|
|
More Cheery News: Public Pensions in deep doo doo
10-11-2009, 08:15 PM
|
#1
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Oct 2006
Posts: 7,733
|
More Cheery News: Public Pensions in deep doo doo
Today's Washington Post has a great article that everybody with state or local pension should read (and most of you taxpayer also). Steep Losses Pose Crisis for Pensions
A couple of interesting data points.
Quote:
The upheaval on Wall Street has deluged public pension systems with losses that government officials and consultants increasingly say are insurmountable unless pension managers fundamentally rethink how they pay out benefits or make money or both.
Within 15 years, public systems on average will have less half the money they need to pay pension benefits, according to an analysis by Pricewaterhouse Coopers. Other analysts say funding levels could hit that low within a decade.
|
The other thing that struck me is this section. At a time when the board consensus thought a 8% return wasn't safe Our pension plan administrators were basing future returns on this number.
Quote:
From there, the deficit will grow even wider, according to Kim Nicholl, the national director of PricewaterhouseCoopers public sector retirement practice. Even if public pension funds were to hit their 8 percent investment targets every year, Nicholl calculated they would have less than half of what they need by 2025. This is because a greater share of the population will be retired and those who are will live longer, thus collecting benefits longer, she said.
|
I have to say in the upcoming war between higher taxes and lower benefit for public employees, while I am rooting against tax increases, I see no winners.
|
|
|
|
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!
Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!
You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!
|
10-11-2009, 09:13 PM
|
#2
|
Thinks s/he gets paid by the post
Join Date: Feb 2006
Posts: 1,183
|
It is astoundingly short sighted to give (spend) more than you have and think the well will never run dry. The day is dawning when those who govern will be the mop up team from those who have moved on (been voted out). Gov't spending has been on a collision course for some time and this recession just exacerbates it. No difference in my minds eye to all those who are now in pain from having lived the good life on false profits with home equity loans. It is a royal mess and will impact even those who did not indulge in the insanity as well as the children and those not yet born.
|
|
|
10-11-2009, 10:28 PM
|
#3
|
Full time employment: Posting here.
Join Date: Feb 2008
Posts: 920
|
My wife's govt pension plan gives an 8% interest rate on contributions and matches, applicable if you cash out. The match fully vests after 10 years.
I always thought that rate of return absurd, it's like a GIC fund on steroids.
|
|
|
10-12-2009, 08:23 AM
|
#4
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Oct 2005
Location: North Oregon Coast
Posts: 16,483
|
The first thing they need to do is eliminate or substantially water down the "pension deal" for new hires in most public sector occupations. In this economy, you don't need to offer a Cadillac retirement plan to attract decent employees. If there are particular occupations that have a strong and legitimate need for retention (such as public safety and perhaps education), those can be examined on a case by case basis -- but even those may not be able to afford the "3% at 50" type of plan with a COLA and health insurance for life. And there should be no more spiking.
By doing that, maybe we can avoid reneging on the promises made to people already in the plan and reduce the amount by which state and local governments have to come to the taxpayers to make up shortfalls.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
|
|
|
10-12-2009, 09:28 AM
|
#5
|
Moderator Emeritus
Join Date: Jan 2007
Location: New Orleans
Posts: 47,501
|
Quote:
Originally Posted by ziggy29
The first thing they need to do is eliminate or substantially water down the "pension deal" for new hires in most public sector occupations. In this economy, you don't need to offer a Cadillac retirement plan to attract decent employees.
|
My supervisor began advertising my job last March. But there has not been one qualified (or even remotely qualified) applicant yet. This despite the recession, the health care crunch, and so on. Personally, I thought my job was a plum due to the benefits and job security, but I guess the combination of low pay, living in New Orleans, and working for "the man" is a turn-off for many.
The ad was not bad, but I made some suggestions anyway and gave her a list of universities offering graduate oceanography degrees that she can notify in the hopes of getting someone who just graduated. She retracted the ad and has been working on it.
