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Old 08-05-2011, 08:16 PM   #41
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Yes, there may well have been malfeasance in Central Falls but we are talking about a state law here and that is where I take issue with making pensioners subordinate to bondholders. Not a precedent I want to see spread across the country.
To be fair if I was getting a pension, I'd probably agree with you.
However, since I am not I guess we'll agree to disagree.

I know that there are bankruptcy lawyers on the forum so I'll defer to them, but it seems to me that pensioner are unsecured creditors while in most cases bondholders are secured creditors and generally speaking secured creditor get paid before unsecured creditors.
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Old 08-05-2011, 08:35 PM   #42
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To be fair if I was getting a pension, I'd probably agree with you.
However, since I am not I guess we'll agree to disagree.

I know that there are bankruptcy lawyers on the forum so I'll defer to them, but it seems to me that pensioner are unsecured creditors while in most cases bondholders are secured creditors and generally speaking secured creditor get paid before unsecured creditors.
I don't have a pension either but I guess we will indeed agree to disagree.

People plan their lives based on those pension promises so I don't think it should be so easy to push them behind a bond investor.
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Old 08-05-2011, 09:17 PM   #43
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Yes, there may well have been malfeasance in Central Falls but we are talking about a state law here and that is where I take issue with making pensioners subordinate to bondholders. Not a precedent I want to see spread across the country.
As much as I may sympathise with those pensioners who were genuinely ignorant of the true position and of the economics of the promises that were made to them, I agree with this.

Firstly, as a matter of not changing the law retroactively - both the bond holders and the pensioners relied on promises that cannot both be kept. Changing the legal position after the fact would represent a major departure from the country's legal system and would be subject to legal challenge on various grounds. Second, as a practical matter, if the bond holders lose their priority then no state which is in financial difficulties will be able to borrow money (or will have to pay a much higher interest rate to do so).

If the bondholders had not enjoyed statutory preference at the time the bonds were issued, my views would have been different (but then, this whole mess would have come to a head much earlier).

My biggest sympathy goes to the long suffering local taxpayers who are getting stuck with what are (IMHO) ridiculously high taxes.
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Old 08-05-2011, 09:21 PM   #44
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People plan their lives based on those pension promises so I don't think it should be so easy to push them behind a bond investor.
And many people plan their lives around the promises made to muni bondholders. There really are grannies out there clipping coupons to make ends meet each month.
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Old 08-05-2011, 09:39 PM   #45
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My biggest sympathy goes to the long suffering local taxpayers who are getting stuck with what are (IMHO) ridiculously high taxes.
Agreed - paying for people who are no longer providing the services.
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Old 08-05-2011, 11:52 PM   #46
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Look... I don't know the specific detail of that situation. My comment was "in general". So I suppose others could be to blame.


Were there some situations on pension that were outrageous?? Like those council men and the mayor in that small California town?

If not...

Who else would we blame? They were/are the stewards of the entire system... they were/are the decision makers and the negotiators that have the responsibility to deal with any issues that arise. Doesn't matter if it is a union negotiation or what it is. I mean really... isn't that their job? I don't care how much they were paid or not paid. They are stepping into those jobs and have responsibility to everyone in that town or county or state or whatever.


It seems to me that everybody would have been better off if they did their job to begin with. If that meant a less generous pension... OK... but before the fact, not after. Those people can't make it up after they have retired or are approaching retirement.


It sure sound like they let people down... all around. If they went bankrupt... they really messed up. I don't believe they should get dispensation for that.

They knew it a long time ago. There is no way they could not have known! Have you ever worked in finance or accounting? I will guarantee you they knew! Somebody did not do their job!

+1 on your post....

But you can't get blood from a turnip.... so the people who pay are the ones who were supposed to be covered by a pension...


And it is not like it has not happened to a lot of others.... look at the steel industry or the airlines.... many people lost their pensions there because someone was not doing their job.... it is a fact of live....
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Old 08-05-2011, 11:56 PM   #47
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Yes, there may well have been malfeasance in Central Falls but we are talking about a state law here and that is where I take issue with making pensioners subordinate to bondholders. Not a precedent I want to see spread across the country.

More than likely it will spread.... when I saw this on the TV news they were showing a good number of states and municipalities that were on the road to the same fate...


