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> Bankruptcies are a wonderful part of our economic and legal system, just as forest fires are an important part of nature. Screwing with them, like Obama did in Detroit, creates bigger disasters down the road.
1. what's not sustainable...
Weird how many people get caught by surprise with this Ch9 though. Would you buy a house in a county with pension issues about to pop-up? Why be such a martyr? Better to wait till pension burdens are fixed to a level that young families can afford. Just my 2 cents.
Young families have everything to lose by catching that falling knife imho. They need to retain mobility given uncertainty of job situation, they need more services like education that go down in quality. But also face the brunt of the burden cause these counties in distress often pass prop 13 type of protections for the retirees, which are just a wealth transfer from those that buy homes at inflated prices to those that enjoyed buying homes super cheap. It's a transfer in the wrong direction imho.
Nebraska, Not California, is King of Municipal Collapse - Bloomberg
I find it disingenuous, RS, to blame public unions and only public unions. Democratic AND republican politicians agreed to these pension deals. They are the ones with the power to do so, not the unions.
If governments breach their contracts with their employees, they will no longer be able to hire on the longstanding basis of lower pay for greater security. Either pay will go up, or government services will go down. That's going to cost the next generation of taxpayers rather badly.
If governments breach their contracts with their employees, why won't everyone else who might be able to make some money by breaching a contract they wish they hadn't made try to do the same? Rot begins at the head, as the saying goes.
If governments breach their contracts with their employees, why won't everyone else who might be able to make some money by breaching a contract they wish they hadn't made try to do the same? Rot begins at the head, as the saying goes.
The contracts were a joke, unions exchanged votes for a contract against the interests of the cities at large, and if the cities fail, then there won't be anything to collect at all.
financeguy, again, like the debate about speculators and banks, you seem to rile only one side, in this case, the guby, but not the unions ? It takes two to tangle. They are all to blame. The only party not to blame is the taxpayers!
The unions are complicit in corrupting the entire process.
From Nicole Gelinas- But the other huge factor is cops’ pensions.
Last year, New York City taxpayers put nearly $2.1 billion into the cops’ $24.7 billion pension fund to pay for future benefits — up from more than four-fold from the 1999-2000 average. (Cops’ own contributions are $207 million, but they pay only 9 percent of the total.)
If pension costs for cops had “only” doubled in a decade, we’d have an extra $1 billion a year — enough to hire at least 5,000 cops.
One problem is that the pension fund isn’t earning the magical returns expected of it. It’s supposed to generate 8 percent returns a year — but has managed just 5.76 percent annually over a decade. . . .
Benefit payments — the amount we send every year to retired cops — have nearly doubled since the head count hit its peak, to $2 billion a year.
That’s because we let cops retire so young (as soon as after 20 years of service) with a half-salary benefit, including overtime.
The NYPD has more than 12,096 retirees who are younger than 55, making an average of nearly $43,000 in pension benefits. This doesn’t include officers who were injured — nor does it include retiree cops’ annual “bonus” payment that starts at $2,500 and rises over time to $12,000.
Twelve years ago, the city had 3,526 retirees under 55, who made a benefit of less than $30,000.
Here’s a truly scary stat: New York is inching toward paying more retired cops than active ones — with 27,890 regular retirees now, up from 18,793 in 2000. (Include the 15,095 retired on disability, and we’re already there.)
As average wages and overtime have risen — from $60,955 in 2000 to $97,811 in 2010 — so have pension payouts, and thus the incentive to retire young.
To control pensions, you’ve got to first control pay — but current-worker pay is up 37 percent since 2000 even as the number of people we pay is down.
Read more: http://www.nypost.com/p/news/opinion/opedcolumnists/pension_tension_the_crime_spike_uTj1WEOOpb45LkkKEQQLiN#ixzz20oDpzqy3
Weird, I thought the job of managers is to manager and of budget managers is to manage budgets. I didn't realize we were paying school teachers and firemen to do that. If balancing the budget and investing the pension fund is their job, perhaps we should be paying them at Wall Street rates.