It's not just my job - - my agency is having a hard time getting engineers or scientists of any needed specialty in the New Orleans location. The top brass from OPM came out to look into the matter a few weeks ago so maybe he can do something (like, raise the pay through the "locality pay" approach, possibly).
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities. - - H. Melville, 1851.
Happily retired since 2009, at age 61. Best years of my life by far!
|
|
|
10-12-2009, 09:34 AM
|
#6
|
Thinks s/he gets paid by the post
Join Date: Nov 2006
Posts: 2,288
|
Ziggy,
This time I agree with everything you said, but you would be surprised how very few people meet the qualifications (and want) to become a police officer. Our "now hiring" sign is NEVER taken down. The positions cant be filled even with our sweet pension.
|
|
|
10-12-2009, 09:37 AM
|
#7
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2006
Location: Collin County, TX
Posts: 9,296
|
Quote:
Originally Posted by ziggy29
The first thing they need to do is eliminate or substantially water down the "pension deal" for new hires in most public sector occupations. In this economy, you don't need to offer a Cadillac retirement plan to attract decent employees. If there are particular occupations that have a strong and legitimate need for retention (such as public safety and perhaps education), those can be examined on a case by case basis -- but even those may not be able to afford the "3% at 50" type of plan with a COLA and health insurance for life. And there should be no more spiking.
By doing that, maybe we can avoid reneging on the promises made to people already in the plan and reduce the amount by which state and local governments have to come to the taxpayers to make up shortfalls.
|
My old Megacorp stopped providing pensions for new hires about eleven years ago. Hopefully this fact will help keep those checks coming to us for years to come.
__________________
There's no need to complicate, our time is short..
|
|
|
10-12-2009, 09:38 AM
|
#8
|
Moderator Emeritus
Join Date: Jan 2007
Location: New Orleans
Posts: 47,501
|
Quote:
Originally Posted by utrecht
Ziggy,
This time I agree with everything you said, but you would be surprised how very few people meet the qualifications (and want) to become a police officer. Our "now hiring" sign is NEVER taken down. The positions cant be filled even with our sweet pension.
|
The NOPD has a terrible time hiring police officers! The pay is very low, the work is unbelievably dangerous, and the hours are grueling. From what I have been told, the NOPD pension may sound great but it is based on their base pay, not what they actually make. They make a lot in overtime and on details. So, the pension isn't really as good as one might think.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities. - - H. Melville, 1851.
Happily retired since 2009, at age 61. Best years of my life by far!
|
|
|
10-12-2009, 10:01 AM
|
#9
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2006
Location: Collin County, TX
Posts: 9,296
|
Quote:
Originally Posted by utrecht
Ziggy,
This time I agree with everything you said, but you would be surprised how very few people meet the qualifications (and want) to become a police officer. Our "now hiring" sign is NEVER taken down. The positions cant be filled even with our sweet pension.
|
It's different in my town. We just had testing for three positions. There were 350 applicants...
__________________
There's no need to complicate, our time is short..
|
|
|
10-12-2009, 10:24 AM
|
#10
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2005
Posts: 17,244
|
Maybe someone needs to send this article to the Times reporter on the other thread...
There is no such thing as a 'guarantee'... someone is paying for it... someone is taking the risk..
|
|
|
10-12-2009, 10:34 AM
|
#11
|
Thinks s/he gets paid by the post
Join Date: May 2006
Location: Where the stars at night are big and bright
Posts: 2,847
|
Quote:
Originally Posted by bbbamI
It's different in my town. We just had testing for three positions. There were 350 applicants...
|
There are always people who want the job - in fact you could charge people to do it if you wanted and would still have folks lined up for it - but the question comes down to are they the kind of people you want wearing badges.
Our pension system took a hit in the recent bad times - 18% down - but the real problem has always been the city over-promising on the pension while undercutting their contributions. We had to take steps to try and protect the system from the politicians and filed a suit against the city. The new administration came in and we worked out a compromise, and I would say we are doing much better than we were.
