mind you, not figuring out how to fund them. There is a distinction there.
More actuarying: a Capitol Hill briefing on Social Security by the American Academy of Actuaries. An excellent run-down of the principles of the trade-offs and the reform choices. Take a look.
This doesn't really fit anywhere else, so I'm throwing it here -- odd consequence of shutting down the NASA Shuttle program: having to pay off pension costs of private subcontractor.
CALIFORNIA
Great investment: Arizona land sells for 8% of its original sale price. Calpers was one of the investors.
San Marcos: pension consultant recommends town to boost pension contribution even higher than Calpers requirement.
The ongoing San Fran pension scrum: trying to keep Adachi from running his own, stiff proposal.
Yes, people do understand what happens when you've got "tiers" of pensions, and you especially get a generational divide. The younger guys aren't going to give a crap what happens to the retirees with the cushier benefits. There will be no solidarity.
Gifts to state pension officials under investigation. This will be interesting, I'm sure.
Daniel Borenstein asks for an honest accounting of Calpers plans. Let us know how that goes.
GEORGIA
Atlanta Mayor Kasim Reed directly calls for pension reform. Yes, the debate is rather heated.
ILLINOIS
Low-hanging fruit: high pensions for politicians. Let's just whack it. The base assumption should be they're all base. I know John Adams could probably be a perpetual motion source at this point to see what "public servants" are, but he saw the Lee boys in action back in the day, so none of this should be new to him. [there are some excellent comments on this piece]
Did you know that Illinois is having trouble paying its regular bills? Again? The Repubs aren't allowing $6B (yes, billion) in borrowing to cover the the backlog (but it looks like quite a few Dems voted against it, too), to force the issue.
Even the state treasurer has gotten into the game, saying he is going to make borrowing more expensive for the state by asking rating agencies to downgrade state debt (that's not what it says explicitly, but read between the lines), to try to make the legislators a little more responsible and cut spending. (Okay, it is more complicated than that -- but the point is to make new debt issues more difficult for the state, and that includes rolling over debt.) Isn't public finance fun?
Sharing the pain: Chicago retirees will see a 15% hike in their health premiums. And they begin to see that an unfunded liability is not just a danger to taxpayers (and bondholders), but also to the people who were promised something.
Speaking of unfunded liabilities (and their causes), I would like you to consider the following report from the Commission on Government Forecasting and Accountability. I draw your attention to Appendix M, at the bottom of page 104 which shows the total for the 5 Illinois state-funded pension plans -- a breakdown of the sources of the unfunded liability change over the period from 1996-2010:
| $Billion | Percentage | |
| Salary losses | 0.7 | 1% |
| Investment losses | 11.7 | 20% |
| Employer contribution
shortfall |
24.7 | 43% |
| Benefit increases | 5.8 | 10% |
| Changes in assumptions | 3.5 | 6% |
| Other (spike) increases | 10.6 | 19% |
| Total | 57.0 | 100% |
Now, that's not the full unfunded liability, by the way, but about 2/3 of it. That's merely the increase over 15 years... and the largest percentage is due to (begin EDIT:) "employer contribution shortfall" - as noted by Bill Zettler in the comments, this is mostly coming from interest on the already accrued unfunded liability not being covered...but the main point is the pension not being funded when the liability is being accrued, more than the investments going south (end EDIT). In short, these plans have been systematically underfunded for at least 15 years, and while yes, crappy investments did a number on the fundedness, you have to actually stick some cash in there from time to time, and the pols were loathe to do that.
I think you will find in many of the cases of the worst-funded plans across the country that the reason almost always has been underfunding as opposed to only investment problems....though there are wacky investment things going on at various points, but I'll save that for a different time.
In any case, this is why the pols in Illinois are actually working together to pass pension reforms, over the objections of the public unions who had good reason to think they had bought the pols.
But according to the report linked above, the combined plans are less than 40% funded, so political contributions can't keep fiscal reality from hitting Springfield. The unions have got to realize the three options being offered are what they have to work with: keep current benefits but have to pay more for them; don't pay more but get less in benefits; or get thrown to the DC wolves. Make your choice, guys.
But wait! Unions win! They make the pols put off a reform til fall. I don't know if I'd call that a win, guys. As Marc Levine says, you may regret this. The choices may become more harsh as the state's finances deteriorate. Cook County employees are seeing furlough days, and I bet there's going to be more fiscal pain shared ith public employees before this is over. And don't expect a federal bailout... remember who holds the purse strings now.
So what were the Illinois pols doing instead of fixing the pension mess? Betting on casinos.
KANSAS
Gentlemen, ready your lawsuits! The employees of Illinois may wish to look at what is going on in Kansas as employee groups there seek to sue over a law that intends to force employees to either contribute more to their pensions or receive less in benefits. Though this involves COLAs alone it seems, and not the general benefits.
MICHIGAN
Biggest change to tax code: taxability of pensions.
I still think it's dumb. Who the hell wants to retire to Michigan in the first place? Great way to drive people away even more, dumbasses.
Emergency finance manager stirring debate.
NEVADA
Double-dipping law under fire. Unlike most states, "double-dipping law" here means a law that allows for public employees to collect pension payments and also remain public employees. In most places, it's a law to preclude such behavior.
NEW HAMPSHIRE
OREGON
PENNSYLVANIA
After all that work to get the numbers to dance, the state may end up taking over the Pittsburgh pensions after all. Well, expecting money to magically appear was never much of a plan.
RHODE ISLAND
The governor is getting a bit tetchy that the treasurer has all the press over the awful state of RI pensions. Dude, just let her have the issue. There's not going to be a huge amount of glory there.
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?
PUBLIC FINANCE AND THINGS FALL APART
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.
UNIONS SHTUFF
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.
GENERAL PENSION ISSUES
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.