The difference is that right now a state can not declare BK.... I think that will change in the next few years....
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Old 08-06-2011, 07:42 AM   #48
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As much as I may sympathise with those pensioners who were genuinely ignorant of the true position and of the economics of the promises that were made to them, I agree with this...

My biggest sympathy goes to the long suffering local taxpayers who are getting stuck with what are (IMHO) ridiculously high taxes.
Why sympathise with the taxpayers? They chose to live there, they voted in the miscreants, and they are as much to blame for their ignorance of the true situation as the civil servants. At least the taxpayers can move and avoid the consequences (high taxes). The pensioners are toast.
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Old 08-06-2011, 09:27 AM   #49
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As a pensioner, I am worried. Many retirement systems passed on increased benefits during the go go market boom of the 90's and the problems are just now coming home to roost. Combine this with assumed actuary results of 8%, you get a funding problem. Most pension funds have to be diversified to some degree. How may safe bonds out there pay 8%? Cash funds 8% HA! So how much in the equity market will you have to return to make up for that money? 15%-20% yearly? That doesn't seem to be very reasonable.
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Old 08-06-2011, 11:04 AM   #50
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Why sympathise with the taxpayers? They chose to live there, they voted in the miscreants, and they are as much to blame for their ignorance of the true situation as the civil servants. At least the taxpayers can move and avoid the consequences (high taxes). The pensioners are toast.
The taxpayers fullfilled their promise when they put the money into the fund. If the fund was too generous with benefits, mismanaged their funds etc then it is what it is.

People seem to be under some dillusion that government pension funds are backed by the government entity that funded them in the first place having the ability to levy future taxes. This is not the case.
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Old 08-06-2011, 12:50 PM   #51
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Old 08-06-2011, 12:58 PM   #52
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Why sympathise with the taxpayers? They chose to live there, they voted in the miscreants, and they are as much to blame for their ignorance of the true situation as the civil servants. At least the taxpayers can move and avoid the consequences (high taxes). The pensioners are toast.
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The taxpayers fullfilled their promise when they put the money into the fund. If the fund was too generous with benefits, mismanaged their funds etc then it is what it is.

People seem to be under some dillusion that government pension funds are backed by the government entity that funded them in the first place having the ability to levy future taxes. This is not the case.
Let me also throw in a different perspective:

DW will retire with a small pension for the years she worked as an Illinois Municipal Employee (IMRF fund). DD is starting her teaching career in Illinois, her pension will be through the Illinois TRS. So I happened to check out the funding on each of these, since I know that Illinois is in bad fiscal shape.

The IMRF is funded ~ 86%. The TRS is funded at 48%!

TRS Issues and Answers
IMRF Online - IMRF 101

Yes, there is plenty of blame to go around for that 48% funding. But I'm going to place most of the blame on those closest to the situation.

When the Union negotiated for those pensions/benefits, they surely must (or should!) know what the funding status was. They did not force a higher funding level as part of the negotiations, so I think they need to take primary responsibility for the shortfall. Instead, it appears they went back to their members, claimed they 'won' all these benefits for them, knowing full well it was a house of cards of empty promises ( mixed metaphors are fun!).

Second in line for responsibility would be the teachers themselves. They should be critiquing what the Union is promising them.

Third is the politicians, it is their fiscal responsibility - but I would say the Union should be the one playing 'watchdog' on them, as they are the ones directly impacted.

Fourth is the general public, but they are far removed and if the choice in the ballot box is tweedle-dee or tweedle-dum, what can you do?

Fully funding those pensions would probably require a(nother) State tax increase. But if that happens in 'real time' the voters can respond. By low funding, the State is just pushing that tax on future generations who cannot vote right now. And risking the promised pensions. Fully funding them would put it to debate NOW - do we raise taxes, or do we adjust pensions, or some of both? Kicking the can down the road is just a fraud (on both the teachers and the taxpayers).

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Old 08-06-2011, 01:17 PM   #53
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If I were a resident of Illinois (which I'm not) I wouldn't be concerned with the pension fund in the least. No politician is going to cut the taxpayers throats for more money in this economy, and if we restore order in Wash DC the pension fund will recover.

The contributions to the fund were calculated by actuaries using plausible data at the time. The numbers wern't "trumped up" or fraudlant.

I fail to see how it's possible for the taxpayers to kick a fulfilled promise "down the road"

The burden for this debacle should fall on the union to fix, whether it be adjusting pensions or re-appropriating funds. If they want to continue current benefits and hope for the best so be it.

