Public Pensions Bankrupt???

[Spanky]

... and they may never deliver...

 

[Texas Proud]

I paid 7-9 percent of my income into my retirement system for 27 years. (IN addition to the 10 percent to TSP)  If there isn't money there, someone took it.

setab

Texas is underfunded by about $8 billion the last time I looked... which was awhile ago.. they had something like $80 or $90 billion in assets...


To all.. there is a difference in the city and states.. they DO have a fund set aside.. look at CALPERS... one of the biggest pot of money around.. But, the future benefits are huge!!! And, the politicians continue to try and make it even better.. Houston had promised a higher percentage to retirees awhile back.. and had to take it away as they made a major calculation error.. it is easy to balance the budget today by promissing something in the future which some other politician has to worry about...

As for the statement that public employees are paid less.. I saw a study that refuted this fact.. they are paid 'about' the same overall (on average)... but, their pension is like 5 or more times better than the private sector..

 

[kz]

Public pensions are 5 times better than private ones?? I'd love to read that study. I admit I have a great public pension but I don't know of anyone from the private sector that gets only 1/5th of what I get. Heck I don't of anyone who isn't getting darn near the same as me or better.
I really would love to read that study.

 

[setab]

Quarterly statements aside, I take it that you are under the impression that your money went into your (lockbox) account rather than being thrown into the giant abyss know as the federal budget.

Keep saying it... I paid... they promised...I paid... they promised...

maybe that will make you feel better.

MB,

I don't believe you are correct.  The CSRS system is separate, as is the FERS system.  That being said, I find almost any scenario possible these days, but what are you suggesting as an alternative?  If the Federal pension system goes down, what makes you think any private investing you do is safe?  We can all run around shouting the sky is falling, or we can all take a deep breath, and realize that many stories such as the one that started this thread are highly sensationalized pieces of drivel that sell newspapers in spite of their lack of factual bases.

setab

 

[katfish]

Skilled public employees, as least at the county level here in South Jersey
are paid, apparently, less then the private sector. I base this on the fact
are authority was unable to find an electrican at the salary we offered.
WE are unable to attract qualified experienced engineers. We are unable
to find, at the salary we will pay, qualified tech. personal. We require
skill levels but we don't pay. WHAT we offer is membership in DP state
plan and good medical. THATS all we offer. Its apparent NJ wants to
cut its DP pension plan. Since all local and county workers are members
I wonder how we are going to find the qualified people to operate water
and wastewater plants. Health departments, highway tech. people
and it goes on and on. You don't realize how many people work for the
public and make life a little better here ... If the public wants a new deal
they can have it .

 

[Texas Proud]

Public pensions are 5 times better than private ones?? I'd love to read that study. I admit I have a great public pension but I don't know of anyone from the private sector that gets only 1/5th of what I get. Heck I don't of anyone who isn't getting darn near the same as me or better.
I really would love to read that study.

Let's see.... my sister worked as a school teacher for 41 years.. she is getting over 90% of her three best years salary as a pension... I do not know of ANY public company that would pay anywhere close to that percentage..

If I worked that long at my company, and bought an annuity based on my cash balance account (my pension), added the SS I would get to make it apples to apples (which was not in the study).. then I THINK I might make close to 30% of my salary... and that is being optimistic.. probably more like 25%...  

Since I read it in the newpaper... I doubt if I could find it again..

 

[MasterBlaster]

MB,

I don't believe you are correct.  The CSRS system is separate, as is the FERS system.  That being said, I find almost any scenario possible these days, but what are you suggesting as an alternative?  If the Federal pension system goes down, what makes you think any private investing you do is safe?  We can all run around shouting the sky is falling, or we can all take a deep breath, and realize that many stories such as the one that started this thread are highly sensationalized pieces of drivel that sell newspapers in spite of their lack of factual bases.

setab

Well some of us know better.

remember all that drivel we heard about "Social Security is there for you"... Blah Blah Blah

Well I paid but I'm sure not counting on them to live up to their end of the bargain.

Some of us know better.

 

[unclemick]

Hmmmm - I also paid 1966-1992.

And starting last year - I'm getting the money.

heh heh heh heh - P.S. I'll try not to spend it all. "Social Security is there for me."

 

[setab]

federal employees never got profit sharing, Christmas bonuses, etc., etc.  Merit bonuses were a joke and usually not handed out due to a "lack of funds."  Cost of living raises were constantly cut below levels required by law by both Democratic and Republican administrations.  Federal employees work a 2087 hour work year which means hourly pay doesn't come out the same as the schedule suggests.  (Any other business you know figure its pay on 2087 hours?)  Hiring professionals is always difficult and retaining them is very nearly impossible.   A junior Captain took a job with a local industry legal office for more money than the highest paid person in the government legal office he left.  I could go on and on.  People don't stay in government work because of the tremendous salaries or even the "generous" benefits.  Sure, some stay because they are slugs and they can hide, but the majority stay because they actually get hooked by the notion of public service and they take pride in the work they do in spite of a system and a public that constantly denigrates their efforts.  And they cling to the belief that their "deferred compensation" somehow makes up for that.  They know better, but they believe it anyway.  I guess it is naive these days to believe that the government of all entities will keep its promises and honor its contractual and moral commitments.  I guess I'm naive, because the alternatives are just unacceptable.

setab

 

[Scrooge]

heh heh heh heh - P.S. I'll try not to spend it all.