ALABAMA
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.
CALIFORNIA
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
ILLINOIS
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.
KANSAS
Pension reform bill goes to governor, but questions linger about to what limits reform can be taken.
MICHIGAN
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.
MINNESOTA
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.
NEW HAMPSHIRE
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.
NEW YORK
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.
OHIO
A proposal to yank the pensions of corrupt pols -- I say let's be proactive. No pensions for any pols.
OKLAHOMA
Pension reform bill signed by governor
PENNSYLVANIA
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.
RHODE ISLAND
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.
TENNESSEE
Legislature passes bill to curb teachers unions, stripping them of most collective bargaining rights.
Public Pensions, Finance, and Unions 15May2011 Deadline Edition
It's deep into publication deadline season for me (working on life reinsurance! Woo! This weekend! Awesome! Not!) so my editorial comments will be at a minimum.
Yeah.
Right.
EUROPE
Greece: their finances suck. Response? You know. The experts do not see this ending well, not just for Greece, but the entire eurozone (I like the restructuring option built into the bonds to begin with - if you were a sucker to trust Greece, or expect a bailout, you get what you deserve.)
UK: public employees to hold a more restrained set of strikes over pension cuts. Guys, doesn't matter if you go the violent route or the civilized route -- you're not getting your goodies. Because there's no one to pay for them.
Ireland: not doing so well, either. What are they going to do? Tax private pensions. A 60-basis point tax on assets. Per annum. "Temporarily". Uh-huh. Pull on the other one, it's got bells. Oh, but some people get better treatment than others. Surprise.
Some reactions to the Ireland plan. Pension professionals not pleased - well, duh, it would kill many private pensions. Leo Kolivakis rounds up more, and is also skeptical of how useful this will be.
The Irish people have been told to shut up and not to whine, because FISCAL ARMAGEDDON would result if they didn't go with the EU-IMF bailout. IMF, huh? Those guys have a good reputation, don't they?
OUR UNDERPAID PUBLIC SERVANTS
California lifeguards, making over 200K.
Illinois assistant superintendent of Education making over 300K, making 60K more than his supposed boss.
High-paid public employees is not just a U.S. thing. What was that about austerity in Ireland again -- evidently not everyone gets hit.
A public hospital CEO given $4M in pension benefits.
SOCIAL SECURITY
A report came out. Social Security is in the red from now on...til something changes. And something will change. The problem is now, not when the lie that is the Trust Fund is depleted.
GENERAL PENSION STUFF
USPS ain't doing so hot - it's not just a pension thing, but hey -- it's a big part of their problem.
Remember the injustice that the Wisconsin public employees were having their God-given rights to collectively bargain yanked away by harsh, unfeeling Republicans? Well, weep for this group of government employees who have never been given this right, and who might get their pensions cut.... federal workers.
Oh, and it's not just undercontributions and overgenerous benefit designs that got us into this mess. There's also pension fund corruption.
Just take a look at this graph... the horizontal axis is only a 11-year period, so why would that slope be so steep? Think about what's going on there.
Oh, all this public pension foo-fa-raw is pure envy on the part of the have-nots. Hmmm. What was that about class war, again? Didn't expect to be in the "have" class, now did we, union agitators?
CALIFORNIA
CHiPs get real and negotiate, bumping retirement age up to the ancient 55 years old. Hey, it's better than their prior eligibility age at 50. (and 3% per year? Holy crap, that's generous at any age.)
San Jose mayor declares fiscal emergency, pensions play large role.
A review of the pension pain precipice in Santa Cruz.
Cutting police and jail services to pay for pensions.
Sacramento County must hand over pension info to media, says court.
UC system benefit perk still paying out when it can least afford it (WARNING: NYT link).... this will play out interestingly.
CONNECTICUT
Step up, ladies and gentleman, and let me introduce you to your next version of Prichard, Alabama. I do not see the pensioners of Hamden, CT, doing well over the next five years. Why, do you ask?
The town’s pension is 25% funded, and the mayor only allocated a $3 million contribution, or around 15% of the $19.85 million recommended by the town’s actuaries, for the upcoming fiscal year. The pension was closed to new enrollees in 2008, but supports 664 retirees and 568 active employees. The fund has only $75 million in assets and $242.3 million in unfunded liabilities. The pension pays out around $20 million each year to current retirees.
Yeaaaaaaaah. That's what we call unsustainable. This is a completely foreseeable disaster. It does not take fancy math to see that the money will run out in short order.
We see this on a relatively small scale - a town with a less than a couple thousand people impacted by the money running out. So what do we do when it's Illinois or New Jersey? Prichard retirees have not gotten bailed out, Hamden employees will not get bailed out, and when it's order of magnitude larger -- it's not going to get bailed out because there's no money of. Tough shit.
ILLINOIS
There's been a lot of politicking by state employees lately in Illinois. I don't think it's going to work -- because the hole is too big. But let's take these things one by one.
Don't break pension promises, say those from the public union side.
A TRS trustee writes a letter and Bill Zettler has some pointed questions to ask those on the teachers union side. (I will pick only a couple):
4. Why are teachers allowed 2 years of sick leave credit when they retire adding enormously to the pension cost? No one in the private sector has that.
....
9. If pensions are reasonable how can a 54 year-old Music teacher retire on a pension of $130,000 after working only 33 years and contributing only $193,000? Since he retired in 2009 he has already received more than he contributed ($225,000). That does not seem reasonable to the 95% of IL workers who are not in the state pension system. The cash value of his pension is 8 times what Social Security would be for the same salary and years worked. Why does any public employee deserve more than 8 times Social Security?
There is a lot more at the link.
A police union leader again reiterates that pension promises must be kept.
From the business side, a call for reality -- and explains measures he had to take to make his private pension plan sustainable.