__________________
There is no pleasure in having nothing to do; the fun is having lots to do and not doing it. - Andrew Jackson
|
|
|
10-12-2009, 10:35 AM
|
#12
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2005
Location: Chicago
Posts: 13,186
|
Quote:
Originally Posted by utrecht
Ziggy,
This time I agree with everything you said, but you would be surprised how very few people meet the qualifications (and want) to become a police officer. Our "now hiring" sign is NEVER taken down. The positions cant be filled even with our sweet pension.
|
A more realistic approach to attracting qualified candidates to hard-to-fill public sector jobs would be to offer hiring bonuses, higher starting pay and a system of merit increases based on performance.
A "sweet" pension plan (while it pushes off the cost to the next set of politicians years from now) is more abstract for young candidates to see the value. And it pays everyone the same regardless of whether they were constantly superior performers or they were just barely able to keep the job.
__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
|
|
|
10-12-2009, 10:45 AM
|
#13
|
Moderator Emeritus
Join Date: Sep 2007
Posts: 17,774
|
Our town offers its law enforcement workers a pretty limited and not too dangerous level of crime to deal with (emergency, come quick, someone at the high school is missing an iPod!) and a nice salary and benefits. Seems like there should be some economic equation applied: more dangerous environment = higher salary and benefits. Could be applied to education, too.
__________________
“Would you like an adventure now, or would you like to have your tea first?” J.M. Barrie, Peter Pan
|
|
|
10-12-2009, 10:46 AM
|
#14
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Oct 2005
Location: North Oregon Coast
Posts: 16,483
|
Quote:
Originally Posted by Leonidas
but the real problem has always been the city over-promising on the pension while undercutting their contributions.
|
Yep. And this overpromising can cause pension fund managers to take more risk than is prudent. There are pension funds which were in bed with the hedgies when they blew up. That is simply ridiculous.
Combine the overpromising and excessive risk-taking with a down market and state/local governments not wanting a taxpayer revolt over increased pension costs in the budget, and you wind up with the perfect storm we're seeing today.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
|
|
|
10-12-2009, 10:50 AM
|
#15
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2006
Location: Collin County, TX
Posts: 9,296
|
Quote:
Originally Posted by Leonidas
There are always people who want the job - in fact you could charge people to do it if you wanted and would still have folks lined up for it - but the question comes down to are they the kind of people you want wearing badges.
|
Hopefully the rigorous testing and background checks can get at least three good ones out of all those applicants...
__________________
There's no need to complicate, our time is short..
|
|
|
10-12-2009, 11:11 AM
|
#16
|
Moderator Emeritus
Join Date: Dec 2005
Posts: 10,125
|
Quote:
Originally Posted by Want2retire
The NOPD has a terrible time hiring police officers! The pay is very low, the work is unbelievably dangerous, and the hours are grueling. From what I have been told, the NOPD pension may sound great but it is based on their base pay, not what they actually make. They make a lot in overtime and on details. So, the pension isn't really as good as one might think.
|
Houston police department used to be similiar. The hospital I worked at used to hire the officers for security. The idea was that they could double their very low pay by moonlighting and have a semi decent standard of living. Of course, none of this was calculated into their pension.
__________________
Angels danced on the day that you were born.
|
|
|
10-12-2009, 12:58 PM
|
#17
|
Thinks s/he gets paid by the post
Join Date: Nov 2006
Posts: 2,288
|
Quote:
Originally Posted by bbbamI
It's different in my town. We just had testing for three positions. There were 350 applicants...
|
Thats probably true for lots of small towns. Im talking about the City of Dallas (or just about any big city for that matter).
PS..We have thousands of applicants. Thats not the problem. The problem is that most of them arent qualified. Hiring standards for police officers are pretty strict.
Also, we recently added a $10,000 signing bonus and other incentives, but that was all taken away within the past 6 months along with 900 city employees (not all within the police dept) getting laid off.