Thanks for leaving something for the rest of us! 

 

[Martha]

You all are so pessimistic. My bet is that SS will remain around, with tweaking. My bet is that your public pensions will be OK. My bet is that taxes will increase.

 

[Scrooge]

My bet is that SS will remain around, with tweaking.

Well, as the last Trustee report states:

The annual cost of Social Security benefits represents 4.2 percent of gross domestic product (GDP) in 2005 and is projected to rise to 6.2 percent of GDP in 2030, and then slightly to 6.3 percent of GDP in 2080. ...

Projected OASDI tax income will begin to fall short of outlays in 2017, and will be sufficient to finance only 74 percent of scheduled annual benefits in 2040, when the combined OASDI trust fund is projected to be exhausted. ...

Social Security could be brought into actuarial balance over the next 75 years in various ways, including an immediate increase of 16 percent in payroll tax revenues or an immediate reduction in benefits of 13 percent (or some combination of the two). To the extent that changes are delayed or phased in gradually, greater adjustments in scheduled benefits and revenues would be required.

So the current system is likely sustainable (assuming the report is in the ballpark) during our lifetimes even though some benefit cuts or tax increases may need to be introduced in order to balance it. That's why I figure that counting on 60-70% of my currently projected SS income is probably realistic if the current system stays in place. Still, I'd prefer not to depend on it since there is no guarantee that the current system, sustainable or not, will be retained. That's one of the reasons why plan A is to continue working for at least 3 more years.

On the other hand, the current Medicare system is not sustainable without major changes:

Medicare's annual costs were 2.7 percent of GDP in 2005, ... now projected to ... reach 11 percent of GDP in 2080.

HI could be brought into actuarial balance over the next 75 years by an immediate 121 percent increase in program income, or an immediate 51 percent reduction in program outlays (or some combination of the two). As with Social Security, however, adjustments of far greater magnitude would be necessary to the extent changes are delayed or phased in gradually, or to make the program solvent on a sustainable basis over the next 75 years and beyond.

That's pretty drastic, although Medicare taxes are fairly low right now and a 121% increase may be possible without upsetting the applecart. It should also be noted that future Medicare costs have been historically hard to predict accurately, so we may be revisiting this discussion in another couple of years.

I see health care expenses after 65 as the wildcard of ER while still in your 40s or younger: a potentially huge but vaguely defined extra expense that you have no control over.

 

[al_bundy]

Skilled public employees, as least at the county level here in South Jersey
are paid, apparently, less then the private sector. I base this on the fact
are authority was unable to find an electrican at the salary we offered.
WE are unable to attract qualified experienced engineers. We are unable
to find, at the salary we will pay, qualified tech. personal. We require
skill levels but we don't pay. WHAT we offer is membership in DP state
plan and good medical. THATS all we offer. Its apparent NJ wants to
cut its DP pension plan. Since all local and county workers are members
I wonder how we are going to find the qualified people to operate water
and wastewater plants. Health departments, highway tech. people
and it goes on and on. You don't realize how many people work for the
public and make life a little better here ... If the public wants a new deal
they can have it .

what about all the stories I hear about NJ Transit conductors making $100,000 a year?

 

[al_bundy]

I paid 7-9 percent of my income into my retirement system for 27 years. (IN addition to the 10 percent to TSP) If there isn't money there, someone took it.

setab

at 10% return is the money you are promised more than the value of the 7% - 9% you put in? here in the northeast a lot of public employees make A LOT of money and have better pensions than private sector employees and people are getting tired of paying insane property taxes to support it.

 

[macdaddy]

http://www.boston.com/news/local/ma...5/03/12/19_officers_earned_over_200000_in_04/

 

[Zipper]

Texas, 41 years paying into a pension system is a l-o-o-o-o-n-g time.

She's probably getting 2% year, but I'm going by Ontario standards. No one goes that long here. I went 33 = 66% and that's about average.

Age + experience = 85. I paid 9% per year and that was matched by the government.

After 41 years she would be well over 60 and with a life expectancy ~ 25 years her pp has the upper hand. I bet you could have done better if you had saved 10% per annum in a good balanced fund for that amount of time.

 

[Texas Proud]

Texas, 41 years paying into a pension system is a l-o-o-o-o-n-g time.

She's probably getting 2% year, but I'm going by Ontario standards. No one goes that long here. I went 33 = 66% and that's about average.

Age + experience = 85. I paid 9% per year and that was matched by the government.

After 41 years she would be well over 60 and with a life expectancy ~ 25 years her pp has the upper hand. I bet you could have done better if you had saved 10% per annum in a good balanced fund for that amount of time.

