California pensions might be challenged in a BK soon article

[Texas Proud]

I am putting this here because it will become political....

Surprised nobody else has posted..

http://www.nytimes.com/2012/03/17/bu...WT.mc_ev=click

"When the city manager of troubled Stockton, Calif., had to tell city council members why it was on track to become the biggest American city yet to go bankrupt, it took hours to get through the list. "

"On it went, a grim drumbeat of practically every fiscal malady imaginable, except an obvious one: municipal pensions. "


An interesting article about California and pensions... I will bet this will be in courts for a long time once someone challenges CALPERS...

[haha]

Quote:

Originally Posted by Texas Proud I am putting this here because it will become political.... Surprised nobody else has posted.. http://www.nytimes.com/2012/03/17/bu...WT.mc_ev=click "When the city manager of troubled Stockton, Calif., had to tell city council members why it was on track to become the biggest American city yet to go bankrupt, it took hours to get through the list. " "On it went, a grim drumbeat of practically every fiscal malady imaginable, except an obvious one: municipal pensions. " An interesting article about California and pensions... I will bet this will be in courts for a long time once someone challenges CALPERS...

The future cannot be guaranteed, but my guess is that if the fiscal stress continues, pensions will eventually be modified, in California and elsewhere, on the time tested expedient of "what is your current usefulness?"

I predict that the current usefulness of retired workers will sometimes be found to be less than police and fire protection, continued access to credit markets, and tax levels that do not cause an exodus of all the solvent people from a city. In reality, who needs to be in Stockton? Only those too poor or too unskilled to pick up and leave.

Ha

[Texas Proud]

Quote:

Originally Posted by haha The future cannot be guaranteed, but my guess is that if the fiscal stress continues, pensions will eventually be modified, in California and elsewhere, on the time tested expedient of "what is your current usefulness?" I predict that the current usefulness of retired workers will sometimes be found to be less than police and fire protection, continued access to credit markets, and tax levels that do not cause an exodus of all the solvent people from a city. In reality, who needs to be in Stockton? Only those too poor or too unskilled to pick up and leave. Ha

Or what happens if Stockton just decides not to be a city anymore

I wonder if they can do that? I have heard it done in Texas, but for a very very small town....

[ERD50]

I read an article just yesterday that there was some consideration of cutting existing retired Illinois teacher's pensions COLA from current straight 3% to 2%. There was almost no other content though, so not not much to discuss. I'll poke around later to see if anyone else picked it up with more detail.

Some of these local municipal pensions are in peril. Federal and State pensions at least have a larger base to spread the pain. (edit/add: and AFAIK, nothing like the PBGC that private pensions have) As haha said, who needs to live in Stockton (or any other small town)? If they have to raise taxes now, people will leave, and they will have to tax the remaining people even higher, and so on. They better start inviting Buffet to take up residence there, sounds like a good fit - they need tax income, and Buffet doesn't think he's taxed enough.

-ERD50

[ziggy29]

We left California in 2003 when I took a job transfer, and there's a lot I miss about part of it (especially the weather). We'd love to relocate back to the Sierra foothills someday... but the dysfunctional government, budget mess and taxes are likely to prevent us from ever coming back.

Stockton is hardly alone. We already had Vallejo and many other cities are near the precipice as well.

[eytonxav]

Texas is not immune either. Fort Worth is in big trouble and I'm worried since we get our water from them. It could become pretty expensive to water the lawn in the next few years given the pension situation there.

[ERD50]

So here's some recent news on IL pensions. Read it and weep (bold mine):

Illinois pension reform measure passes House - Chicago Tribune

Quote:

... Tribune disclosed a pension windfall for former Democratic state Rep. Robert Molaro of Chicago. Molaro nearly doubled his state-supported pension to more than $120,0000 a year because he worked one month as a well-paid aide to Ald. Ed Burke, chairman of the City Council Finance Committee. .... Molaro got the pension boost when he received a $12,000 paycheck for his monthlong job of advising Burke and writing a 19-page white paper on pensions. State law allowed him to annualize the paycheck over 12 months and base his retirement check on a $144,000 salary. It sent his pension soaring to more than $120,000 a year — nearly twice the $64,000 pension he would have gotten without the maneuver.

A bump from $64K to $120K annually - for on months "work"? Plus I assume a 3% COLA.

Even though I'm against vigilante justice, I'm at the point where I could support an angry mob outside this guys house 24/7 until he rescinds the boost in pension. Something's got to give, this is crazy.

-ERD50

[MichaelB]

ERD, the article you linked is about impeding the practice you are denouncing in your post.

[flyfishnevada]

I still cannot believe the abuses of these systems in some states. No employee contribution, overtime is counted, spiking, exorbitant COLA's. It's not that pensions are unsustainable per se. It's that many are run so poorly. When you contribute based on a base salary but pay out based on twice that, well it doesn't take a financial wizard to see that's going to cause problems.

I get 75%, but no spiking, I contributed half, no overtime is counted, etc. My biggest concern is the number of active employees per retiree is going down here, but the fund's total assets is going up so I guess it's not affecting the bottom line too badly. Even so the active employee's contribution rate is adjusted annually to compensate.

[ERD50]

Quote:

Originally Posted by MichaelB ERD, the article you linked is about impeding the practice you are denouncing in your post.

Yes, but these things have gone on a long time, and there are any number of little loopholes carved out for these abuses. And some get grandfathered in even after the changes. And we learn about them only after the fact - too late.

There were recent reports of city employees that went to work for the Union at some big salary, then when they retire shortly thereafter, they get a pension based on this inflated, short-term Union salary. And it all comes out of the average municipal worker's pension fund, even though there were little/no contributions made at that level.

-ERD50

[MichaelB]

Quote:

Originally Posted by ERD50 Yes, but these things have gone on a long time, and there are any number of little loopholes carved out for these abuses. And some get grandfathered in even after the changes. And we learn about them only after the fact - too late. There were recent reports of city employees that went to work for the Union at some big salary, then when they retire shortly thereafter, they get a pension based on this inflated, short-term Union salary. And it all comes out of the average municipal worker's pension fund, even though there were little/no contributions made at that level. -ERD50

In all fairness to Texas Proud, the thread topic is about Stockton and the article discusses the California pension system. If you want to rant about discuss Illinois pensions why not start a separate thread?

[ERD50]

Quote:

Originally Posted by MichaelB In all fairness to Texas Proud, the thread topic is about Stockton and the article discusses the California pension system. If you want to rant about discuss Illinois pensions why not start a separate thread?

Hmmmm, I guess seeing Texas Proud posting about California pensions made me think he was interested in the general state pension issue, not specifically California.

-ERD50

[Texas Proud]

Quote:

Originally Posted by MichaelB In all fairness to Texas Proud, the thread topic is about Stockton and the article discusses the California pension system. If you want to rant about discuss Illinois pensions why not start a separate thread?

Quote:

Originally Posted by ERD50 Hmmmm, I guess seeing Texas Proud posting about California pensions made me think he was interested in the general state pension issue, not specifically California. -ERD50

Michael, thanks for moderating and trying to keep things from wandering, but I really do not care..

ERD50, it is interesting to see about the various states... I just thought that it was interesting that the state of California was holding the line on the locals even at the cost of services to their citizens...