More Public Pension Woes—Constructive Suggestions Wanted

[Emeritus]

As for some of the arguments on reduced payments... it does happen all the time... when a bank fails, the acquiring bank has the right to stop paying on a CD that is to high... ..

Not in the past 60 years. The price the acquiring bank pays is discounted for the true value of the obligations.

 

[Emeritus]

I'm stupefied... are you actually advocating unilateral contract modification for convenience?

I took it a s facetious

 

[HsiaoChu]

Something does not make sense. Her death did not eliminate the CD obligation. It goes to the estate

Yeah..... but I was her estate. And I wanted to keep the CD at the 15% interest. They said, "No way! Now that it belongs to you, you have to cash it out." They made me cash it out.

 

[Texas Proud]

Not in the past 60 years. The price the acquiring bank pays is discounted for the true value of the obligations.

Wrong-o my friend... the acquiring bank has the ability to have the FDIC reject any of the obligations the old bank took on... they can cancel any contract that was entered into by the old bank...

Most banks that take over another decides not to cancel a CD to try and keep the customer... and they would discount the price they pay for that... but I doubt any bank would agree to pay 15% for a 30 year CD...

BTW, a lot of small banks don't have many bidders and so go very cheap.. back in the 80s the bank I worked for used to by some small ones... your bid was in a sealed envelope... the guy would go in with two... one for the 'real' bid... and one if nobody else was in the room... if nobody was in the room, the much lower bid was submitted and we won...

 

[Emeritus]

Wrong-o my friend... the acquiring bank has the ability to have the FDIC reject any of the obligations the old bank took on... they can cancel any contract that was entered into by the old bank...

Most banks that take over another decides not to cancel a CD to try and keep the customer... and they would discount the price they pay for that... but I doubt any bank would agree to pay 15% for a 30 year CD...

BTW, a lot of small banks don't have many bidders and so go very cheap.. back in the 80s the bank I worked for used to by some small ones... your bid was in a sealed envelope... the guy would go in with two... one for the 'real' bid... and one if nobody else was in the room... if nobody was in the room, the much lower bid was submitted and we won...

You are correct that there was a change in FDIC policy somewhere under the Bush administration

I am checking for the date

 

[Tadpole]

The fact that a how do you handle pension shortfalls ultimately targeted teachers, leading to sweeping statements about quality of teachers, and finally to somewhat inexpert ideas at performance measures for teachers is interesting.

So the solution to the original problem is to find low paid good teachers with poor pension prospects. Educate me here. What is the discussion.

I'm wondering how many in this discussion have no personal skin in the education game. (Meaning children or grandchildren in better suburban public schools or private schools or meaning no kids currently receiving the service anymore.)

I suspect the teacher phenomena is more related to women having more options that pay more today thus gutting the topmost women from the profession than it has to do with anything else. I also imagine that the dedication of those topmost women (and men) who try to follow their heart quickly becomes drained.

 

[HsiaoChu]

I suspect the teacher phenomena is more related to women having more options that pay more today thus gutting the topmost women from the profession than it has to do with anything else. I also imagine that the dedication of those topmost women (and men) who try to follow their heart quickly becomes drained.

I followed your line until you got to the above paragraph. I don't know what these two sentences mean.

 

[ziggy29]

I followed your line until you got to the above paragraph. I don't know what these two sentences mean.

I think what's being said here is that part of the increased difficulty with finding and retaining the best teachers is that many of these historically were women who now have other occupational choices they didn't have a few decades ago.

For example, 40-50 years ago they would have went into teaching or nursing, which were among the few widely available career paths for college-educated women at the time. This obviously has an impact on the supply of both teachers and nurses (and we all know about chronic nursing shortages).

Also, if a teacher "burned out" decades ago, their options (at least if they were female) were largely to drop out of the workforce or to suck it up and deal with it. Now they have a lot more mid-career opportunities to reinvent themselves professionally.

I think that was the point; could be wrong, though.