I believe that she got 2.2 per year... she did NOT pay into SS, so that is why I put SS in my number.. I do not know her percentage withheld... any Texas teachers here

Also, she COULD have retired when she was 55 and started her pension right then with about a 66 to 72 percent of her salary...

Very few (if any.. that are not union..) private pensions will allow you to get 100% of your benefits at 55.. almost all require you to wait till 65.. so that is another 10 years without getting any money..

 

[Texas Proud]

Federal employees work a 2087 hour work year which means hourly pay doesn't come out the same as the schedule suggests. (Any other business you know figure its pay on 2087 hours?)

My company used to calculate on a 2088 hour year... if you actually count the DAYS, they are right..

But, most public sector employees do not work the overtime that private sector people work... as an example, a daughter of a co-worker just started at the VA... she was told she can NOT under any circumstances work more than 40 hours a week... because they must pay overtime...

Now, my company would love me to work 80 hours a week.. so your argument on this goes out the window...

Public sector employees do not have to worry as much on layoffs... not that they do not happen, but it is much more rare that it happens.. (I had another sister work for a county.. she got laid off because someone with more seniority wanted her job!!! And the rules where she was said they could take a job if they were qualified and had more tenure.. so by by to my sister).. Our company has laid off thousand of people because they want to move processing to India.. or, they want to hire younger workers that make less, so there is a major layoff and then they start to hire people because 'business has picked up'.. but do not hire back the peopel they let go.. so, that one goes out the window also...

But, I will agree with you that there are a lot of people who work in public and want to do a good job.. and usually do a good job if the management does not get in the way.. so my hats of to all of you that do so..

 

[rmark]

I treat my expected Social Security as a fixed pension, since I suspect future Medicare B costs with eat up the inflation adjustment.

 

[2B]

Big Article on this in the Minneapolis paper in the last few days about Duluth.

If you have an unfunded public pension, it isn't guaranteed by the Federal folks. When a city chokes, it chokes.

 

[Leonidas]

Duluth's problems don't stem from its pension, but rather from its guaranteed free health care to all retired employees. Saying that's a generous benefit is an understatement.

The city's human resources manager, Gary Meier, acknowledges that its retiree benefits are "generous" and says they influenced his decision to leave a better-paying job in the private sector in 2000.

How Duluth got into its problems is pretty typical of government planning. Or lack of planning as in this case.

He said Duluth's plan dates to 1983, when city administrators agreed to it in exchange for workers' giving up the right to accumulate and cash large amounts of sick leave and vacation. "In 1983, we didn't have double-digit medical inflation," Meier said, "and they had no way of predicting that things would get so out of hand." Duluth's liability is at $300 million and growing by $40,000 a day.

It was only after they realized that they were in serious problems last year that anybody thought to have an actuary look at the numbers. They were $178 million in the hole then.

The city I work for has engaged in this kind of stupidity regularly. In the 70's when the local private sector was booming, they decided to give employees an enticement to stay in low-paying city jobs by allowing for unlimited accumulation of unused sick, vacation and overtime. Every pay raise and promotion was applied to all the hours in the accumulated banks. You collected a big fat paycheck when you retired, and people stayed thinking they could use the money to pay of mortgages and other debt. Ten years later a different administration was in office and they saw an unfunded liability growing out of control. The new plan was to freeze the dollar value of the time accumulated each year. Twelve years later, and under yet another administration, they realized that the tech economy was booming and they couldn't attract enough qualified applicants for low-paying jobs. Plus, the size of the checks they were writing to people leaving was hurting the bottom line. The new-new plan was to allow retirees to use all of their accumulated time just before they retired by taking a long paid vacation. The most recent administration comes into office and freaks out when they realize that, among other goofy things, they are paying a couple of hundred people like me to sit at home while they pay us our salaries. They start whacking away at the plan and in response nearly a thousand people retire rather than lose benefits. Ooops.

And so it goes. The first mayor who started this craziness in the 70's? Dead. The next was last heard of as a political consultant advising other mayors how to "run a city like a business". Her replacement is rich as hell and living in his penthouse, while his replacement is teaching "government and political affairs" in the Ivy League. Meanwhile the city, its employees and the taxpayers are left behind to clean up the mess.

 

[Texas Proud]

And so it goes. The first mayor who started this craziness in the 70's? Dead. The next was last heard of as a political consultant advising other mayors how to "run a city like a business". Her replacement is rich as hell and living in his penthouse, while his replacement is teaching "government and political affairs" in the Ivy League. Meanwhile the city, its employees and the taxpayers are left behind to clean up the mess.

My point exactly.... the first few guys took the easy route... instead of doing what was necessary, they kicked the can down the road KNOWING they would not have to worry about it..

ANY unfunded or underfunded pension or benefit plan is doomed to fail eventually.. without major changes or some heafty infusion of money... and what politician will say, let's cut services today so we can fund the pension plan

So, what do states do about it They pass laws stating that benefits can NOT be reduced... making it impossible to fix..