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Old 04-13-2010, 11:33 PM   #61
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Z,

I am aware that not all public pensions are the same. They do vary quite significantly. However, public sector pensions, in general, are much more generous than private sector pensions, most of which are either in demise or in danger of termination. Only a few mega corps are still offering a pension plan.

BTW, I have great respect for teachers.
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Old 04-14-2010, 12:54 AM   #62
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Originally Posted by clifp View Post
The free market doesn't do a great job at delivering these services, and they are legitimate and important function of government. Certainly in the case of police, and teachers their are private sector equivalents (security, private investigators, private schools, corporate trainers) that can be used to help establish what is the fair market value of the service.
There is zero equivalency between what a police officer does and the function of a security guard. (Most) Security guards have badges, and some have guns, and after that there are no similarities. I won't be go into endless detail, but I'll give you an easy comparison by showing training required for the different occupations per Texas law:

Unarmed security guard - 8 hours
Armed security guard - 30 hours
Basic Texas Peace (Police) Officer - 688 hours.
Houston Police Department - Approximately 1900 hours (1200 hours academy training, 600-700 hours field training).
HPD Citizens' Police Academy - 33 hours (3 more than that provided to an armed security guard).
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Old 04-14-2010, 12:55 AM   #63
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I picked the 50K salary for illustrative purpose. I believe the average starting salary for college grads is around 46K, and if you exclude the higher paying math,science and engineering, average starting paying for liberal art grads in in the neighborhood of 35-40K over course that is for 12 month jobs with 2-3 weeks annual vacation.

I've encourage people to look at the particulars of their pension plan since as you say the are very different, but overall the pension picture isn't good. I'd encourage you to do a search for Pennsylvania in the Pew study . The teachers and public employee pension appear to be about average 3 out 4 but the trend as far as funding is bad.

I then went to the PSERS website and download the presentation the euphemistically named employer Rate Spike information.

Quote:
If it continues to gain at 8%(this past year it gained at 13%) if won't have really bad issues, no matter what.
Zarathu, no offense but you are badly mistaken. According to the PEW report PA only contributed 40% of the needed contribution to state/teacher pension plans, one of the lowest rates in the country. The fix the pension plan administrator is suggested is to dramatically increase the states contribution from $600 million this year to 4 billion in 2013 and 5 billion in years after that.

Now since billions are an eye glaze over number, let me help make it a little more approachable. The state of Pennsylvania has around 4.5 million households, previously they were paying around $100/year for teacher pension, now the state is going to ask each household to pay $1000-$1100 for teacher pension (and of course more for other state employees). I am guessing that if you went to 50 or so of your close neighbors explained all the great things that you done to help their children over the years you could probably get $100 out of a lot of them to pay your pension. I suspect that very few would fork $1,000 especially if you had went back year after year.

In order for your pension to be fine it needs to earn 8%/year on the existing assets AND collect $1,000/household more a year.
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Old 04-14-2010, 02:09 AM   #64
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There is zero equivalency between what a police officer does and the function of a security guard. (Most)
I really really wasn't thinking of the mall cop security guards. More the head of corporate security of fortune 500 who are typically retired police detectives or such. The guys you were talking about who made more in the private sector.
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Old 04-14-2010, 02:17 AM   #65
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I really really wasn't thinking of the mall cop security guards. More the head of corporate security of fortune 500 who are typically retired police detectives or such. The guys you were talking about who made more in the private sector.
Okay, you might be able to make some comparisons there, but you would have to do a lot of extrapolation. You're right that most of the people filling those positions are retired police or federal law enforcement, but I know what they make and I don't know a one that is making less than $110-120K a year. You could find some correlation with mid-management in a police agency, but working your way down to front line supervision and police officers would get pretty complicated once you factor in physical danger, shift work, occupational stress that is unique to police work, and increased mortality rate/reduced lifespan.
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Old 04-14-2010, 03:48 AM   #66
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I need to get life because I know normal people should be watching the Oscar winning Precious on netflix, rather than reading pension plans for states I've never lived but the Pennsylvania Public School Employees Retirement System (PSERS) really deserves special mention, cause of it remarkable creative accounting. PSERS won an award for best financial reporting and its all there except for a common sense explanation of what is going on.