Overview of proposed pension changes, the main change being that employees would have to contribute a lot more to the pension fund...and the unions claim this to be unconstitutional. Oh, this should be interesting.
Picking low-hanging fruit: cutting a benefit for local pols.
KANSAS
Making the case that Kansas police retirees have a modest pension benefit. I'm going to go all actuary on your ass for a moment:
Our retirees live to an average age of 72 — six years below the national average, according to the Centers for Disease Control and Prevention.
Let's go to the life tables, shall we? Life table for 2006 from the CDC, and historical life expectancy (go to table 22 if it doesn't take you there automatically). Now, these are general population mortality tables, which includes all sorts of sick people, but let's assume it's okay. First thing that's deceptive about his statement: I bet most of the retirees are male. There is a major life expectancy gap between males and females to begin with, which makes for a couple years difference between the general population life expectancy and male life expectancy. Secondly, that 76-ish life expectancy in the general population is 1. from birth and 2. assuming you were born after the 1990s (so it involves guesswork on mortality patterns). Well, were you?
In any case, the life expectancy stats include people who died in infancy and childhood and is not the proper number to compare against for pension plans. You should either use life expectancy from age you enter the plan (say, age 25 or 30), or retirement age (say 50 or 55).
Now, I don't have enough info to do a good comparison of the life/death stats on that pension plan and other pension plans/general population. I don't know what time period that life expectancy was calculated over... but more to the point, it might be irrelevant.
Sir, your retirees might die young, but I bet many of them have spouses/ex-spouses who get joint benefits. What are their ages? What have their death age distributions been like? You can have a policeman die at age 60 and his widow collects full benefits til she's 95. Let's talk relevancies.
Ok, enough actuary talk for this post. And if I screwed up any of the details above, I'm sure one of my fellow actuaries will set me aright.
MICHIGAN
Looks like that pension tax (oh, sorry, "curb on pension tax breaks") passed. Let's see what happens.
NEBRASKA
Not a generic public pension issue, but interesting trivia: criminal's pension protected from being garnished to pay for money he owes sexual assault victim. This is an ex-state patrolman child molester, if one wants to get more specific.
NEW HAMPSHIRE
Employees rush to retire. But hey guys, just saying -- being a retiree won't necessarily save you from fiscal pain.
Why are they rushing to retirement? Because of ongoing pension reform discussions.
NEW JERSEY
John Bury notes that New Jersey needs minimum funding rules on its pensions, and supports the passing of PEPTA, a federal bill requiring greater
transparency in public plan reporting.
Of course, even without those requirements, the bond markets are waking up to their risks.
And the various NJ unions are trying to remain relevant and hold onto what they've got in this debate. Good luck with that.
RHODE ISLAND
Pension reform goes out with a whimper... I guess when they run out of money will be the bang. More on the death of reform efforts this year. Pony up, taxpayers.
Looks like investigations into possible disability pension fraud is ongoing, though.
Mothers Day Public Pensions, Finance, and Unions Mayhem 2011
These stories are stinking up my browsers. I want to close my tabs for ma's day.
A gift that gives to me.
STATES FACING REALITY, MAKING HARD DECISIONS
A couple states look at their budget situations, and decide the thing to do may be to cut the school calendars down. California is likely going to have to cut a lot more than just the school year.
A Q&A session about the state of public pensions and "legal restraints". Legal restraints can't keep the money coming in.
Ugly demographics in West Virginia, and many other places... and guys, it's not just lack of immigrants that means that you've got more deaths than births. There are places with plenty of immigrants that are just bleeding residents.
People are told that hey - they're living longer, they should be working longer. No one wants to hear that stuff, though, do they? Actuaries always wonder why we're so unpopular. It's the slide rules, isn't it?
I'm going to be harsh for a moment. You're bummed that you can't go to Texas to visit the grandkids? Tough shit. You should've saved up. A couple hundred years ago you would have been dead of cholera by age 40, so be happy! For people who are dying of our own gluttony and ease, we are a bunch of whiny bitches, aren't we?
Some governors are still huffing glue or something. The pension funding has "stabilized" to the extent that many of the states have decided what level they'll fund at... not that the benefits are at all likely to ever reach 100% funding given current policy. Yes, many states are okay. But Illinois, California, New Jersey, Rhode Island.... and I could go on.... are not okay.
CALIFORNIA
An interesting comparison was made between defined benefit and defined contribution plans for teachers in California. I haven't checked the numbers myself in the study, made by these guys, and frankly, it sounds a bit fishy to me though Marcia Fritz and her crew have generally played straight. But I know about how number-crunching can go wrong, especially when you're looking for particular results and you're rushing to publish (which reminds me, I have some major deadlines over the next two weeks, so I'll likely be silent for a while). Here's a different post on it, and they didn't just look at the teachers plan... other comparisons sound more in line with what I'd expect.
We're going to be hearing a lot about San Fran's pension proposals this year. So here's the latest from the NY Times. An excerpt:
The proposed change would allow the city to pay vast sums it owes to the pension fund over 10 years instead of five. The change would save the city about $30 million a year over the next few years — but would cost the pension fund considerably more than that over the course of the decade because the fund would have less capital and thus lower investment returns.
Leaders of the public-employee unions, under pressure to sharply increase their members’ contributions to the fund as the city struggles to close a $306 million budget gap, pitched the accounting change to David Chiu, a mayoral candidate and the powerful president of the Board of Supervisors, in a meeting Tuesday.
....
The city attorney’s office ruled last month that the proposed accounting change could not legally be included in the amendment to the city charter that unions and city officials hope to put on the ballot this fall. Thus the unions’ aim is to get city leaders to join them in pressing the pension-fund board to seriously consider the idea, which would allow the pension fund to “smooth” its recent losses over 10 years.