Anyone going into any job should do their due diligence and know what they're entering. Hopefully things work out well with the pension for your daughter but if she gets $.50 on the dollar for her pension at retirement, she can't claim she didn't know what she was getting into.

It is what it is.
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Old 08-06-2011, 01:22 PM   #54
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Anyone going into any job should do their due diligence and know what they're entering. Hopefully things work out well with the pension for your daughter but if she gets $.50 on the dollar for her pension at retirement, she can't claim she didn't know what she was getting into.

It is what it is.
And I do plan on educating her on this in the near future. She's heard my grumblings at the dinner table, so it won't be a total surprise.

-ERD50
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Old 08-06-2011, 04:42 PM   #55
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The people I know who live near Central Falls (but go out of their way not to drive through it) are surprised only that it took this long for the town to self-destruct.
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Why sympathise with the taxpayers? They chose to live there, they voted in the miscreants, and they are as much to blame for their ignorance of the true situation as the civil servants. At least the taxpayers can move and avoid the consequences (high taxes). The pensioners are toast.

From Bestwife's comment, reading the receiver report, and using Google Earth, I'd characterize Central Falls as one step above a ghetto. Even this heartless conservative has a hard time blaming poor people for not moving out of ghetto. . (Don I fear the forum's "people should pull themselves up by their bootstraps" attitude is corrupting you. )

I also agree with ERD, it is unreasonable to expect citizen to dig deeper into a city finances than what they are told by city workers and/or the mayor. I am guessing that their isn't a local newspaper so another source of investigation is also closed down.
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Old 08-06-2011, 04:43 PM   #56
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And I do plan on educating her on this in the near future. She's heard my grumblings at the dinner table, so it won't be a total surprise.

-ERD50
Absolutely. The nice thing is she's got a good job in a middeling economy, she's got guidance (you), and she's got your inheritance (hopefully someday long into the future)
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Old 08-07-2011, 02:40 AM   #57
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Why sympathise with the taxpayers? They chose to live there, they voted in the miscreants, and they are as much to blame for their ignorance of the true situation as the civil servants. At least the taxpayers can move and avoid the consequences (high taxes). The pensioners are toast.

maybe because the taxpayers were sold a lie....

Have you taken a look at the budget of your local anything Including retirement funds along with capital budgets etc. etc... Like city, county, school district, water district, fire district, hospital district etc. etc.... (we have maybe 20 that I pays taxes to).... thought not...

And by the way... the budget was not that out of whack according to the receiver... just that they put revenue in the budget that just did not happen for a few years and spent it....
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Old 08-07-2011, 09:19 AM   #58
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maybe because the taxpayers were sold a lie....

Have you taken a look at the budget of your local anything Including retirement funds along with capital budgets etc. etc... Like city, county, school district, water district, fire district, hospital district etc. etc.... (we have maybe 20 that I pays taxes to).... thought not...

And by the way... the budget was not that out of whack according to the receiver... just that they put revenue in the budget that just did not happen for a few years and spent it....
Actually, I do sympathize with the taxpayers. But I am not so ready to blame the workers as many seem to be. All those factors you mentioned apply to workers as well. Too many people seem content to throw them under the bus even though they don't even have PBGC backing of their pensions. We are all justifiably frustrated with our politicians but I believe blaming the civil servants for our woes is misdirected. By the way, my comments here are aimed at the general tenor of the debate not at you.
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Old 08-07-2011, 10:33 AM   #59
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The fact of the matter is that solving the public pension problem is going to be like solving the public debt problem, social security and medicate/medicaid. It cannot realistically be solved solely by spending cuts or solely by raising taxes.

As a group, people receiving public pensions are going to take a haircut at some point. This is not "fair" but I think it will happen, because the public is not going to tolerate the taxes required to make pensioners whole. Certainly some pension are well run and this will not happen to everyone, but I believe it will happen to most.

I blame everyone; public employees, union bosses, voters, non voters, and politicians. I am not sure what the proper order of blame is (most to least), but there is plenty of blame to go around.
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Old 08-07-2011, 12:25 PM   #60
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So, how do employees who expect to receive a pension value it as part of their compensation?

My expected FERS pension is a big part of my total compensation. If they told me right now that it wouldn't be there, or be greatly reduced I would have to seriously consider looking for another job.
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