Is There Really a Pension Fund Crisis?

"Fund Lawyer Says" ..meaning this guy has an agenda to keep pensions alive and well to collect his 1% off billions..

Well, of course, but what about the Bloomberg analysis. It is hard to figure out which analysis is right, but I am suspicious of the one where this an agenda behind it. I seriously doubt that Bloomberg (the new organization, not the mayor) has a similar agenda.

If there is a major pension fund crisis, then how are retireees still receiving every dime of their pension check? Why hasn't the fund be depleted by now?

Granted though, some states do have a big pension mess. NJ is a prime example, where politicans like Christie regularly sskip making pension payments so they can use the money in a way that buys votes.

>Christie regularly sskip making pension payments so they can use the money in a way that buys votes.

Smart way to buy votes. The abusive pensions benefit what, maybe 1-2% of the population, and the remaining 98-99% have to pay for it.

> If there is a major pension fund crisis, then how are retireees still receiving every dime of their pension check? Why hasn't the fund be depleted by now?

exactly. local govs will go the obvious way: keep on sending the pension checks while cutting the health care benefits for current retirees, the way illinois is doing. it's a no brainer as those costs are beginning to be higher htan the pension checks and are not guaranteed (as supposed to the pension checks that are)

How are pension benefits "abusive'? WOrkers were promised those pensions when they were hired and made contribitions to it their entire career.

They are abusive (not illegal) as politicians promised the generous benefits to get votes. Pension costs were and still are miscalculated - biggest reason being the return assumption of 8% munis are allowed to assume on the money they put away to pay pensiona. Also, there is clearly an abuse by working a lot of over-time during the last few months of career, disability etc. Muni and cities should default and reduce pension obligations. The bond holder have the seniormost priority to my knowledge - above the unions but politicians will not let it happen due to the votes.

If states and cities go under, then the bond holders should take a beating.

They will and should but their claims are more senior than the pensions (as far as I know for most states) but since the politicians are the main decision makers, they would rather increase the taxes than declaing bankruptcy so that they do not have face the seniority issue. Also, in GM govt favored unions over the bond-holders but forcing the bond-holders to absorb disproportianalte share of losses relative to the unions.

Sorry Typo
"They will and should but their claims are more senior than the pensions (as far as I know for most states) but since the politicians are the main decision makers, they would rather increase the taxes than declaing bankruptcy so that they do not have face the seniority issue. Also, in GM govt favored unions over the bond-holders BY forcing the bond-holders to absorb disproportianalte share of losses relative to the unions."

States cannot file for bankruptcy under federal law. To be allowed to file would require an act of Congress. Also, bankruptcy would have unintentional consequences, like higher borrowing costs in the future. The #1 holder of state debt are banks, and as much as some Republican politicans want to throw union contracts down the toilet, they are not going to do it if it means that banks have to take huge losses.

Which brings us back to the pensions.

Last week it was Illinois time to cut the cost of public employees, this week is Wisconsin. New York will end up getting real soon too imho.

http://www.nytimes.com/2011/02/12/us/12unions.html?src=me&ref=homepage
"Among key provisions of Mr. Walker’s plan: limiting collective bargaining for most state and local government employees to the issue of wages (instead of an array of issues, like health coverage or vacations); requiring government workers to contribute 5.8 percent of their pay to their pensions, much more than now; and requiring state employees to pay at least 12.6 percent of health care premiums (most pay about 6 percent now). "

Private employees (ie: most taxpayers) contribute 25% avg towards premiums, so 12.6% is better than what most taxpayers face. also it should be extended to current retirees imho. paying something towards premiums and copays stops overuse and is an incentive for preventive medicine (like avoiding obesity and diabetes).

> He would further weaken union treasuries by giving members of public-sector unions the right not to pay dues. In an unusual move, he would require secret-ballot votes each year at every public-sector union to determine whether a majority of workers still want to be unionized.

the right not to pay dues is a step in the right direction too.

Wisconsin's plan does not reduce costs. It's a union busting bill disguised as a cost cutting bill.

"paying something towards premiums and copays stops overuse and is an incentive for preventive medicine"

Requiring people to pay copays and premiums will do the exact opposite: resut in fewer people seeking preventive medicine.

Walker plan risks public employee strikes, professor says

And there were strikes. In the 1970s, Madison teachers, UW-Madison teaching assistants and the Wisconsin State Employees Union were among those staging walkouts. “If you don’t have meaningful collective bargaining ... the only thing employees have in this process is their labor,” Dresang said.