Oh, "smoothing". That "friend" ... until now.... of public unions and politicians (and actuaries). I understand the theory, and it's not necessarily objectionable, given we all do it -- more or less -- but most of us do not do it to the extent that governments get away with it. There's an issue of balance sheet, and then there's an issue of cash flows. And while the smoothing can make the balance sheet look better for a while, the real stuff is the cash flows that have to be covered eventually. If they take too long to fill the hole, the cash flows of the pension payments will not be made.... ask the (dead, unpaid) pensioners of Prichard, Alabama about that. They can tell you what happens when the money runs out.
L.A.'s fiscal troubles aren't merely pensions but also "stealth bonuses".
A real cost savings for taxpayers in San Diego as current employees agree to contribute to their pensions.
Corrupt pols in Cali rejoice as they can still collect their pensions.
HAWAII
Legislature reducing benefits for new hires. It's a start.
ILLINOIS
Hey, new Mayor Rahm! How you like these apples?
First, you change pensions for new workers. Then you change pensions for current workers. You know what the next step is, right? The state treasurer thinks they might be onto something.
But wah wah wah, no you can't cut. We'll see about that.
If I were these guys, I'd get out of the state. You don't have to be in the state to collect the pension, and people are less likely to show up with pitchforks on your lawn. If they decide to cut off your pensions, you can just as easily deploy your lawyers from Arizona as from Schaumburg. But if I were the lawyers, I'd require retainer, and not work on contingency... the pickings may be slim.
Guess what? Illinois still has a lot of unpaid bills. Cheers!
If I were a business, I'd be careful about overpaying taxes.
They already raised taxes in Illinois, but it wasn't enough. Let's see what happens next.
NEW JERSEY
Open Space trust fund used to pad a pension. Also from John Bury, the very rare occurrence of lawyers lying.
A tax assessor is making money from 9 different towns. Not necessarily nefarious (in NJ? mwa ha ha ha), but of course it doesn't look good.
NEW YORK
State pension fund making big bet on natural gas.... a local resource issue. This is not what I call diversifying risk.
RHODE ISLAND
Firefighters union supports probe into fraudulent disability pensions.... because it's really really bad PR, and they'd like to hang onto any DB pensions, thank you very much.
Providence, RI, is looking at reducing its costs by being able to revoke pensions of any corrupt public employees..... deal!
CANADA
People weren't too happy to find out how well the recently-fired MPs would be taken care of. So current MPs say they'll look into that. Sure.
Public Pensions, Finance, and Union Spew 5 May 2011
Cinco de Mayo!!!!!
WOOOOOOO!!!!!
And you know what's the perfect thing to kill the party spirit -- yeah! DOOOOOOOOOOOOOM!!!!!
Okay, kick it.
UNIONS AND THEIR FRIENDS
Washington Examiner opinion piece -- Abuses Happen When Unions Have Government Friends.
A letter: public employees are just like you. Yes, when I screw up majorly, I get protected from firing and I can retire with a DB pension in my mid-50s. Just like me. Oh, and I can opt out of Social Security. There are services that perhaps should be controlled directly by the government, but it seems to me that much of this stuff can be outsourced to private companies, just as my company outsources its payroll operations, for example. If the public employees are just like the private ones, seems like if the private ones are cheaper, it's in my interest as a taxpayer to get the cheaper one that gives me the same service.
Way to shoot yourself in the foot, dipwad.
Want to see other ways public employees are just like you? Just check out the various perks some get, like million-dollar home loan concessions.
BOOMER (NON-)RETIREMENT TWADDLE
Sure, one of these things is not like the other, but thought I'd throw it in here. A too-precious NYT review of a book on the "encore stage" for Boomers. For we Xers, this is the "dammit, do we have to get out the hook to yank them off the stage?" stage.
FINANCE SINKING US ALL
Steve Forbes on middle class tax hikes to bailout public pensions. And you can't tax the rich because 1. there's not enough of them and 2. the middle class has more money, collectively.
PENSIONS ON THE WHOLE
Just a note -- we've been seeing a lot of public pension fund managers leaving to go into the private sector. HMMMM. You think they know something? I think what they know is that the private sector pays more, is less political, and is actually a lot lower-profile.... especially as some ugly financial battles are upcoming.
On the Pew report on public pensions: state pension gap continues to grow.
CALIFORNIA
John Dickerson at YourPublicMoney.com has been detailing the failure of public financial management in Mendocino County. Check out his latest issue (currently on the three levels of financial problems - how, once the county got into debt, it wasn't dealt with... my never heard anything like that before.)
California employees trying to defend their "modest" benefits. Thing is, guys - if it's $1,000 for 1,000 people, that's $1M. A lot of little "modest" benefits can add up, and if proper provision is not made, even "modest" benefits can be unaffordable. And here's the kicker: something can look like a small amount of money, but if it's going to be paid out monthly over a period of 40- 50 years.... and inflation-adjusted.... yeah.
Interesting: a councilman requests a legal analysis of San Bernadino's pension obligations, which the council as a whole rejects. But as some of the councilmen note, it's becoming a squeeze between current services and benefits paid for past services.
Now is not the time for a $4-million retirement package. Dude, you picked a poor time to be in the public sector.
That said, politicians look out for their own as they nix a proposal to yank benefits from corrupt officials. Hey, =they= could be those corrupt officials in the future!
DELAWARE
Governor signs bill that requires employees to contribute more to their pension and health benefits.
FLORIDA
More modest pension reform bill sent to the governor.
GEORGIA
The case of the missing pension docs
ILLINOIS
Public employee unions trying to make PR case to avoid getting hit by budget cuts. Here's a thought -- let taxes be raised just on you guys to cover the expense, and you don't get cut! I'm all about the win-win.