 

[HsiaoChu]

Ziggy,

If that's the reference, then it also applies to much of the whole debate. I am a male in an elementary a school who is not an administrator. I will retire next year after 40 years in. When my wife went into teaching 37 years ago, you are right, back then the career jobs for women were often teaching or nursing. She wanted to be a dancer but her father the banker refused to pay for anything other than teaching or nursing for her.

Having the teaching force be something other than young women has in part changed the whole nature of the job. People don't just go into teaching because they have nurturing needs.

A better place to have a discussion about education itself is on the Education forum of the city data website: Education Forum - universities, high schools, elementary schools, teachers... - City-Data Forum

But none of this really has anything do to with solutions to the long term pension issues. And i still think, even as an educator of 40 years with a DBP, that the full on 80% DBP IS DEAD. I think that for new employees, we are probably looking at plans which provide 35%, and the rest is up to the individual investor.

z

 

[ziggy29]

But none of this really has anything do to with solutions to the long term pension issues. And i still think, even as an educator of 40 years with a DBP, that the full on 80% DBP IS DEAD. I think that for new employees, we are probably looking at plans which provide 35%, and the rest is up to the individual investor.

In other words, state and local employers really should look more to the FERS model that the feds use, with the true "three legged stool" approach that is approximately 1/3 DB pension, 1/3 TSP/401K/403B and 1/3 SS. Seems reasonable and sustainable to me; I've defended and supported the FERS model for civil servants for quite some time.

 

[utrecht]

I dont disagree that this "three legged stool" system is sustainable and it may well be the way of the future, but all it is is a disguise for saying "we are cutting your pension".

Most of these people already have a 401k and SS, so all the FERS model does is lower the pension amount to 1/3 of the equation from whatever it is now (larger).

Yes, I realize that some civil servants don't pay into SS (including me) but a lot of them do.

 

[HsiaoChu]

I dont disagree that this "three legged stool" system is sustainable and it may well be the way of the future, but all it is is a disguise for saying "we are cutting your pension".

Most of these people already have a 401k and SS, so all the FERS model does is lower the pension amount to 1/3 of the equation from whatever it is now (larger).

Yes, I realize that some civil servants don't pay into SS (including me) but a lot of them do.

This model is only for new, unvested pensioners. If you are already in the system and you have less that 20 years to go, its is not appropriate, to even think about changing it. These people, myself included, have no opportunity to come back and fix things.

So no..... its not about cutting anyone's pension. Its about changing how you get your pension for new un-vested employees.

I've also advocated other items that would assist with the bubble in previous posts:
increasing the pensioner pay into the system, increasing the number of years before vestiture, increasing the amount of money that the state and local districts put into the pot and making it a straight payout of say 8% over the next 30 years and the only way it goes down is if the fund balance goes above 100% of coverage, increasing the penalties for early retirement, increasing the age before full retirement can be taken. Some of these things can be done for existing vested people, some not. Those who are within 10 years of normal retirement should not have the normal retirement age jumped on them.

If these things are done then the actuarial formulas will change and the remainder of those on the full 80% benefit plans will be payable. Most of us in that category who are either retired or close to retirement will be dead in 15-20 years anyhow.

Z

 

[ziggy29]

I dont disagree that this "three legged stool" system is sustainable and it may well be the way of the future, but all it is is a disguise for saying "we are cutting your pension".

Not if it only applies to new hires. They were never promised a bigger pension to begin with, so there is no "disguise" involved and no "promise breaking" involved (ignoring how many of us in the private sector *did* have that promise broken). They would accept the job knowing their pension deal won't be as good as the one their parents had, but they know what their deal is at the time they accept the job offer.

 

[HsiaoChu]

........ ignoring how many of us in the private sector *did* have that promise broken..........

We don't live in a society yet, thank the Deities, that when one segment of the society gets shafted, everyone gets shafted.

So if one person gets raped, then everyone needs to get raped.

If one person has their land taken, then the government claims everyone's land.

Just because SHAT happens, does mean that everyone needs to have the stuff happen to them too.

 

[ziggy29]

Just because SHAT happens, does mean that everyone needs to have the stuff happen to them too.