The taxpayers elected the politicians who decided to defer costs into the future (i.e., now) and proposed to allow the voters to not pay taxes for the services they wanted, instead borrowing from from government employees. And, of course, it was the taxpayers who walked off with the lower taxes. So even if they were "not to blame" in voting for politicians who promised the impossible (but convenient), they were the beneficiaries.
How are taxpayers "not to blame" while teachers and police and secretaries who did their jobs according to the contracts they were offered are corrupt??
My view is that usually markets work better when laws aren't changed midstream to give new rights to the most privileged. And those who are paid and trained to be responsible ought to take responsibility, not force the less privileged to clean up the messes they made.
The way to avoid governmental corruption is to pay ordinary government workers a decent wage, not to constantly seek ways to teach them that laws apply only to people who have no choice. Especially government workers with guns.
On the other hand, politicians and especially pension fund managers who claimed that pensions could earn 10% a year by investing with Wall Street donors, are a different story. I don't see why we pay them at all -- usually Wall Street is quite willing to finance its advertising even without governmental assistance.
"The unions are complicit in corrupting the entire process."
Yes I agree 100%. I just don't agree when people say its JUST the unions, and ignore the fact that Republican AND Democratic politicians for years have been playing along. Often, the GOP with cops and firefighters, and Dems with teachers, but often both parties with all of the above.
> financeguy, again, like the debate about speculators and banks, you seem to rile only one side, in this case, the guby, but not the unions ? It takes two to tangle. They are all to blame. The only party not to blame is the taxpayers!
Do taxpayers need to be financially literate themselves to elect financially literate politicians? If that's the case, then we shouldn't expect optimal and reasonable budgetary decisions as possible outcomes. To be financially literate one needs to be good at math, that's the weakest area of our public school system.
During a deep but short love affair with C-Span I got a chuckle from a representative of our area, Bronx, discussing the bank bailouts. He said with a straight face that he had to look in the dictionary to see the difference between a billion and a trillion. That means that pre-bailout talk this guy was confused about USA's GDP, USA's on-the-books debt levels, even his own state's GDP well before these talks.
Is this guy able to understand by himself what's the optimal allocation of more than a trillion taxpayer's money? He gets confused reading the numbers! Imagine him advocating for them, confusing billions with trillions. Using bribing, lobbying will come easier as decision making tools given abilities.
SACRAMENTO, CA – The California Public Employees’ Retirement System (CalPERS) today reported a 1 percent return on investments for the 12 months that ended June 30, 2012, falling short of its benchmark that returned 1.7 percent. CalPERS assets at the end of the fiscal year stood at more than $233 billion
alPERS is both corrupt and incompetent. If it were a private firm, the lies about return on investments would send executives to jail and billions in lawsuits filed.
“The California Public Employees’ Retirement System (CalPERS) is the biggest public pension in the country. It is also deeply underfunded. Depending on the measure used, they have just 55-75% of money needed for future expenses while 80% is considered the minimum to be safe. Their return is currently less than 99% of big pension funds.
On March 12, CalPERS voted to lower their expected return from 7.75% to 7.5%, ignoring the advice of their own chief actuary that it should be 7.25%. More than a few investment professionals consider a projected rate of 7.75% to be unrealistically high in these times and question whether 7.25% is realistic.”
Now we know that CalPERS is in the lowest 1% of all pension funds—what else would you expect from a California government agency?
CalPERS needs a Trustee and new management—the purpose of the new management is to close the agency—California deserves honest government, not corruption and incompetence as usual.
"Fiscal Crisis in States Will Last Beyond Slump, Report Warns
By MARY WILLIAMS WALSH and MICHAEL COOPER 11:00 AM ET
Long after the economy rebounds, states will face financial problems that include rising health care costs and underfunded pensions, a task force of budget experts said...."
I guess it could be even worse than it is in NYC.
MTA vs. WMATA: Why Metro Is Terrible
fg has now officially jumped the shark. Probably happened quite awhile ago, but just stopped reading....
"I find it disingenuous, RS, to blame public unions and only public unions. Democratic AND republican politicians agreed to these pension deals. They are the ones with the power to do so, not the unions."