And here are the unions trying to protect their pensions. Guys, you should've thought of that when the pension obligation bonds were being issued instead of real contributions being made. Blog post on this from Capitol Fax. It looks like this will be a very interesting legislative season in Illinois.
Oh look what ex-mayor Daley is up to: dumping all his pensionable service into one bucket. Read the comments on the story for some fun. A Daley spending any time off the public teat? You must be joking. Special extra bonus Daley puke: Daley's farewell speech.
One of the worst pension funds in the country -- Illinois Teachers Retirement System. Always been in crappy financial position...follow the timeline from 1973 (before I was born).
KANSAS
In current negotiations, a 401(k)-style pension option for state employees is off the table. Lots of negotiations ongoing, stalls, etc.
MICHIGAN
Mayor Bing of Detroit has unveiled his deficit-cutting plan. Changes to retirees benefits (medical and pensions) are a big part of this plan. More on Detroit budgeting.
NEW HAMPSHIRE
Negotiations are ongoing in the state legislature over pension reform. (I know, I know... exciting!) The House is cramming its bill with all sorts of reform measures that the Senate has rejected (ain't that the way). This part is unlikely to pass, but this is the most intriguing reform measure I've heard of:
The House added two controversial items to the Senate bill. One would punish public workers if unions sue over the reform, forcing them to absorb a major hike in their pension contribution rate they take a challenge goes to court. Opponents have called it a “poison pill” clause. If employers challenge the reform, there would be no similar penalty.
NEW JERSEY
A very short video courtesy of John Bury and a recent actuarial meeting - don't worry, no scary number-crunching, though it is scary. Here is a key exchange:
John Bury says: "What tools do the actuary need or should the actuary have to handle New Jersey?"
NASRA's Keith Brainard: "New Jersey would make a terrible place to make a pension policy"
....
Mr. Brainard ended his response to my question by saying:
“We get the government we deserve and New Jersey voters ought to stand up and demand better.”
[Dan, if you could embed the video, that would be great]
Yes, the voters of NJ got the government they deserve good and hard.
Of course, who am I (New Yorker ... BY CHOICE... to talk).
OKLAHOMA
Legislators approve plan to require pension cost-of-living adjustments to be funded. You'd think that would already be required, but you'd be wrong. Many COLAs are "funded" by being amortized over a very long period... and the person who received the bump may be long dead while the benefit is still being paid for. Yay. An opinion piece approving of the move.
RHODE ISLAND
News flash: fixing the pensions may mean CHANGING THE BENEFITS! whoa. Never thought of that. (yes, and this includes current employees.... and though she doesn't say it explicitly, current retirees.) More from the state treasurer on this issue.
Criminal investigation of a disability pension being paid to a firefighter - looking into whether it's fraud. Fun factoid: accidental disability pensions such as this on make up more than half the pension payments the Providence FD makes this year -- almost 60%, in fact.
WASHINGTON
Even in Washington State, double-dipping isn't looked upon kindly.
WEST VIRGINIA
After Pew released its updated report on state pensions this year you're going to see more of these stories as each state sees where it falls out. And West Virginia gets to shout We're #2! We're #2!
CANADA
There was an election in Canada recently, and a bunch of MPs (not me!) lost their jobs. But don't worry about them! They've got cushy pensions to fall back on. No, really, they'll be okay.
To Really Screw Up An Election Count, Add Computers…
....and dumb people who don't know how to properly set up systems or check their errors.
While the Wisconsin recount slowly grinds on, I bring you two stories courtesy my membership in the European Spreadsheet Risks Interest Group (these stories don't seem to rise to the level of our horror stories, though.)
First, out of Waukesha, we have "Kathy's special program":
Waukesha County Clerk Kathy Nickolaus was using a software program created especially for her by the state Government Accountability Board when she made the huge error in compiling results for the State Supreme Court race between incumbent David Prosser and challenger JoAnne Kloppenburg. The special program was revealed in an email sent to other county clerks and released by the Kloppenburg campaign to buttress her claim that an independent investigation of Nickolaus’ office is needed.
....
The email, by Rusk County Clerk Denise Wetzel and addressed to other county clerks in Wisconsin, including Nickolaus, was sent on April 8, the day after Nickolaus revealed the vote-reporting error in a press conference.It reads, “Please note that the program Kathy uses IS NOT the new canvass reporting program that is in the (Statewide Voter Registration System) that we all have been using as of late. It is a completely different program that was created by GAB for Kathy to accumulate her votes prior to uploading them into the program that the rest of us use.”
....
“We ran this for the governor’s election,” she said, “and we ran the same system for the February election. We had no problems.”Under the system, Nickolaus said municipalities, including Brookfield, are given a template spreadsheet to fill in with election results and email back to her. Municipalities are instructed not to alter the spreadsheet – but on the night of April 5, when Brookfield returned its form to Nickolaus, she noticed it contained “extra columns,” complicating the process of importing it into the database.
The clerk said she called staff in Brookfield to again stress the importance of not altering the template.
Nickolaus, however, didn’t say this complication was the cause of Brookfield’s vote totals being omitted from the initial results released by her office.
Hey, blame an intern. That's what most cubicle warriors do.
But yeah, giving people a data entry template you're going to use to import into your huge database.... WELL DAMMIT YOU WRITE YOUR QUERIES TO CHECK THE FUCKING COLUMN COUNT AND HEADERS.
So somebody accidentally hit "insert column", just to the left of the vote count column, I bet. It would've been an empty column. Oh, I don't know - having data checks before entering them into your database is pretty standard.
Thing is, Kathy isn't a tech person. Indeed, it shouldn't require a tech person to run an election. AND IT DIDN'T - because Althouse is also not a tech person, and she noticed that there was a problem with the magnitude of the numbers being reported.
WHAT IT REQUIRES IS SOME FUCKING COMMON SENSE.