I agree with that. I'm just trying to provide some perspective as to why there may not be too much sympathy from folks in the private sector who had their hire-in pension and retiree health insurance benefits terminated while they were already employed into it.

Having said that, I do not want to be a part of giving someone else the same shaft that I got from Megacorp. As concerned as I am as a taxpayer about unsustainable pension benefits, I do not want that on my conscience.

Looking at it another way -- the market was terrible for pension funds in 1966-82 also, but there were two big differences: (a) demographics were favorable (i.e. the Boomers were just entering the work force) and (b) many private sector folks were getting the same deal (so they were willing to fund the same for civil servants). I'd argue that neither (a) nor (b) is in play today.

 

[Emeritus]

I agree with that. I'm just trying to provide some perspective as to why there may not be too much sympathy from folks in the private sector who had their hire-in pension and retiree health insurance benefits terminated while they were already employed into it.

Having said that, I do not want to be a part of giving someone else the same shaft that I got from Megacorp. As concerned as I am as a taxpayer about unsustainable pension benefits, I do not want that on my conscience.

Just worth noting that over the years there have been numerous reduction in public sector pensions for current employees, not just new hires.
In my own case the state unilaterally instituted a 40 percent increase in employee contributions to keep precisely the same pension benefits

 

[Texas Proud]

You are correct that there was a change in FDIC policy somewhere under the Bush administration

I am checking for the date

Just to let you know... I have been in banking since the mid 80s... I worked with the guy who used to buy banks for out bank... and I lived through two bank failures... I am not talking about anything that changed during the Bush years.... I know they could cancel any contract back then... now, I am not sure what happened prior to that... (hmmm... maybe you are talking about Bush 1... but I still think it was there with Reagan....)...

Now, what has changed is the ability to close all banks that are under a bank holding company... prior to a change back then... it was more difficult to just close everybody down... now it is easy... also, now there is a lot more cross state banking which was not present back then...

 

[Emeritus]

Just to let you know... I have been in banking since the mid 80s... I worked with the guy who used to buy banks for out bank... and I lived through two bank failures... I am not talking about anything that changed during the Bush years.... I know they could cancel any contract back then... now, I am not sure what happened prior to that... (hmmm... maybe you are talking about Bush 1... but I still think it was there with Reagan....)...

Now, what has changed is the ability to close all banks that are under a bank holding company... prior to a change back then... it was more difficult to just close everybody down... now it is easy... also, now there is a lot more cross state banking which was not present back then...

Yes I'm talking about Bush 1, But I'm still checking.
This all went back to the S & L Debacle. IIRC and it is not my area, at the time to prevent runs on banks or SL they distinguished among "liquidation" "buying the assets" and "Assuming the deposits". CDs that did not exceed the insured level were continued if the acquiring bank "assumed the deposits". Otherwise there was moral hazard involved since effectively some of the protection would go to deposits that exceeded the statutory level.

 

[utrecht]

Not if it only applies to new hires. They were never promised a bigger pension to begin with, so there is no "disguise" involved and no "promise breaking" involved (ignoring how many of us in the private sector *did* have that promise broken). They would accept the job knowing their pension deal won't be as good as the one their parents had, but they know what their deal is at the time they accept the job offer.

My bad.

 

[FinanceDude]

The fact that a how do you handle pension shortfalls ultimately targeted teachers, leading to sweeping statements about quality of teachers, and finally to somewhat inexpert ideas at performance measures for teachers is interesting.

Perception is reality for a lot of folks. Education is an industry, although noone thinks of it as such. However, we all know a couple if not several teachers that either don't seem to care or are so burned out they should not be teaching. However, teacher's unions are probably the strongest unions left in America, and they do a good job of "protecting their own". it seems nothing short of a felony conviction will get a longtime teacher fired or disciplined. There is no measurement of performance like you see in law enforcement or other govt jobs. Plus, a lot of folks are envious of the amount of benefits teachers get, like 3 months off every year.

I would have given ANYTHING NOT to have BOTH parents home during the summers when I was a kid..........