Except those politicians are bought and paid for by the unions. Try getting elected in this town without them.
(Reuters) - California Governor Jerry Brown and lawmakers have reached a deal to raise public employees' retirement ages, have them pay more into their pension accounts, and cap retirement payments in a vast overhaul of the state's pension system that he says will save $30 billion.
"We have lived beyond our means," Brown said. "The chickens are coming home to roost and this is just one in a series of countermeasures that will be required over the next decade."
Some BN stories on out of control pensions. Since sometimes RS is not a complete loonie.
This story links to a whole series on pensions. Scroll down to see:
"America's Great Payroll Giveaway: a Six-Part Series
Part 1: In Race to Spend More, California Leads
Part 2: A Bidding War for Prison Psychiatrists
Part 3: Pension Funds Make Managers Rich
Part 4: Retirement Bonanzas
Monday: Top Paid Cops
Tuesday: Poorer Schools, Richer Pay"
In light of the events of yesterday in Newtown, I propose a moratorium on the bashing of public employees on this forum for a few weeks. Instead of complaining about pensions and the salaries of civil servants -- who do the important and necessary jobs you wouldn't be caught dead doing because you're oh so clever -- perhaps you should reflect on the heroism of the school principal and school psychologist who rushed a man pointing an automatic weapon at them and lost their lives; or the teachers who were shot to death while shielding children with their bodies. Your precious economic theorizing and soulless carping are so absolutely insignificant and inappropriate at a time like this.
A Vulnerable Age
Loans Borrowed Against Pensions Squeeze Retirees
By JESSICA SILVER-GREENBERG
Published: April 27, 2013
To retirees, the offers can sound like the answer to every money worry: convert tomorrow’s pension checks into today’s hard cash.
But these offers, known as pension advances, are having devastating financial consequences for a growing number of older Americans, threatening their retirement savings and plunging them further into debt. The advances, federal and state authorities say, are not advances at all, but carefully disguised loans that require borrowers to sign over all or part of their monthly pension checks. They carry interest rates that are often many times higher than those on credit cards.
In lean economic times, people with public pensions — military veterans, teachers, firefighters, police officers and others — are being courted particularly aggressively by pension-advance companies, which operate largely outside of state and federal banking regulations, but are now drawing scrutiny from Congress and the Consumer Financial Protection Bureau.
The pitches come mostly via the Web or ads in local circulars.
“Convert your pension into CASH,” LumpSum Pension Advance, of Irvine, Calif., says on its Web site. “Banks are hiding,” says Pension Funding L.L.C., of Huntington Beach, Calif., on its Web site, signaling the paucity of credit. “But you do have your pension benefits.”
Another ad on that Web site is directed at military veterans: “You’ve put your life on the line for Americans to protect our way of life. You deserve to do something important for yourself.”
A review by The New York Times of more than two dozen contracts for pension-based loans found that after factoring in various fees, the effective interest rates ranged from 27 percent to 106 percent — information not disclosed in the ads or in the contracts themselves. Furthermore, to qualify for one of the loans, borrowers are sometimes required to take out a life insurance policy that names the lender as the sole beneficiary.
LumpSum Pension Advance and Pension Funding did not return calls and e-mails for comment.
While it is difficult to say precisely how many financially struggling people have taken out pension loans, legal aid offices in Arizona, California, Florida and New York say they have recently encountered a surge in complaints from retirees who have run into trouble with the loans.
Ronald E. Govan, a Marine Corps veteran in Snellville, Ga., paid an interest rate of more than 36 percent on a pension-based loan. He said he was enraged that veterans were being targeted by the firm, Pensions, Annuities & Settlements, which did not return calls for comment.
“I served for this country,” said Mr. Govan, a Vietnam veteran, “and this is what I get in return.”
The allure of borrowing against pensions underscores an abrupt reversal in the financial fortunes of many retirees in recent years, as well as the efforts by a number of financial firms, including payday lenders and debt collectors, to market directly to them.
