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Growing deficits threaten pensions
05-11-2008, 07:17 AM
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#1
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Full time employment: Posting here.
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Posts: 961
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Growing deficits threaten pensions
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05-11-2008, 07:49 AM
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#2
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Full time employment: Posting here.
Join Date: Jan 2008
Posts: 649
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This story is a good reminder to factor increased taxes into my ER scenario. DW will be one of those drawing a public pension after working in the public school system. Dealing with these funding shortfalls just keeps getting pushed further into the future. We can rest assured that when the bill finally has to be paid, the tax man cometh
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05-11-2008, 09:03 AM
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#3
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2005
Location: Chicago
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It's been the custom in Illinois for decades to grant generous retirement benefits to public sector employees without a funding plan to pay for them. It makes the workers happy and the politicians know that the bill doesn't come due for years, likely after they're out of office. At the state level, Dems and GOP politicians do this with equal fervor as though planning budget disasters was the common denominatior between the parties.
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"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
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05-11-2008, 09:29 AM
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#4
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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
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What a fun post to read nice and early in the morning.
Trying to freak me out?
Good article, nothing new, but it was accurate. The freak out factor did have me go over to the pension site to re-review the latest financial report though.
If you want to fix blame for why public pensions are so screwed up, part of it is over-generous plans that tried to "shoot the moon" and serve as incentives for hiring and retention. Years of pushing current liabilities away from salaries and benefits off into some distant future pension liabilities that some future politicians will have to deal with are coming home to roost. My employer was parsimonious in the area of salaries when we were at near 100% authorized strength. But they were throwing pension and other after-retirement benefits at us left and right to keep people from retiring and going elsewhere. When that finally started to peter out, they gave in and negotiated a contract with substantial salary increases. But again, they couldn't pay for it and tried to forestall the inevitable by playing games with pension funding.
Quote:
Virginia, for instance, has been using an accounting method since 2005 that allowed the state to contribute about $300 million less into its pension funds each year than what its own pension board has recommended. Some pension actuaries called this "highly unusual" and "troubling."
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Money that they should have been paying into the pension went to fund salaries.
Contribution as percentage of payroll:
FY City Share Employee Share
1998 16.33 8.99
1999 15.61 9.85
2000 12.43 8.83
2001 12.22 8.79
2002 12.35 8.51
2003 12.11 8.39
2004 12.2 8.79
2005 11.26 8.61
2006 16.53 8.99
2007 18.35 9.33
All of the chickens came home to roost at about the time that the administration that was the most egregious with this financial hanky panky was being term-limited out and the pension system filed a lawsuit against the city for its refusal to make payments as the contract stipulated.
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There is no pleasure in having nothing to do; the fun is having lots to do and not doing it. - Andrew Jackson
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05-11-2008, 10:11 AM
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#5
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gone traveling
Join Date: Mar 2007
Posts: 559
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they'll either raise taxes or declare bancruptcy.(or do both)
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05-11-2008, 12:12 PM
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#7
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Oct 2005
Location: North Oregon Coast
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Defined-benefit ension plans are simply unsustainable with people retiring earlier and living longer, AND with unrealistic expectations about return in the pension funds. Grandfather all the people already participating in them if you must, but I think public pensions should go the way of private pensions and rely exclusively on defined contributions for new hires .
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"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)
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05-11-2008, 12:27 PM
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#8
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gone traveling
Join Date: Mar 2007
Posts: 559
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unless your the one on the public pension
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05-11-2008, 01:13 PM
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#9
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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
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Quote:
Originally Posted by ziggy29
Defined-benefit ension plans are simply unsustainable with people retiring earlier and living longer, AND with unrealistic expectations about return in the pension funds. Grandfather all the people already participating in them if you must, but I think public pensions should go the way of private pensions and rely exclusively on defined contributions for new hires .
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Not a problem, all you have to do is raise current salaries to attract the right kind of people. Pay me now, or pay me later, but the price still has to be paid. My previous employer discovered this when they changed pension benefits for new hires (later payment, reduced payout, increased employee contributions, etc.). Salaries keep going up, hiring bonuses are being paid, millions spent in overtime for current employees and ad campaigns to attract new hires and they still are only able to hire 35-45% of their targeted numbers.
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There is no pleasure in having nothing to do; the fun is having lots to do and not doing it. - Andrew Jackson
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05-11-2008, 04:22 PM
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#10
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Moderator
Join Date: Dec 2007
Location: Eastern WV Panhandle
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Quote:
Originally Posted by ziggy29
Defined-benefit ension plans are simply unsustainable with people retiring earlier and living longer, AND with unrealistic expectations about return in the pension funds. Grandfather all the people already participating in them if you must, but I think public pensions should go the way of private pensions and rely exclusively on defined contributions for new hires .
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Many of them are. The defined-benefit plan I'm under they stopped offering in 1978. What followed was a hybrid of defined benefits and a 457 plan. (The 457 plan is similar to 401K but for city and county employees.) I think, but am not certain, that new hires are entirely on their own with the 457 plan.
But as Leonidas noted, they're having a very hard time attracting and keeping people in an area where a small townhouse costs north of $300K. They want intelligent, dedicated, educated hard-working people with the minimum of a BS degree, require them to work in a 24/7 agency, and be literally willing to "die for the cause". Taxpayers are not going to get that kind of people cheap because every other potential employer out there wants them too.
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When I was a kid I wanted to be older. This is not what I expected.
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05-11-2008, 04:48 PM
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#11
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Gone but not forgotten
Join Date: Aug 2006
Posts: 6,924
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Quote:
But as Leonidas noted, they're having a very hard time attracting and keeping people in an area where a small townhouse costs north of $300K. They want intelligent, dedicated, educated hard-working people with the minimum of a BS degree, require them to work in a 24/7 agency, and be literally willing to "die for the cause". Taxpayers are not going to get that kind of people cheap because every other potential employer out there wants them too.
