Growing deficits threaten pensions

Wags

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NBC News - Growing deficits threaten pensions :eek:
Accounting tactics conceal a crisis for public workers

Growing deficits threaten pensions - Washington Post - MSNBC.com

Folks the pensions for public workers appear(s) to be in big, big trouble.:eek:

It looks like state and local governments will have to start cutting some services in order to meet their obligations to their retirees.

God Bless Us All:angel:
 
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:bat:
 
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. :(
 
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.
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."
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.
 
they'll either raise taxes or declare bancruptcy.(or do both):bat:
 
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 .
 
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 .
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.
 
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 .

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.
 
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.

Isn't this the Capitalism Conundrum?

At some point, you gets what you pays for.
 
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.

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........
 
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........

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.
 
Personally I agree. But that is not the deal I was offered.
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.
In any event, a deal is a deal, and I fully expect the contract to be honored.
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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Not a problem, all you have to do is raise current salaries to attract the right kind of people.

Today, benefit are more important that pay,so just raising the salary isn't going to do it.

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.

There's a reason for that........;)
 
Today, benefit are more important that pay,so just raising the salary isn't going to do it

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.
 
http://sfgate.com/cgi-bin/article.cg...BA6E10JVID.DTL
Vallejo, CA declares Chapter 9 bankruptcy; more cities to follow?
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.
 
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 :)
 
... 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.

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.
 
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.

It has changed dramatically in the past couple years...........;)
 
The reality is most citizens are woefully uninformed about what's going on at City Hall until something blows up. The politicians just want to get re-elected and they spend all of their time and energy doing magic shows to keep the uninformed appeased and in the dark. The news media knows that most people don't want to be informed as much as they want to be entertained, so they only publish/broadcast stories that show things going wrong (because bad news gets watched/read). And even then they almost always go after low hanging fruit.

When politicians start over promising services they run up against the reality that there is not enough money in the treasury to cover the bills. Administrators get pressured to produce more income or reduce spending. (God forbid they tell the citizens the truth and cut services or increase taxes, because either of those two are a sure fire way to get un-elected.)

The bottom line is that common sense is completely absent in the decisions that are made. Everybody is talking out of both sides of their mouth and doing the opposite of what they say they are trying to do. And when money is involved - logic leaves the building.

So you wind up with city services that are often just a sham that is either operating understaffed and underfunded, or is a glitzy cover up that is over funded and overstaffed in order to distract you from the stuff that isn't working very well. If something blows up and the media notices, they just shift funding and manpower until it looks good again.

I've seen entire functioning divisions created to address a problem, disbanded or reduced to transfer people and assets to someplace where there is another problem, and then brought back to bigger than ever five years later because the old problem was out of control again. It's psychotic crisis management. Not only are millions of dollars wasted, but the citizens are the ones who also pay the price in screwed up service. Sometimes they pay with their property, and sometimes they pay with their lives. But meanwhile, the politicians who created the mess keep getting reelected because they haven't raised taxes and they keep pulling off the magic show.

And the current pension crisis is just more of the same.

To the taxpayers and voters they said "Hey, we can keep services at their current superior levels without raising taxes. Pleeease reelect me", and to the employees they said "Pleeeease stay, we can't replace you. We'll give you a mediocre raise but we'll make your retirement golden if you'll just stay a few more years."

Who is to blame? Well, I would go to sleep with a big smile tonight if we all agreed that first thing tomorrow we were going to string up all the politicians. But who bought the pig in a poke? Was it the employee who entered into a contractual agreement that stipulated everything in black and white, or the voters who kept reelecting people who sold them BS by the ton?
 
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Just curious, in your public sector job do/did you pay into SS or is your job one of those excused from participation?

I paid into both a retirement system (7.5% of salary) and SS. At retirement I had a choice of either taking a reduced pension and having SS on top of that, or taking more immediately and having it reduced by the predicted amount of SS at 62. I took the first option.
 
The reality is most citizens are woefully uninformed about what's going on at City Hall until something blows up. The politicians just want to get re-elected and they spend all of their time and energy doing magic shows to keep the uninformed appeased and in the dark. The news media knows that most people don't want to be informed as much as they want to be entertained, so they only publish/broadcast stories that show things going wrong (because bad news gets watched/read). And even then they almost always go after low hanging fruit.

When politicians start over promising services they run up against the reality that there is not enough money in the treasury to cover the bills. Administrators get pressured to produce more income or reduce spending. (God forbid they tell the citizens the truth and cut services or increase taxes, because either of those two are a sure fire way to get un-elected.)

The bottom line is that common sense is completely absent in the decisions that are made. Everybody is talking out of both sides of their mouth and doing the opposite of what they say they are trying to do. And when money is involved - logic leaves the building.

So you wind up with city services that are often just a sham that is either operating understaffed and underfunded, or is a glitzy cover up that is over funded and overstaffed in order to distract you from the stuff that isn't working very well. If something blows up and the media notices, they just shift funding and manpower until it looks good again.

I've seen entire functioning divisions created to address a problem, disbanded or reduced to transfer people and assets to someplace where there is another problem, and then brought back to bigger than ever five years later because the old problem was out of control again. It's psychotic crisis management. Not only are millions of dollars wasted, but the citizens are the ones who also pay the price in screwed up service. Sometimes they pay with their property, and sometimes they pay with their lives. But meanwhile, the politicians who created the mess keep getting reelected because they haven't raised taxes and they keep pulling off the magic show.

And the current pension crisis is just more of the same.

To the taxpayers and voters they said "Hey, we can keep services at their current superior levels without raising taxes. Pleeease reelect me", and to the employees they said "Pleeeease stay, we can't replace you. We'll give you a mediocre raise but we'll make your retirement golden if you'll just stay a few more years."

Who is to blame? Well, I would go to sleep with a big smile tonight if we all agreed that first thing tomorrow we were going to string up all the politicians. But who bought the pig in a poke? Was it the employee who entered into a contractual agreement that stipulated everything in black and white, or the voters who kept reelecting people who sold them BS by the ton?

You are so right on all counts.

In a way I think all of us are to blame because we keep on voting these rascals into office and we keep on listening to their little sweet lies.

Unfortunately at the end of the day when things hit the fan we are the one's who are left holding the bag of dung.:bat:

God Bless Us All:angel:
 
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