PSERS report claims that it is 86% funded, which is better than average for public pension in the country. How it arrived at the figure is the rest of the story. The average teacher in PA contributes about 7.5% of their salary they can retire at 62 or after 35 year at any age with a pension equal to years of service * 2-2.5%.

Since as I showed earlier even a 16% contribution is NOT enough for 70-80% salary after 35 years, the state is suppose to make up the difference. Historically the state was lousy about contributing to the pension, so PA has passed various laws requiring the state to contribute a minimum amount. Right now by statue the state has to contribute 4% of all teacher salaries to the pension. However, 4% isn't nearly enough to fund the pension so the state is suppose put in more. Of course the state doesn't actually do this contributing between 29-46% of what they needed to the last 5 years. Last year the state put in $503 million of the 1.76 billion required, by 2014 that number is will be 5 billion.

Now imagine every year your wealthy brother hires you for $10K to manage his extensive rental properties during his summer vacation, but every year he only pays you $3,000 instead of $10K. He does other good stuff like pay for mom's nursing bill so you don't want to be an asshole. You are saving for retirement so every year you do a balance sheet to measure your progress. After 5 years of this how do you treat the $35,000 of unpaid income? Most people would write it off and even assume that next year that you'd only get $3,000 in income from your brother.

Not those smart folks managing the PA pension system, they not only treated the $35,000 as an asset, but AFAIK they tacked on a 8.25% interest charge to the unpaid state balance and included this in the fund's assets! This and few other legitimate things is how they managed to improved the funded status of the fund from 85% to 86% last year. This astounding bit of financial wizardry occurred despite suffering a 27% investment loss, cause the brilliant guys had 20% of the teachers pensions in alternative investment (i.e. hedge funds). BTW, Zarthus PSERS did worse than all of its own benchmarks.

There are some other astounding assumptions. In 2009 the system had 14,693 people retire and 4,471 die or a ratio of more than 3:1. Now with an increase lifespan one would assume that this ratio would increase. Not the PSERS by 2018 they project 11,370 retire and 6,199 a ratio of under 2:1. I guess there is a clause that teacher over 85 are turned into Soylent Green.

Clever tricks like this is why my simple system is in many ways better than fancy actuarial trick to determine an answer to the question
"is my pension sound."

PSERS
Assets 46 Billion
Active members 273K
Inactive but vested member 100K
Retirees 174K

Ratios
Active Members/Inactive 1:1
$/Member 84K
$/Retiree $264K

Average pension $22,748

Annuity value of $264,000 (50% survivor benefit NO COLA) $20,200

So right now the system is in ok shape. The problem is the system will soon be seeing a huge increase in the average pension payments as higher paid teachers retire in the next 5 to 10 years, and without the state massively increasing their payments the system is in trouble.
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Old 04-14-2010, 09:11 AM   #67
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So right now the PENNSYLVANIA system is in OK shape. The problem is the system will soon be seeing a huge increase in the average pension payments as higher paid teachers retire in the next 5 to 10 years, and without the state massively increasing their payments the system is in trouble.
Bottom line in from above quote above.

The 7.5% that teachers pay into the fund is 7.5% of their gross IRS income, which actually amounts to about 9.5% of actual take home after other taxes. If they didn't take it out of my paycheck, then that would be the amount of what I have left over after taxes that I would have to put into a 401K or whatever.

Everybody knows what the state will do, when it eventually gets off their duffs and does something:

1. First of all they will have to intervene: By law and its a law that has been run through the courts numerous times, as well as it being in the state constitution that these committments to pensions MUST be paid, all current vested members benefits are obligations that must be paid. People can complain all they want, but its a waste of their energy which they could put into something more useful. Its like complaining that you have send in your taxes on April 15, or that its going to rain.