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Isn't this the Capitalism Conundrum?
At some point, you gets what you pays for.
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05-11-2008, 06:08 PM
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#12
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Quote:
Originally Posted by Walt34
But as Leonidas noted, they're having a very hard time attracting and keeping people in an area where a small townhouse costs north of $300K. They want intelligent, dedicated, educated hard-working people with the minimum of a BS degree, require them to work in a 24/7 agency, and be literally willing to "die for the cause". Taxpayers are not going to get that kind of people cheap because every other potential employer out there wants them too.
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I agree that you have to pay what the market demands to get a product and if certain public sector employees are scarce and command high salaries to attract them, so be it. That's how our economy works. But pay it in current salaries, that is "pay as you go." Don't do it with promises of overly generous pensions payable by the next generation many years from now........
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"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
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05-12-2008, 07:35 AM
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#13
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Moderator
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Quote:
Originally Posted by youbet
I agree that you have to pay what the market demands to get a product and if certain public sector employees are scarce and command high salaries to attract them, so be it. That's how our economy works. But pay it in current salaries, that is "pay as you go." Don't do it with promises of overly generous pensions payable by the next generation many years from now........
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Personally I agree. But that is not the deal I was offered. The taxpayers, via their duly elected representatives, offered that deal because the taxpayers either didn't care, didn't want to bother crunching the numbers, or like the politicians, would rather foist the cost on to the next generation.
In any event, a deal is a deal, and I fully expect the contract to be honored. Fortunately, we had a union (formed at a time when we were getting 2% raises while private sector raises were routinely 10%) and that contract is in writing. If the former employer tries to back out they will lose the lawsuit that will inevitably follow.
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When I was a kid I wanted to be older. This is not what I expected.
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05-12-2008, 08:29 AM
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#14
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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Quote:
Originally Posted by Walt34
Personally I agree. But that is not the deal I was offered.
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I was really suggesting that things be changed going forward. Simply draw a line in the sand, change the rules and move forward. That's what is happening in the private sector today. But continuing to offer future benefits to be paid by the next generation just to avoid having to pay now is just plain wrong.
Quote:
In any event, a deal is a deal, and I fully expect the contract to be honored.
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I'd say public sector pensions, and changes to them, should be as sacred as SS. Either both can be changed over time or neither can be changed over time. Like SS, public pensions will probably be safe for those already collecting. Those still working may find changes made concerning credit they earn going forward.
Just curious, in your public sector job do/did you pay into SS or is your job one of those excused from participation?
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"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
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05-12-2008, 09:00 AM
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#15
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Quote:
Originally Posted by Leonidas
Not a problem, all you have to do is raise current salaries to attract the right kind of people.
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Today, benefit are more important that pay,so just raising the salary isn't going to do it.
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Pay me now, or pay me later, but the price still has to be paid. My previous employer discovered this when they changed pension benefits for new hires (later payment, reduced payout, increased employee contributions, etc.). Salaries keep going up, hiring bonuses are being paid, millions spent in overtime for current employees and ad campaigns to attract new hires and they still are only able to hire 35-45% of their targeted numbers.
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There's a reason for that........
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05-12-2008, 09:26 AM
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#16
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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Quote:
Originally Posted by FinanceDude
Today, benefit are more important that pay,so just raising the salary isn't going to do it
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I've been retired for a coupled of years, so my data isn't completely up to date. But, the Megacorp I worked for found that recruiting was not negatively impacted when they withdrew retiree medical benefits and defined benefit pensions for new hires. An agressive starting salary and competitive 401k match (vs other employers) seemed to do it for today's young folks.
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"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
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05-12-2008, 09:39 AM
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#17
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http://sfgate.com/cgi-bin/article.cg...BA6E10JVID.DTL
Vallejo, CA declares Chapter 9 bankruptcy; more cities to follow?
Quote:
By declaring Chapter 9 bankruptcy, the city hopes to freeze its debts and gain time to renegotiate its police and fire contracts, which comprise about 74 percent of its $80 million general fund budget. It also hopes a judge will void part or all of the contracts, allowing the city and unions to start from scratch.
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For the fun of it...Keith
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05-12-2008, 10:33 AM
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#18
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Full time employment: Posting here.
Join Date: Aug 2007
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__________________
War is a poor chisel to carve out tomorrow. - Martin Luther King Jr.
Seek peace, and pursue it. - Psalms 34:14
Be kind to unkind people - they need it the most - by Ashleigh Brilliant.
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05-12-2008, 10:41 AM
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#19
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Thinks s/he gets paid by the post
Join Date: Dec 2007
Posts: 4,764
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Ran a report on California last night. The govinator is looking to slash all kinds of stuff to make the budget. Otherwise they will have to go do some borrowing by Sept. The democrats want to raise taxes I love this state.
Still paying for Davis blowing the surplus
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05-12-2008, 10:54 AM
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#20
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Recycles dryer sheets
Join Date: Aug 2003
Posts: 481
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Quote:
Originally Posted by Walt34
... that is not the deal I was offered. The taxpayers, via their duly elected representatives, offered that deal because the taxpayers ... would rather foist the cost on to the next generation ... In any event, a deal is a deal, and I fully expect the contract to be honored.
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I'm currently having some work done on my basement. Since I figure the kids play down there more than I do, I just drew up a contract with our builder that my kids will pay him with interest in 20 years. As their legal representative, and since there's a contract, I don't see any problem.
Of course you want what you were promised, and you should probably get it, but if pain comes down the road I don't see why anyone should be immune.
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