The pension-advance firms geared up before the financial crisis to woo a vast and wealthy generation of Americans heading for retirement. Before the housing bust and recession forced many people to defer retirement and to run up debt, lenders marketed the pension-based loan largely to military members as a risk-free option for older Americans looking to take a dream vacation or even buy a yacht. “Splurge,” one advertisement in 2004 suggested.
Now, pension-advance firms are repositioning themselves to appeal to people in and out of the military who need cash to cover basic living expenses, according to interviews with borrowers, lawyers, regulators and advocates for the elderly.
“The cost of these pension transactions can be astronomically high,” said Stuart Rossman, a lawyer with the National Consumer Law Center, an advocacy group that works on issues of economic justice for low-income people.
“But there is profit to be made on older Americans’ financial pain.”
The paper has points, but once again fails to find a credible victim to illustrate them.
The retired veteran served from 1971-1975 and has a long history of suing the U.S. to get his pension (for "anxiety disorder") increased from 10% to 100%.
I don't find the foreclosure, but there're multiple bankruptcies. If he's not a logical candidate for "credit outcast", then who should be? What lender should be forced to let him borrow at less than usurious rates?
Blind Brook-Rye Superintendent of Schools William Stark has set a new standard in the lucrative — and legal — practice of double-dipping, with taxpayers set to lavish close to $460,000 on him in the 2013-14 school year.
It took a clever strategy to pull it off. Stark, 66, who has served as Blind Brook schools chief since 2008, resigned from that position effective June 30. However, he won’t be cleaning out his desk. Instead, he’ll return to his office three days later, July 3, resuming the job from which he resigned and then entered into the state retirement system.
Those few days when he’s off the district’s books will satisfy state law that requires employees to have a break in service of at least one day to qualify for their pension, and lets them be rehired to the position from which they’ve just retired. Stark’s pension is estimated at $200,000 a year — 79 percent of his final average salary for his last three years, according to the state Teachers Retirement System’s website
Yesterday I described the destructive effect of abundance on decision-making: An Abundance of Bad Decisions. One aspect of this dynamic is the tendency to extrapolate prosperity into the future as a permanent state of affairs.
One example of this is state/local government pensions: during the past 30 years of financialized abundance, the benefits and pensions promised to public employees were increased substantially. Public unions are a powerful political force in many states, and in eras of rising tax revenues, it's an easy political decision to increase public employee benefits and pension payouts.
The rising stock and bond markets generated huge profits for the public-employee pension funds, enabling them to grow without taxpayer contributions. The effortlessness and persistence of this growth encouraged the mindset that pensions would be paid for via the magic of ever-rising markets; if tax revenues weren't even needed to fund the pension plans, then no hard political choices would ever have to be made.
Alas, the 8 % annual growth rate of the boom era is now structurally unrealistic.The New Normal is bond yields of 2% or 3% at best, and equities markets that are increasingly at risk of significant sell-offs.
The illusion that the pension funds can pay the promised benefits is maintained by plugging wildly unrealistic 7% or 8% returns into projections of future pension fund earnings. Now those unrealistic projections are being questioned: California, Illinois on Brink of Pension Crisis (Mish).
This means tax revenues will have to be diverted from other government expenses to fund the pension plans.
Some of you people take the initial FACTUAL statement by Riversider way too personally. Some of you completely miss the point of this statement. PENSIONS ARE DRAINING THIS CITY. Look at the MTA for example. Not two years ago there was a report from the Bridges and Tolls having an over $500,000,000 surplus. Still, they raise the fare per ride, $8 per monthly card, and so on.
Social Security has already been drained by our government. I am 29, and I do not have any hope for the future of receiving social security by the time I am 65 or older.
Individuals WHO DO NOT WORK jobs where their lives are at risk get pensions and are able to retire at 40. I know someone who worked for the DOS here in the city. The guy picked up trash and retired at 40 years old with a pension. Give me a break!
There needs to be limitations. People clearly know they can work for 15-20 years in mediocre jobs and retire receiving a pension for the rest of their lives. There is no balance, ever.
State pensions face larger-than-usual funding gap, Moody’s report says
By Michael A. Fletcher, Published: June 27 E-mail the writer
State pensions face a much larger funding gap than their financial reports typically reveal, according to a new calculation released Thursday by the credit rating firm Moody’s Investors Service.