2. The state will pass a new law that states that both the state itself and the districts will amortorize the current debt to the system over a period of 30 to 40 years of same amount payments into the system every year that cannot be changed. With a change in the total system, and some steady payments into the current system and the hoped for early death of all retired teachers, this will ease the crises.(yeah.... when I called them to ask about my own retirement, they admitted that statistically only, they wished my mother at age 88, a retired teacher, would die soon.)

3. The state will probably raise the teacher portion of the payment into the system to 12% of gross pay.

4. For new hires, the state will partially eliminate the defined benefit program from what amounts to about 75% of previous three highest years to something like 35-40% of three highest years of income, and force the educators into some kind of 401K that either they administer or the state administers for the remainder of the amount. I doubt that this will affect teacher performance at all, or hiring. Teachers don't generally go through all the training processes that they have to do and then change at the end because there is not a good retirement system. No teacher who is 22 years old EVER thinks of retirement 40 years later.

5. The state will develop some kind of across the board health care system for every teacher and retired teacher and every other public employee, that will reduce the costs to the districts for the individual health care of each employee, thus freeing up money for spending on pension obligations.

6. I believe that they will change the time when teachers can retire of 35 years at any age or 30 years at age 60, to 30 years at age 62 at the earliest. I don't believe any teacher will be allowed to retire at age 58, and the earliest you could retire with a full pension would be 62. They might even bump it to 64 or 65.
------------------

Part of the issues for districts involve a whole series of basically unfunded mandates from the Feds for No Child Left Behind and Special Education that over the years have siphoned massive amounts of money from districts that in the past were used for their pension obligations. Over the past 9 years of not paying into the pension funds, my district's class size at elementary has dropped from about 30 to 18 per class. Class size will have to go back up, and all the other frills that we didn't have before when districts were required to pay into the pension fund(like from 1978 to 1997 nearly everyone of my budget requests was always cut), will go away. I should say They will not have since I will be retiring after 40 years. No real early retirement for me.

It will work itself out. It always does somehow.

Z
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Old 04-14-2010, 09:22 AM   #68
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People can complain all they want. They can ask their neighbors if they want to pay this bill all they want. They can do what they want.

They can also complain about the weather and the april 15 tax deadline.

IN PA THE law is very clear, its been tested through the courts, and its in the state constitution. The current pension obligations have to be paid. You can change the future obligations, you can change the time the teachers can get the obligations, you can increase their payment into the fund, but you cannot change the benefits which were defined by law.

So rather than complaining about it, we all need to move on, and work on doing something about it. Besides, I will have to pay for this increase along with everyone else, and on my retirement salary too.

I'm interested in solutions, not constant complaining about why it happened. That makes no difference now. it is what it is.


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Old 04-14-2010, 10:43 AM   #69
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bold mine:

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A private school that was forced to take in the same population of children that the public school gets and must address would not be able to do any better than some public schools.

However, the one elementary school where I work is a national blue ribbon school and is #13 and #20 in reading and math in the entire state of 5000 elementary schools.

No private school can even hope to match that.
You say that like it is a fact. How can you know this, since some of it seems hypothetical at this point (I don't think any private schools are forced to take the same cross-section)? Is it even true?

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Old 04-14-2010, 02:33 PM   #70
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bold mine:
You say that like it is a fact. How can you know this, since some of it seems hypothetical at this point (I don't think any private schools are forced to take the same cross-section)? Is it even true?

-ERD50
I know it because my wife works for and started her own private Quaker Elementary School. I know it because I have close contact with many of the other private Quaker Schools in the east coast, including the very famous West Town School, and the Sidwell Quaker School that the President of the United States sends his kids to. These are schools which only take the cream of the crop from public schools.

And yes, it is true that these private schools do not have to take anyone they don't want to take. They are just like places like MIT or Harvard, or like specialized grad programs like the nuclear physics one my son got into at Notre Dame. The have entrance requirements.

But I have a feeling I answered a question that isn't what you were actually asking.