I think the Kloppenburg campaign would have a point of saying "You really shouldn't have someone dumb as a brick running your elections".... but they're not the most credible people to be doing this.
Let's move on, shall we?
Sure, here's another spreadsheet error in an election, this time in West Virginia (and to no effect):
Morgantown City Clerk Linda Little said a computer error led to a discrepancy in vote totals for council candidate George Papandreas.
The candidate -- who was defeated by incumbent Ron Bane -- actually received 99 more votes than was originally indicated in the total listed on the city's unofficial results.
....
Little said election officials had put the total number of votes for each precinct into a Microsoft Excel spreadsheet. The computer program skipped over an entry when it added the totals, she said.
I think they're trying to make this sound more complicated than it probably was. I bet somebody manually put in a =SUM(:) function, and either forgot to include the first or the last row. That's all. That's not a computer error -- that's a human error.
In both of these cases, the error was with the human, as it usually is.
For those who are interested in preventing some basic errors like these (and how to check), I recommend Patrick O'Beirne's Spreadsheet Check and Control. Also, I have a paper at the Society of Actuaries that can be useful for non-actuaries: Spreadsheet Issues: Pitfalls, Best Practices, and Practical Tips(PDF).
Common sense can be trained up, to a certain degree.
Sheer stupidity, well, can't do much about that but pray for wisdom....
Explain to a Simple Girl: How Does Raising Taxes Lower Prices?
No, really.
Because this is important.
Obama seems to think that an appropriate response to increasing gas prices is to threaten to remove various tax breaks on gas companies. I well understand all the arguments against such a move -- I want to understand, other than some nebulous "fairness" or "punishment" blather, how the hell this is supposed to help people dealing with rising gas prices.
Even to the general masses, this has got to look like a total non sequitur.
White House press secretary Jay Carney said at his daily briefing Tuesday that this is an apt week to highlight the tax breaks.
“The oil and gas companies are all announcing their profits this week. They’re expected to be quite large,” he said. “And while we certainly are glad to see companies making a profit, we do not believe that . . . they need to be subsidized by the American taxpayer.”
Okay......and? You raise taxes on them, so they raise their prices to keep up their profit margins and....?
I mean, how was this supposed to work out for the rest of us?
But let's look at those taxes on gasoline, shall we, and see who's making how much money on that gas:
Oh, here in my great state of NY, the various govt entities are making almost 66 cents per gallon. Do you think the gas companies are making that much in profit, hmmmm?
Do you really want to talk about taxes, Obama?
SPEAKING OF GAS TAXES: When people buy electric vehicles, you'd think they'd get to avoid the high gas taxes... well, Washington state isn't about to give up those revenues.
Mountains of Public Finance, Pensions, and Unions DOOOOOM 26April2011
For all that Monty has been doing his fiscal DOOM posts at AoS (and check them out, they're good and depressing), I still claim I've been doing them longer (albeit focusing on the pensions stuff mainly).
But there's plenty of room for more people with sandwich boards proclaiming THE END IS NIGH. So it's all good.
GENERAL PENSIONS STUFF
The people who brought us the classic Trillion Dollar Gap report last year now follow up with an even bigger gap:
The gap between the promises states have made for public employees’ retirement benefits and the money set aside to pay for them grew to at least $1.26 trillion in fiscal year 2009—a 26 percent increase in one year—according to a Pew report.
The Widening Gap: The Great Recession’s Impact on State Pension and Retiree Health Care Costs analyzes 2009 and 2010 data on states' funding of pensions and retiree health care. The report shows how states’ retirement systems—many of them already on shaky ground—were affected by the Great Recession:
-Pension funding shortfalls accounted for $660 billion of the $1.26 trillion gap, and unfunded retiree health care costs accounted for the remaining $635 billion.
-States had only about $31 billion, or 5 percent, saved toward their obligations for retiree health care benefits.
-State pension plans were 78 percent funded, declining from 84 percent in 2008.
Use our interactive map below to see state-specific data on funding for public sector pensions and retiree health care.
If Dan can yank that Flash-enabled interactive map at the link and embed it here, that would be great. If not, hie ye over to the Pew site and play with it yourself. What's really annoying, of course, is the huge lag in info -- they're telling you the balance sheet position as of 2009 -- but given how long-term these liabilities are, 2 years really isn't that huge of a lag.
Of course, 2009 was the last time the pensioners of Prichard, Alabama got paid. Ask them if two years is a long time or not.
And I want you to note how much money has been stashed away for retiree health care -- basically none. Up until recently, government entities could account for these liabilities on a pay-as-you-go basis, without figuring in any future costs. As you can imagine, given former demographics, this understated the liability. GASB (the Government Accounting Standards Board) changed this only a few years ago... and states are playing catch-up now. But you'll see many still aren't putting by any provision for this.
Luckily, many states don't have a constitutional provision protecting retiree health care. So guess what? The moment it really becomes unsustainable, it will be dropped. I think that may fix all those too-early-retirement ages (unless some idiot listens to Robert Reich and drops the Medicare eligibility age below 65).
Here's P&I's coverage of the Pew Report from above.
Here's some government group trying to talk happy. Yes, it's propaganda. Please, mister, don't take away our DB pensions!
Speaking of, Michael Barone asks if the U.S. can afford DB pensions at all (public or private). I think we can, actually, but it requires more modest benefits. At the very least, I think some longevity risk can be diversified away.
Unless Aubrey de Grey is successful. Work til you're 200! Talk to Lazarus Long...
Andrew Biggs explains valuation rates and how the value of a liability does not decrease simply because one funds it with riskier assets. More on valuation rates.
Oh look, the once untouchable current pensions are very touchable (NYT link).