Ive said this before and I'll say it again about pensions. The problem isnt with overpromising of benefits...its with the mismanagement of the pension fund itself. My dept's pension fund is in no trouble whatsoever even after losing 19.9% in 2008. During the current decade, the SP500 is just about flat. Actually its slightly negative. My dept's pension fund has returned just under 7% per year during the 2nd worst decade in history. I dont see why they all cant do that. Then, there wouldnt be a problem.
|
|
|
10-12-2009, 04:59 PM
|
#18
|
Thinks s/he gets paid by the post
Join Date: Oct 2006
Location: North-Central Illinois
Posts: 3,228
|
Quote:
Originally Posted by utrecht
....Ive said this before and I'll say it again about pensions. The problem isnt with overpromising of benefits...its with the mismanagement of the pension fund itself. My dept's pension fund is in no trouble whatsoever even after losing 19.9% in 2008. During the current decade, the SP500 is just about flat. Actually its slightly negative. My dept's pension fund has returned just under 7% per year during the 2nd worst decade in history. I dont see why they all cant do that. Then, there wouldnt be a problem.
|
Our pension plan is in just about the same shape....it took a hit in the last year or so, but it's still strong & steady, with NO shortfall or impending doom. The good years were very good, and the bad years weren't very good, but they weren't real bad either. Our plan went from being just over 100% funded, to about 89-90% funded. The plan's financial gurus trustees are confident that it will get back to 100% within a few years, and I think that they're right.
Thankfully, even though it's public pension plan in Illinois, it's NOT run by or administrated by the state...and under the state constitution they can't touch it!!! It's controlled and administrated by trustees elected by participating employers, employees, and retirees.....so ALL of the trustees have a very real stake in the well-being and solidity of the fund. They're ALL either future or current recipients of the plan! They're also not a bunch of risk takers either....they tend to keep investments fairly conservative!
|
|
|
10-12-2009, 05:29 PM
|
#19
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Oct 2005
Location: North Oregon Coast
Posts: 16,483
|
Quote:
Originally Posted by Goonie
Thankfully, even though it's public pension plan in Illinois, it's NOT run by or administrated by the state...and under the state constitution they can't touch it!!! It's controlled and administrated by trustees elected by participating employers, employees, and retirees.....so ALL of the trustees have a very real stake in the well-being and solidity of the fund. They're ALL either future or current recipients of the plan! They're also not a bunch of risk takers either....they tend to keep investments fairly conservative!
|
I think this is why a lot of the private-sector pension plans that are actually run by the unions are in better shape than the ones that aren't -- the folks who make the investment decisions are also pensioners of that fund, so they have a vested interest to not use hedge funds and arcane options strategies and other things -- they can just keep a conventional and fairly conservative asset mix and avoid getting killed in a bad market.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
|
|
|
10-12-2009, 05:33 PM
|
#20
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Oct 2006
Posts: 7,733
|
Even more cheery news. This guy with impressive credentials, PHd from the London School of Economics and lots of think tank experience, argues that article misses an even bigger problem with public pensions.
Quote:
The Washington Post
reports today on the sorry state of funding in state and local employee pensions, focusing on the impact of recent poor stock returns. While a poor investment climate certainly hasn't helped, it's not the biggest reason public employee funds are in bad shape. A bigger reason public pension plans are underfund is that, in effect, we told them they can be. State and local pension plans use different and far less demanding accounting rules than do corporate pensions, even though public employee benefits are guaranteed by law while corporate pension benefits are not.
....
Corporate pension plans must discount their future benefit liabilities at the low interest rates earned by high-quality corporate bonds, while public pension plans are allowed to use the much higher expected return on their assets, which include a high proportion of stocks and, more recently, hedge funds and private equity. The effects can be startling.
|
He then goes on to make case that public pension actually need twice their current assets. Meaning that in 15 years they'd only be 25% funded oh joy.
|
|
|
|
|
Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
|
|
Posting Rules
|
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts
HTML code is Off
|
|
|
|
» Recent Threads
|
|
|
|
|
|
|
|
|
|
|
|
|
» Quick Links
|
|
|