So the solution to the original problem is to find low paid good teachers with poor pension prospects. Educate me here. What is the discussion.

Insustainability of the benefits packages the teachers get. Our school district was looking at building a new elementary school, and their research indicated they would need 3 kindergarten teachers, whose salry and beenfit packages would total almost $100,000 a year each. That's not sustainable.

I'm wondering how many in this discussion have no personal skin in the education game. (Meaning children or grandchildren in better suburban public schools or private schools or meaning no kids currently receiving the service anymore.)

I have two children in the school district, and am a strong supporter of teachers. However, fiscal responsiblity HAS to be implemented, whether folks like that or not..........

My son's 5th grade teacher is one of only 3 male teachers in the school. He is a great guy, just got his Masters in education, he did his thesis on how electronic learning can help students survive in a digital world. My son's class write blogs, does presentation on Smart Boards, puts together Powerpoint presentations, and the class has 15 MACS that are almost always in use..........I personally would love to sit in that class!

 

[Bimmerbill]

My school just became a "school in need of corrective action." Our town voted down the school budget, so teachers and other staff are not getting raises. There is a serious lack of public involvement, as only 6 people went to the budget committee meetings to discuss the budget.
Only 80 residents went to the town meeting prior to voting at the polls (I would guess a majority were teachers, staff, PTA members, as the local principal cited overwhelming support for the budget).
What I found interesting, is the principal said 1/3 of the teachers had NOT reached the salary cap. So, there is obviously a lot of longevity in the system.

 

[Emeritus]

Insustainability of the benefits packages the teachers get. Our school district was looking at building a new elementary school, and their research indicated they would need 3 kindergarten teachers, whose salry and beenfit packages would total almost $100,000 a year each. That's not sustainable.

As an average figure across a school system it sounds about right
You have to pay what it takes to get qualified people.

Here is a survey from 2004

International Education Indicators - Education Across Levels - Teacher Characteristics
All of the major countries we compete with have well paid unionized teachers.
"The United States paid the third lowest average salary to public primary and upper secondary school teachers with minimum training plus 15 years of experience (about $40,000) (figure 1). Compared to the United States, England, Scotland, Japan, and Germany reported higher average salaries for public primary and upper secondary school teachers with minimum training plus 15 years of experience. In all of the G-8 countries, public school teachers at both education levels with minimum training plus 15 years of experience earned at least as much as the average GDP per capita in their respective countries (table 1)."


The USA GDP per capita is about $46,000 Remember this is just salary and does not include retirement or health benefits

Per capita income where I live is about $77,000 and teachers salaries are higher by that difference

 

[ziggy29]

All of the major countries we compete with have well paid unionized teachers.
"The United States paid the third lowest average salary to public primary and upper secondary school teachers with minimum training plus 15 years of experience (about $40,000) (figure 1). Compared to the United States, England, Scotland, Japan, and Germany reported higher average salaries for public primary and upper secondary school teachers with minimum training plus 15 years of experience.

Keep in mind, though, that an apples-to-apples comparison has to include the value of benefits. In some countries the employer may not have to directly pay for any health care benefits, and some countries may have national pension systems that are external to the employer group. In such cases these other countries would not have direct employee health insurance and pension costs, so that can result in higher base pay.

 

[Emeritus]

Keep in mind, though, that an apples-to-apples comparison has to include the value of benefits. In some countries the employer may not have to directly pay for any health care benefits, and some countries may have national pension systems that are external to the employer group. In such cases these other countries would not have direct employee health insurance and pension costs, so that can result in higher base pay.

I'm laughing because it was the Germans who invented employer health insurance and pensions.
A German schoolteacher pays nothing towards the pension, which is very generous. about 70 percent of salary
Health insurance is more complicated and is split

 

[ziggy29]

I'm laughing because it was the Germans who invented employer health insurance and pensions.

Meaning what? There are a lot of countries being compared here, and Germany is only one. Remember what I said: "In some countries...."

One possible counterexample does not negate the statement above. "Some" is not "all" or even necessarily "most."