Conventional wisdom and the laws and constitutions of many states have long held that the pensions being earned by current government workers are untouchable. But as the fiscal crisis has lingered, officials in strapped states from California to Illinois have begun to take a second look, to see whether there might be loopholes allowing them to cut the pension benefits of current employees. Now the move in Detroit — made possible, lawyers said, because Michigan’s constitutional protections are weaker — could spur other places to try to follow suit.
....
Pension funds can run out of money. In Prichard, Ala., a small city outside of Mobile, the fund ran out in 2009. The city stopped sending pension checks to its 150 retired workers, defying a state law that requires it to pay what it has promised. In the 19 months since the checks stopped, 18 retirees have died while waiting for their money.
GENERAL UNION SHENANIGANS
Gov. Haley of South Carolina challenges Obama and the NLRB for yanking prospective jobs from her state over union issues.
More on the NLRB complaint against Boeing.
Union of federal workers urging their members not to vacation in "anti-union" states. Guys, the high gas prices will prevent your members from vacationing at all. Win-win.
ALABAMA
Bill to require employees to contribute more to their pensions, to take effect May 1.
ARIZONA
Pension bill headed to governor's desk (presumably signed by now) - modifies benefits down.
CALIFORNIA
Jerry Brown whines at GOP.
Marin county seeing rising pension costs
More on SF pension reform proposals: Adachi finalizes his proposal for ballot; unions have a competing proposal...watch for the fireworks. Adachi pleads his case.
Bell, Calif., trying to claw back some money from its corrupt officials
via their pension funds.
The evil conservative California population looking kindly upon capping public pensions.
CONNECTICUT
FLORIDA
Fire chief resigns before his pension changes.
GEORGIA
Atlanta mayor details pension reform proposal, threatens service cuts without benefit cuts.
Atlanta firefighters make their own proposal.
ILLINOIS
State employee union bitches that it may be asked to contribute to its own pension fund. More bitchery on same.
Editorial: it's going to go through the courts at some point, so just pass the laws, start amending the state constitution, and do it you weenies.
KANSAS
At least 10 years of pension pain projected for Kansas.
MASSACHUSETTS
Corrupt official gets his pension back, while he's still in the slammer.
MICHIGAN
An argument for the pension tax, conveniently ignoring that people would just leave Michigan to not pay the tax. Idiot.
And yet another pension tax variation. Dude, give it up. Taxes aren't your salvation.
NEW HAMPSHIRE
Alderman notes the obvious: as cuts are proposed, people will retire to avoid proposed cuts.
NEW JERSEY
Pension talks being somewhat quiet... after the very public warning of what may happen if nothing is done (i.e., current retirees will see payments lower)
Mr. Bingley's own little slice of DOOM: salaries go down 2%, benefits go up 20%.
NORTH DAKOTA
Negotiations with ND teachers pension fund ongoing...they need to increase payments to the fund in the short term.
OKLAHOMA
Looking into ending unfunded pension mandates - to wit, cost-of-living increases. Evidently, they didn't have a minimum retirement age stated, either...so they raised it to the oh-so-high age of 60 for new hires.
RHODE ISLAND
Benefit growth is getting to Cranston police and firefighter plans.
The unfunded liability in RI climbs 27 percent. William Jacobson of Legal Insurrection reviews the situation.
EUROPE
Greek pensions loaded with Greek sovereign debt.
UK teachers told they need a reality check. They're suing and striking.
Easter Pensions, Unions, and DOOOOOOOOOOM 24April2011
Hallelujah! He is Risen!
Guess what's not?
But the good news is that it will not require the Second Coming to fix this mess. Yeah, none of the below is particularly fun, happy, or joy joy joy...but all it will take is a little bit of reality and castor oil and we'll get through this.
Feel good?
Yeah, I thought so.
SOVEREIGN AND MUNICIPAL DEBT
Considering making muni bonds taxable - as Girard Miller of Governing Magazine notes, this proposal is DOA, but Miller tells the munis to consider this...because they're going to need all the financing options they can get.
From Kevin D. Williamson, the four national debts: ranging from the short-term to the long-term. As Williamson notes, it's those medium-term notes where the action is, and those turn over in the 1- to 10-year range, and as interest rates rise in the medium term, that's really going to hit. And can hit hard. Because some of the holders of said notes aren't too happy about the situation.
Governmental accounting -- the kind of tricks the federal government is up to would put private entities in the slammer, according to Deroy Murdock.
More on federal debt from William H. Gross at PIMCO.
Fed claims muni bond defaults unlikely. I don't exactly disagree, but I think that the munis are going to find a tough time of it in rolling over their bonds or issuing new ones. The power to tax isn't infinite, especially when one's population keeps moving away (ask Detroit about that). Here's the Chicago Fed letter on this.
Want to feel better (relatively)? Take a look at how Greece is doing.
And plunging you back into despair: a history of the U.S. debt ceiling.
UNIONS MAKING FRIENDS
Grocery workers' union attacks non-union grocer trying to compete with non-union Wal-Mart.
Girard Miller considers public employee pay.
Indiana unions paid for Indiana Dems to bravely run away from their jobs.
Hey, Boeing, you thought you could site your factory in a different state? Sorry, you're shackled to Puget Sound and to its unions. Until the court cases are resolved, at any rate. More on same from Tom Bevan.
Free Enterprise Nation sends out an email, gets replies from (purportedly) public workers.
Much to our surprise, this seemingly innocuous email has produced an inordinate number of negative and downright nasty email responses to FEN. Many replies claim to come from public sector workers (although we have no way to verify their true identity) who say that the facts stated in our communiqué are overblown, preposterous and/or just plain untrue. Because of those charges, we would like to make our sources available for verification. Ironically, the facts we used all came directly from the government’s own websites.
Florida unions pulling money from banks supporting FL Chamber of Commerce.
