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Old 10-13-2016, 03:59 PM   #21
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It's $43/year per resident. Maybe they can hock something.


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I read it as a town of 700 residents now owing $1.6 million to CALPERS.

That would be $2285 per resident. Quite a bit of hocking.
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Old 10-13-2016, 05:20 PM   #22
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I read it as a town of 700 residents now owing $1.6 million to CALPERS.

That would be $2285 per resident. Quite a bit of hocking.

The 1.6m is the termination penalty payment to Calpers. The pension reduction for the 71 yr old retiree is 43k-19k=24k. If the other 3 retiree payments and reductions are similar that's 24*4=96k/yr. So it's actually 96k/700=138 annually from each resident for all four retirees. That's for the city to make up the reduction instead of rejoining Calpers.


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Old 10-13-2016, 08:27 PM   #23
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If every resident is a taxpayer. If only half of them are, then it is $276 per taxpayer.

For someone with a normal property tax of, say, $1500 a year, that would be a increase of 18%.
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Old 10-13-2016, 08:55 PM   #24
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Sad situation. But I'm shocked at a $48k pension for 29 years of service specifically for a small town in a depressed area. She must be doing pretty well with with SS and her pension compared to her neighbors.


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Old 10-13-2016, 08:57 PM   #25
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If every resident is a taxpayer. If only half of them are, then it is $276 per taxpayer.

For someone with a normal property tax of, say, $1500 a year, that would be a increase of 18%.

My point was just that the numbers are not huge.


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Old 10-13-2016, 10:10 PM   #26
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Sad situation. But I'm shocked at a $48k pension for 29 years of service specifically for a small town in a depressed area. She must be doing pretty well with with SS and her pension compared to her neighbors.


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She might not get SS, it depends how it was set up. I know some state employees do not participate in SS.
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Old 10-13-2016, 11:22 PM   #27
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I do not understand why there is so much pushback on the city when CALPERS, supposedly the premier pension folks in USA charged 30K per year to fund a pension with only 4 retires who were paid over 100K per year, how in the world did that work out. Obviously the city dropping out was a mistake but really why was CALPERS ok with 30K per year when they needed 1.6 million and are charging 7.5 percent interest on the balance?
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Old 10-14-2016, 06:53 AM   #28
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She might not get SS, it depends how it was set up. I know some state employees do not participate in SS.
I wondered about SS also. I think many of these articles are poorly presented when they do not include details such as SS participation and whether employee contributions were required.

Here's more on the state of finances at CALPERS

Calpers CIO Says Funding Gap to Widen for Foreseeable Future - Bloomberg
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Old 10-14-2016, 08:22 AM   #29
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I do not understand why there is so much pushback on the city when CALPERS, supposedly the premier pension folks in USA charged 30K per year to fund a pension with only 4 retires who were paid over 100K per year, how in the world did that work out. Obviously the city dropping out was a mistake but really why was CALPERS ok with 30K per year when they needed 1.6 million and are charging 7.5 percent interest on the balance?
You're not looking at the bigger picture: the city started contributing when the workers started working. They worked 25-30 years before collecting the pension. That money grew - they didn't start paying into CALPERS in 2001.

And with an annual pension payout to the retirees of (I think) $120k/year, CALPERS would need a decent chunk to finish paying out those pension payments for the projected life of the retirees.

In many pension funds, there is some allowance for current contributions funding current retirees. For instance, my fiance is a teacher in Missouri. Missouri state teacher's pension is pretty decent as far as financial footing - and even they rely on roughly 20% +/- of the current retiree pension check to be covered by current workers' contributions, AND about 20% covered by current school district's contributions, with only about 60% covered by investment earnings. And MO teachers are not covered by social security, so their plan is probably a little more conservative than others....although I see on their website where they are targeting (and probably assuming) an 8% return on investments for their actuarial assumptions.

However, similar to Social Security, the % of salary that the school districts and teachers have had to pay into the system has steadily increased over the years (14.5% now, but was around 10% or so many years ago).
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Old 10-14-2016, 10:12 AM   #30
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If anybody wants to delve into the minutae of the problems with Calpers, the website nakedcapitalism has done a number of articles. See: You searched for calpers | naked capitalism Many of these are so technical that they go right over my head. One of the most fundamental issues however is that they're predicting ROIs that are more than what they're actually getting. Thus, "Ponzi" is pretty close to reality.

