I don't think there is necessarily much to be gained by trying to figure out who is to blame. Even if it's possible to figure out where the blame lies, it may not be possible to get the money back from the guilty party or parties. It's more useful, IMO, to determine how to fix the problem and prevent it from recurring, and that solution is going to vary from system to system.
(I'll take this second part first...)
Unfortunately, there's a lot of truth to that. If we were somehow to determine that certain politicians and/or labor leaders were 'to blame', it's not like they have enough money in their pockets to make a dent in the damage they have done (and this makes the wild assumption that we could get our hands on what they have). But one benefit of analyzing the 'blame' is to help prevent it going forward.
Maybe it is splitting hairs, but I differentiate between finding the cause of a problem and placing the blame for a problem. Finding the cause asks "why?" or "how?" the problem arose, with the goal of solving the problem and preventing recurrence; placing the blame asks "who?", possibly with the aim of punishing the culprit. IMO, answering the "why" and "how" questions is of much more useful than answering the "who" questions. If the problem is spiking, for example, it won't raise the funding level a bit to determine that it was union reps or politicians or both or neither who created the loophole. The only thing that will help get the fund back to solvency the important thing is to close it and stop the drain on the system.
OK, each case is different - but what to do in the case you describe? Ideally, we would want that fund to get back to 100% funding. Offhand, I have to wonder if they were too aggressive with their AA to have a 45% drop for a market drop of 25%. I assume the rest is draw down from pension payments, but that seems like a lot of draw down if it was really 100% funded, but one would need some numbers and do the math. I wonder if the 100% number was based on too optimistic assumptions - maybe we would say it was not really 100%?
I wonder if the AA wasn't too aggressive also, but that's 20-20 hindsight. IIRC it's roughly 60% equity/40% fixed, which is pretty typical of pension funds, isn't it? Of course "pretty typical" and "overly aggressive" are not mutually exclusive. Maybe the typical pension fund
was too aggressive, and that's why so many are in trouble now. But even if the fund was too heavy on stocks, that doesn't prove that anyone knowingly took action which they knew in advance it would result in underfunding. To assume this is the case would still be attributing to malice what may have been due to ignorance on the part of pension fund management and/or the actuaries.
There was another contributing factor. The reason I know the fund was at 100% in 2007 is that that's the last time the floor COLA was increased. This wasn't the result of anything done at the time by either the union or public officials, it went up because hitting 100% funding automatically triggers an increase, a feature that was written into the ordinance that established the floor, back in 2000 or so. Who wrote the original legislation, at whose prompting, and what the actuaries said about it at the time, I don't know and don't really care. I do think the automatic ratcheting-up of the floor COLA should be removed. The way the law is written, it raises the floor without raising the contributions to compensate.
So are they discussing ways to increase the funding level? That could be increases in employee contributions, employer contributions (from taxpayers) or cuts to benefits. Or, one could assume the market will come back and everything will be fine. Have they considered an insurance program - similar to what private pensions do (the PBGC). With that insurance program, a collapsed pension plan does not go to taxpayers for help, they tap into the insurance plan that they have been paying into.
I won't re-hash the details, and I would not want to see promises to the workers altered, but it isn't reasonable to think there would not be push-back from taxpayers if the biggest part of the answer is raise taxes to fix it. They have their own problems to deal with, and they're not getting help.
-ERD50
Yes, means of increasing the funding level are being discussed. Both employee contribution rate and employer match went up one percentage point the beginning of this year and will go up by the same amount starting Jan 1 2012, which is about a 25% boost in total contributions (from just over 8% to just over 10%). The latest idea I have heard about is changing the credit interest rate (used to calculate lump sums). That has been passed by the Board of the pension system so the City Council will be voting on it in the near future. I checked, and the Seattle fund is definitely not covered by the PBGC; as far as I know, there is no existing insurance system for public pensions. Maybe that's a good idea for the future, but right now, I don't see where a pension system would get the money to pay for insurance when it's underfunded already. The premiums for such a system would doubtless be sky-high, just like health insurance for someone with a pre-existing condition.