Moody’s said its calculation shows that states had just 48 cents of each dollar promised to current and future retirees in 2011. Currently, states report that they have 74 cents of each dollar owed to retirees.
The report is in line with the views of some economists who believe that many states and local governments are understating their pension promises by assuming overly optimistic investment returns. In its report, Moody’s used a corporate bond rate to project the future value of pension fund assets. Many states are using rates that make their pension systems look much healthier than they are, thus allowing governments to contribute less to the plans each year, critics of such practices say.
Memo To Wannabes: The City's Out of Cash: http://www.manhattan-institute.org/html/miarticle.htm?id=9305#.Uc12zaDzsUQ
"In 2002, city-funded spending was $26.4 billion. In the budget for the fiscal year that starts next week, spending will be $53.7 billion — twice as much. We spend $19 billion more than if the budget had kept up with inflation. Over the mayor’s third term, spending is up 17 percent — nearly twice inflation."
"The culprits, as everyone knows, are public-employee benefits. Next year, the city will spend $17.1 billion on pensions, health care and other “fringe” benefits..."
"Toward the end of the next mayor’s first term, pensions and health care will run $19.7 billion annually — 33 percent of city-funded spending (up from 22 when the mayor took office)."
DETROIT RETIREES WOULD HAVE BEEN BETTER OFF WITH A 401K, AS OPPOSED TO AN UNFUNDED DETROIT OBLIGATION
The battle over the future of Detroit is set to begin this week in federal court, where government leaders will square off against retirees in a colossal debate over what the city owes to a prior generation of residents as it tries to rebuild for the next.
Soon after Detroit emergency manager Kevyn D. Orr and Michigan Gov. Rick Snyder (R) approved a bankruptcy filing Thursday, groups representing the 20,000 retirees reliant on city pensions successfully petitioned a county court to effectively freeze the bankruptcy process.
"Detroit Gap Reveals Industry Dispute on Pension Math"
Every year, New York State issues a report that depicts its pension fund at the peak of health — not a penny short of what it needs to pay retirees their benefits. In some years, the report even shows a little surplus.
But now a Republican candidate for state comptroller, Harry J. Wilson, says those rosy numbers are little more than an accounting illusion. In fact, the pension fund is papering over a shortfall in the tens of billions of dollars, says Mr. Wilson, who has an M.B.A. from Harvard.
When the state takes its snapshot of the fund, he says, it makes several mistakes, including two big ones. First, it counts money that is not in the fund — hoped-for investment gains that may or may not appear and future contributions from workers and taxpayers. Second, it does not take into account that the state pensions are worth more than other such promised money because they come with a constitutional guarantee.
The difference in dollars is huge, Mr. Wilson writes in a paper due out on Thursday. If New York recalculated its pension numbers with the stricter standards that companies use, it would come up $30 billion to $80 billion short, he says.
Economists who were shown the paper said Mr. Wilson’s analysis of the problem was sound.
“That part of it is exactly spot on,” said Joshua D. Rauh, an associate professor of finance at the Kellogg School of Management at Northwestern University who has written extensively on the accuracy of state pension numbers.
Nicole Gelinas: Detroit's Bankruptcy: A Warning to NYC
RS, what you write above is true of about 99% of public pensions in Blue, Red, and Purple jurisdictions.
>public pensions in Blue, Red, and Purple jurisdictions.
> So across the board, public pensions are a bad idea.
imho ANY type of pension is a bad idea. as an investor i avoid companies with pensions like there's no tomorrow.
BTW it's a shock that the transition period took so long and it's so patchy instead of a change across the board. after 3 decades of fertility below replacement levels everybody and their dog should be on 401(k)s. it's about how much they are able to save and how well they invest, not about how much they can extract from the next generation.
look into Southern Europe for inspiration towards what happens to society when the transition doesn't happen quickly enough.