Things will get ugly, it's only a question of when (like with Detroit's pensions, and soon Chicago's)
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Old 10-14-2016, 03:59 PM   #31
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Something doesn't smell right. It would cost about $707k just to buy a SPIA to pay Betty's pension benefits ($4,000/year for life) so if she is at all indicative then the $1.6 million Calpers is demanding for 4 retirees doesn't sound that bad... but it is hard to tell given scant information.
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Old 10-14-2016, 04:59 PM   #32
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Look for this scenario to play out in many more municipalities in the years to come.
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Old 10-14-2016, 10:52 PM   #33
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......
In many pension funds, there is some allowance for current contributions funding current retirees. For instance, my fiance is a teacher in Missouri. Missouri state teacher's pension is pretty decent as far as financial footing - and even they rely on roughly 20% +/- of the current retiree pension check to be covered by current workers' contributions, AND about 20% covered by current school district's contributions, with only about 60% covered by investment earnings. And MO teachers are not covered by social security, so their plan is probably a little more conservative than others....although I see on their website where they are targeting (and probably assuming) an 8% return on investments for their actuarial assumptions.
......
This sounds pretty terrible, having current employees paying the pension of retired ones, because it means the contributions of the retired ones was too low to be self funding.
So the current employees are not even getting their full investment set "aside" for themselves as 20% is being siphoned off to pay for the retired ones. This means the current employees are going to be really cheated.
This truly seems like a ponzi scheme.
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Old 10-15-2016, 10:15 AM   #34
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My point was just that the numbers are not huge.


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Yes. It's hard to believe the city can't cut some corners and raise taxes a bit to accommodate these four aging retirees until they no longer receive their pensions. The $30k a year the city is saving by not funding the pension system is a start.
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Old 10-15-2016, 11:55 AM   #35
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The ponzl reference is being taken way to far in this thread. I know it's a good way for the author to create interest but just because current income is being used to meet current liabilities doesn't make it a ponzi scheme. The big crime in a true ponzi scheme is lack of legitimate investment activity IMO.
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Old 10-15-2016, 12:10 PM   #36
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The ponzl reference is being taken way to far in this thread. I know it's a good way for the author to create interest but just because current income is being used to meet current liabilities doesn't make it a ponzi scheme. The big crime in a true ponzi scheme is lack of legitimate investment activity IMO.
Perhaps the definition is being loosely applied. But even most ponzi scheme do perform some investing of the money, rather than have it all sit around in bags on the floor.

But the pension plans that use current contributions to pay for retired folks is much like a ponzi scheme. If they wanted to fund it from current contributions, then there was no need for the retired folks to contribute a penny until one of them hit retirement, then tax everyone to pay for the retired fellow.
Here there is lack of investing or sufficient contributions for each retired person to actually retire.
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Old 10-15-2016, 01:51 PM   #37
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............
But the pension plans that use current contributions to pay for retired folks is much like a ponzi scheme. If they wanted to fund it from current contributions, then there was no need for the retired folks to contribute a penny until one of them hit retirement, then tax everyone to pay for the retired fellow. .............
Hey, wait a minute. Isn't this exactly how SS works? And didn't the initial recipients basically get something for nothing?
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Old 10-15-2016, 02:26 PM   #38
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Hey, wait a minute. Isn't this exactly how SS works? And didn't the initial recipients basically get something for nothing?
Pretty much. And while my fiance's pension that I cited as an example doesn't have as great of a history of SS withholding increases there has been a definite increase payment over time, currently at 14.5% paid by employee and 14.5% paid by school district. I wouldn't be surprised if that continues its steady increase, to be 15% each, then eventually 16% each...much like SS will probably also increase the % tax.

What really wakes one up is when you consider that SS withholding started out at something like 1% withholding on just the employee, then increased over time to become the current 12.4% total employee/employer (and likely going higher still). Increases like that are nothing to sneeze at, and show just how ill-fated the initial plans were, where you have to hike funding from just 1% to 12.4% per worker!
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Old 10-16-2016, 10:05 AM   #39
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My main question, which the article does not address, is are public pensions protected at all by the State of California or its constitution.

If the laws are written so that the pensions are only protected subject to a municipalities willingness to pay, then that is no protection at all.

My guess, from how this went down, is that there is no legal protection for public pensions in California at the state level.

Would be interested if anyone knows the details on this.

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Old 10-16-2016, 04:39 PM   #40
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My main question, which the article does not address, is are public pensions protected at all by the State of California or its constitution.

If the laws are written so that the pensions are only protected subject to a municipalities willingness to pay, then that is no protection at all.

My guess, from how this went down, is that there is no legal protection for public pensions in California at the state level.

Would be interested if anyone knows the details on this.

-gauss
California courts decided that the pensions were guaranteed but came up with a hair brained idea that pension guarantee is only for a "reasonable" pension and that calculation can be changed if the state is not able to pay, so in essence if there is no money government can cut
California county unions appeal to state supreme court on pension decision | Northern California Record

But more interesting is that starting next year all business in California with more than 4 employees will be required to join funds in with the CALPERS, which is woefully underfunded, unless they already have a pension plan. California’s pension deficit is $77,000 per household and CALPERS is requesting that the rate of contribution be changed from 3 percent presently approved to 5 percent and rising over 5 years to 10 percent of California worker’s salary.
http://www.washingtonexaminer.com/th...rticle/2604191
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