If Walker’s plan passes, public employee strikes will again be “a very serious risk,” he said.

http://host.madison.com/wsj/news/local/govt-and-politics/article_771ea8a7-a71e-5661-8cd4-0f810a91a50d.html

Because very liberal Governors like Jerry Brown and liberal economists like Paul Krugman and Robert Reich say there are indeed over $1T worth of unfunded public employee pensions, it is just simply not tenable to claim its some nefarious GOP plot.

socialist, in all seriousness. you express a lot of discontent, but i don't recal you at any point articulating a solution that is not, in a nutshell, pay me my money and f you. maybe you have and i missed it. would you mind doing so now?

Virtually none of the penion "solutions" being proposed by GOP politicans would save any money until 30 years in the future. Cutting pension benefits for new workers (the only ones you can cut per state law) would not save a dime until those workers retire. If politican think pensions are big problem, they should propose immediate solutions, not ones that first take effect in 2041.

ok, so you're just playing this one from the book. gotcha. keep truckin, guy.

Let's not forget that the NYC unions / politicians used a guy to claim that the pension additions they were asking for would not cost anything... and turns out the guy was lying, and got busted. NY Times story a few years back.

"Virtually none of the penion "solutions" being proposed by GOP politicans would save any money until 30 years in the future. "

Idiotic.

It is the exact short-sidedness of putzes like alpo that got us into this mess. We have to start with the doable stuff, and it might sound ways off, but thats BIG DOLLARS.

"If politican think pensions are big problem, they should propose immediate solutions, not ones that first take effect in 2041."

Uh, they are. Bloomberg is just one of many.

Too bad the union-owned politicians are against ALL OF THEM.

"Because very liberal Governors like Jerry Brown and liberal economists like Paul Krugman and Robert Reich say there are indeed over $1T worth of unfunded public employee pensions, it is just simply not tenable to claim its some nefarious GOP plot."

Is it basic math.

of course, that is the part alpo has problems with.

"Uh, they are. Bloomberg is just one of many."

Bloomberg's "solutions" only impact new hires, so they don't save any money for decades. NY State law only allows pension benefits to be reduced for NEW hires.

You clearly need to wikipedia pension accounting. In the FIRST YEAR of the bloomberg plan or any similar plan the unfundex liability will decline. It's a projection of future expenditures, dummy.

Socialist/Prez/Alpie -- listen to jason.

- Pension accounting is all about the "present value of future liabilities". The big nut is the actuarial liability or "projected benefit obligation" based on all prior service. It's calculated using an assumed discount rate.

This creates TWO problems:

- Number one - many public pensions are not FUNDED to the level of the PBO. In other words you know the liability but you ignore it and end up holding less money than the PBO (thus an underfunded liability)

- Number two -- many public pensions use UNREALISTIC discount rates to calculate the actuarial liability. A rate like 7.% is realistic. There are assumed rates out there over 10%! The higher the rate, the lower your PBO. Too high a rate means an underfunded liability. But the plan assets are gonna do what they're gonna do (like 7-8%)

NONE OF THIS HAS ANYTHING TO DO WITH PAYING CURRENT BENEFITS! That's small potatos compared with the full actuarial liability.

and another thing -- a given employee's pension costs are expensed/accrued over their working career. So if you cut benefits for new hires, you still see a decrease in annual expense. Doesnt impact any underfunded position for current employees, but certainly helps in not making the problem worse. And it reduces current expense which helps your budget.

"of course, that is the part alpo has problems with."

nah, he's faking. he just wants his money. and that makes him a CAPITALIST. should we tell him?

What he said. There is really no disagreement among anyone who is NOT a union head or state pension head (say CalPERS) that state and local pensions are underfunded based an accrual accounting. left-wing economists and analysts, right wing economists and analysts, university professors (almost all, of course, Left wing), non-partisan groups like Pew. There are disagreements on by how much and when the crises will hit, but the Ratings agencies HAVE ALREADY downgraded many state GO ratings because of this.

So then politicans should be forced to properly fund penions instead of cutting taxes for rich people. Despite regularly skipping pension payments, NJ's finances are in the toilet, so youc an't blame the pensions.

what happens when they run out of rich people?

In the UK, they import rich people.

"Bloomberg's "solutions" only impact new hires, so they don't save any money for decades. NY State law only allows pension benefits to be reduced for NEW hires. "

Already been noted how wrong you are on the first part... and he is requesting CHANGES TO THE LAW, so you are wrong there too.

"So then politicans should be forced to properly fund penions instead of cutting taxes for rich people. Despite regularly skipping pension payments, NJ's finances are in the toilet, so youc an't blame the pensions. "

That's moronic... saying that the ferrari you bought isn't the reason the minimum wage guy is broke... because he missed some payments.

Alpo really doesn't get this stuff at all.

OR we could do what the Federal Government did 25 years ago and get out of managing pensions altogether.