The issue is not one of public vs private pensions but of how the accounting is done. As Harry Wilson pointed out in his campaign public pensions under-value the guarantee and over-state the return by assuming an appreciation rate of the investment. The issue is compounded at the state and local level when politicians engage in give-aways to unions in exchange for votes.l
> The issue is not one of public vs private pensions but of how the accounting is done.
the lack of sustainability is about demographics and shrinking real wages. i find it hard to believe people that are 50 or younger didn't see it coming and adjusted savings upwards. instead of doing that, many seem to have over-spent on real estate.
According to a research by the Center for Retirement at Boston College, the estimated aggregate ratio of assets to liabilities for their sample of 109 state-administered plans and 17 locally administered plans was 73 percent under GASB’s old standards at the end of 2012.
> According to a research by the Center for Retirement at Boston College, the estimated aggregate ratio of assets to liabilities for their sample of 109 state-administered plans and 17 locally administered plans was 73 percent under GASB’s old standards at the end of 2012.
remember that health care isn't usually funded and it already represents as much as the pension check in NYC. so broadly speaking, to keep it real, one should adjust the "official ratio", that 73% by half to get a more accurate picture. In avg less than 40%-50% funded.
Notadmin you REALLY don't get public versus private pensions at all.
> Notadmin you REALLY don't get public versus private pensions at all.
how naive you are given that it's clear that you didn't look into how health care benefits are funded. this is pretty basic stuff.
i'm happy for you to pay for them if you like them though :-) i'm not into changing your opinion. as for us, we aren't planning on staying for long after those bills come due. sorry that previous voters on coastal areas in US had been over-promising.
"Chicago Sees Pension Crisis Drawing Near"
"Moody's proposes more focus on public pension obligations in bond ratings"
Detroit spent BILLIONS it did not need to...sigh...
Billions extra on pensions.
Bill de Blasio has proposed spending 1 billion in NYC pension funds on affordable housing. From his website:
"New York City has more than $130 billion in public pension funds, but barely 1 percent has been invested here in the five boroughs. Those investments have earned a solid return, put New Yorkers to work, and helped refurbish thousands of affordable homes across the city. As Public Advocate, Bill de Blasio helped spur more locally targeted investment — but we can go even further. As mayor, de Blasio will direct $1 billion in city pension funds to affordable housing construction, preserving 11,000 new units."
Would de Blasio control the pension fund?
Should the pension fund for the past 12 years have invested in Bloomberg LP? Should it have put money with Steve Rattner?
billy boy has lots of payback obligations to the special interests and his true leanings which are only starting to be revealed. think nyc circa 1975, guns-a-poppin and free lunches for all. just hope there is a 2015 version of felix rohytan to save our butts.
The video is about 14 minutes long. Kroft interviews senator Tom Coburn of Oklahoma. Kroft also attempts to interview a couple of law firms that make the most off of putting people on disability for a fee.
One firm has a perfect track record, where every disability case was approved.
Coburn selected cases at random and found 25% of the cases were fraudulent and another 20% were "highly questionable".
The "system is being gamed pretty big right now", said Coburn. "You need look no further than disability lawyers trolling for new clients."
The 60 Minute report names the firms, and they are under investigation. None of them would talk to 60 Minutes, citing legal advice.
Read more at http://globaleconomicanalysis.blogspot.com/#pRjycleKRbC7uUCB.99
In San Jose and across the nation, state and local officials are increasingly confronting a vision of startling injustice: Poor and middle-class taxpayers — who often have no retirement savings — are paying higher taxes so public employees can retire in relative comfort
I know some people who retired after teaching for 25 years. They retired because they take home more as a retiree than if they continued working, even without Social Security. They claimed they worked for peanuts for most of their careers, toughing it out because they knew they would get a good pension and benefits. However, as salaries have risen, people starting out with these higher salaries come under the new pension plans providing considerably less benefits because they should be able to save more on their own for retirement. I don't know what's fair anymore. However, when I see someone in their late 50's pulling down close to 100K in pensions while holding a decent paying job in their new career ....
As for going out on disability, I've known a few teachers with debilitating, serious, incurable illnesses, not eligible for pensions, whose applications for disability were rejected. I've never understood how some civil servants get away with fraudulent/questionable disability benefits.