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Old 04-14-2010, 03:05 PM   #71
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Bottom line in from above quote above.

The 7.5% that teachers pay into the fund is 7.5% of their gross IRS income, which actually amounts to about 9.5% of actual take home after other taxes. If they didn't take it out of my paycheck, then that would be the amount of what I have left over after taxes that I would have to put into a 401K or whatever.

Everybody knows what the state will do, when it eventually gets off their duffs and does something:

1. First of all they will have to intervene: By law and its a law that has been run through the courts numerous times, as well as it being in the state constitution that these committments to pensions MUST be paid, all current vested members benefits are obligations that must be paid. People can complain all they want, but its a waste of their energy which they could put into something more useful. Its like complaining that you have send in your taxes on April 15, or that its going to rain.


It will work itself out. It always does somehow.

Z
Z I hope for your sake you are right, and you are correct these things do generally work out. Still the problem is the $5 billion the state needs is massive PA's budget is only 30 billion, so 1/6 of the budget will be needed to pay for teacher pensions in a few years add in pension for the rest of the worker you have huge chunk of the budget devoted to pension payments. I for one wouldn't depend on voters to accept this meekly.

Laws even constitutions can be changed (they amended the constitution 1/2 dozen times a year in California.). The economy has caused governments to renege on promises, California has done a couple of things (I'm not aware of the details) but I can tell you what has happened here in Hawaii.

In 2001, Hawaii passed a law giving generous tax credits to individuals who invest in local technology or TV/movie businesses. Over the years they have gradually reduced the attractiveness. In the last few years Nords, and I have invested in a few technology companies partly motivated by the tax credits. Last year they reduced the benefits for investment in the last two years of the act 2009/2010. Last week they pass a law that retroactively prevented us from claiming any credits we earned until 2013. In affect massively raising taxes on us for 2010,2011,2012. We will sue claiming that the state seized our property (tax credits) retroactively which is unconstitutional. I suspect that state will win using as precedent the California actions, and in effect claiming that is "technically bankrupt", since its promises exceed its ability to pay.

The are actual bankruptcy lawyers on the forum, but the one thing I do know is that in bankruptcy contract get broken.
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Old 04-14-2010, 08:43 PM   #72
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Laws even constitutions can be changed (they amended the constitution 1/2 dozen times a year in California.). The economy has caused governments to renege on promises, California has done a couple of things (I'm not aware of the details) but I can tell you what has happened here in Hawaii.

.
Not in PA. Nothing changes in PA. Heck our legislators can't even agree to have a budget on time(they were almost 6 months late last year).

What do I think will really happen? I think that the reality is that the state will fail to pay the pensions of anyone who is more than 15 years from retirement. This means that anyone who is younger than 45 years old has little chance of getting a pension. And I think the feds will cap SS at about $25K per year no matter who you are. They will enter some gradually reducing defined benefit plan starting at 60% and over time dropping it to maybe 25%. And a good percentage of my group will be dead in 15 years.

So It will work for me, but not for many more people.

Z
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Old 04-14-2010, 10:28 PM   #73
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But I have a feeling I answered a question that isn't what you were actually asking.

Z
Correct!

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Old 04-15-2010, 02:52 PM   #74
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As you also opted to make your comment public; as if it were not a well-intentioned suggestion for improvement, but, rather, as if it was intended to be a public kick in the shin.

There have been some lengthy posts by others here that I have chosen to not read for the same reason, and yet, I've never succumbed to any desire to publicly point out how they failed to communicate their message to me. Perhaps, in addition to being loquacious, one of my other failings is an over-developed sense of courtesy when it's really not necessary to be rude.

I hope my reply was brief enough. But please, don't waste any further time on correcting me if I was again imprecise in my words. I feel that if I am to improve the brevity of my writing I will have to devote some time to the effort, so I'm going to have to add to my "ignore poster" list so I'm not distracted. Unfortunately, you didn't make the cut.
Leonidas, your response showed more restraint than the comment that originated it. Better manners too. cheers...
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