Seattle city union blocking free effort to clean city parks. They are probably correct - I bet the company is trying to get the city to outsource further city services to them. I don't see why the taxpayer would care if the trash service is from a full-time city employee or provided by a private service, though. If it's cheaper, it's cheaper.
A similar debate in Costa Mesa as employees are laid off and services outsourced... and a raucous public debate ensues.
SEIU trying to get non-union workers in on their "actions". I guess I can see the theory behind it, but I'm not seeing this as a winner. It's really not going to work when the class war is seen as government workers with job tenure against private sector workers who have no guarantees at all.
GENERAL PUBLIC PENSION ISSUES
How the rate of return affects required pension contributions and assets.
Is 8.5% a reasonable discount rate for what is essentially an annuity? More on why an 8.5% assumption is not exactly prudent in today's world.
Public workers decide to get ahead of massive layoffs (and benefit cuts) by retiring in droves. Hey guys, don't assume that means you'll never get cut. Thing is, just because older, more expensive workers are retiring, doesn't mean it's necessarily cheaper for the government -- now they've got to pay for medical benefits they'd pay for anyway for that person, plus perhaps a replacement worker; and then underfunded pension plans start to liquidate which can end in a death spiral.
Last year we got Pew's Trillion Dollar Gap study. What will the number be this week?
GENERAL RETIREMENT ISSUES
Tom Blumer says retirement expectations need to be managed -- I agree. I tell everybody to expect to work til they die (or total disability) unless they save up for it.
Michelle Malkin on making 70 the new 65. Frankly, 65 wasn't the old 65 -- people on the whole start taking Social Security benefits within the first year of eligibility (when they're 62)...though that has been falling. And they do that because generally they haven't been working for a few years at that point. People may change that behavior, and I think they should, but merely changing the "normal retirement age" on these plans will reduce the overall cost, not necessarily get people to change when they retire.
It's a good start that the UK abolished its mandatory retirement ages, but as we've seen in the U.S., that does only so much.
An interesting method to get people to save more for retirement: make them think of themselves as older (and poor), using virtual aging.
The Economist's case for raising the retirement age to 70.
Hey - it's not just public pensions that are troublesome! Taxpayers may be asked to bail out private pensions, too! Yay!
ALABAMA
DROP benefits -- dropped in Alabama, and for very good reason.
CALIFORNIA
Orange County loses court fight over retroactive boost to deputies' pensions. So what's next? All I have to say is that if the pension debt isn't real, that means the pension promises aren't real, and don't need to be paid. Want to make that legal argument?
I knew this was coming -- one of the parties that will get blamed in the public pensions mess will be actuaries. Or, hopefully, specific actuaries as opposed to the entire profession. There's a reason that item #2 on the Society of Actuaries' list of strategic initiatives for 2011 is looking at the reputational risk from public pensions. A little too late, perhaps, but hey - at least they realize there's a risk there.
The dispute between current services and pensions for past services coming to the fore again and again and again in San Francisco. Jeff Adachi had tried something last year, and it looks like he's trying again... just as others are, as well.
Those generous pension benefits cost a lot? Ooops! Our bad!
FLORIDA
This is an interesting turn to the public pensions debate: a firefighter who has been doing his own investigation into his local pensions was ordered to undergo drug and psychiatric testing.
Florida politician defends the draconian proposal to have state employees contribute 3% of their salaries to their pensions. The bastard!
ILLINOIS
This inspires confidence: pensions to be paid without borrowing for the first time in two years. If you can stand the excitement, here's a 19-minute video of the state treasurer talking about borrowing to pay off the bills and pensions.
But are they really? Seems they're not exactly current on their regular bills.
Meh, forget about constitutionality: let's just pass the damn pension bills and let the courts sort it out. Allrighty then.
Evanston fire chief accused of double-dipping. I assume lots of boomer-age (and younger!!) public workers are double-dipping at this point.
MICHIGAN
Michigan passes a mutual assured destruction bill, where all sorts of contracts, collective bargaining, etc., will be dissolved in the event of Really Bad Fiscal Stuff (TM) occurring. Primarily, Detroit is the target of this. And of course, various parties are not sitting still for this -- time to lawyer up!
Hey, it's a better idea than the pension tax. They definitely don't need something to spur more people to leave. I mean, what exactly is the attraction to stay?
NEW JERSEY
John Bury says that politicians doing nothing may be the best option for NJ pensions.... given what happened when they did meddle with the pensions. Of course, doing nothing doesn't end up with happy results, either.
As per the previous story above, NJ is seeing more retirements as Christie talks cuts. Thing is, here's the progression: first, those not yet hired get whacked (less generous benefits, etc.), then current employees, but if the money is too tight, current retirees also get hit. So sure, retiring will prevent getting hit by certain things, but it doesn't mean you're safe.
NEW YORK
Ex-comptroller Hevesi was sentenced for corruption related to pay-for-play and the NY state pensions... he was sole trustee of the plan. The pension governance set-up hasn't changed, by the way, since he was found out.
As long as this crap goes through one office, through one person, you're going to get cases like this.
TEXAS
Talk about needing a resurrection: Texas pension fund needs 21% return just to get to 80% funded ratio. Or, you know, y'all could PUT MORE MONEY IN.
Disputes over pensions enter the Fort Worth mayoral race.
VIRGINIA
Double-dipping doesn't play well in Virginia... or anywhere else, really.
UK
The hot topic on the other side of the pond is teachers pensions. Teachers say they will quit if told to work longer (or contribute more to their pensions). Fine. See what you can get elsewhere. It's a free choice.
Oh, you won't quit your jobs outright, but will strike? Whatever.
And they show their class (har har) by heckling and jeering the schools minister! Huzzah, guys! Next time, throw your poo! That'll show him!
Let me l'arn y'all some Americanisms that may help you deal with your situation: Tough shit. Suck it up. You ain't got the money of.
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