California alone had $113 billion in unfunded liability (Nice: mortgage, credit card)

[TVC15]

Originally Posted by ryuns

For some reason, I'm predicting that the level of discourse in this thread will revolve around fingerpointing and naked links to partisan websites, and not actually the appropriate expected return of professionally managed investments or reasonable and considered reforms to pension promises.

Please help it not to go in that direction.

Feel free to add valued insight about the topic.

[NewToCA]

Originally Posted by TVC15

Show us the real number then.

I also suppose that you don't think that CA needs pension reform?

...And Gov Brown recently signed a bill concerning pension reform, significantly increasing the amount employees contribute and addressing some of the past problems.


Gov. Brown signs California pension reform bill - San Jose Mercury News

[TVC15]

Originally Posted by NewToCA

...And Gov Brown recently signed a bill concerning pension reform, significantly increasing the amount employees contribute and addressing some of the past problems.


Gov. Brown signs California pension reform bill - San Jose Mercury News

Yes I was aware of this already...but please don't think this is all that needs to be done to address this issue.

[NewToCA]

Originally Posted by TVC15

Yes I was aware of this already...but please don't think this is all that needs to be done to address this issue.

No, but it was a significant step in the right direction, and all analysis of the public pension issue(s) should be done with an awareness that this substantial step has already been taken to narrow the funding gap.

More needs to be done, nobody on either side of the political divide disagrees here. However, much has already been done and it should help address future shortfalls.

You know that one of the most significant contributions to the pension funding shortfall is the poor performance of the overall stock market. The S&P 500 index actually is slightly lower than it was over 12 years ago. This impacts the pension funds significantly, and the fault for poor financial performance by the stock funds doesn't lie with the state workers nor the pension fund managers.

[TVC15]

Originally Posted by NewToCA

No, but it was a significant step in the right direction, and all analysis of the public pension issue(s) should be done with an awareness that this substantial step has been taken to narrow the funding gap.

More needs to be done, nobody on either side of the political divide disagrees here. However, much has already been done and it should help address future shortfalls.

You know that one of the most significant contributions to the pension funding shortfall is the poor performance of the overall stock market. The S&P 500 index actually is slightly lower than it was over 12 years ago. This impacts the pension funds significantly, and the fault for poor financial performance by the stock funds doesn't lie with the state workers nor the pension fund managers.

Agree.

That second link that I posted with ugly graph explains the poor investment returns.

CalPERS 1% Annual Return Adds to California Ills - Income Investing - Barrons.com

Legislative Alert July 2012 | PARS

http://www.pionline.com/article/20120409/REG/120409899

[NewToCA]

Originally Posted by TVC15

Agree.

That second link that I posted with ugly graph explains the poor investment returns.

CalPERS 1% Annual Return Adds to California Ills - Income Investing - Barrons.com

Legislative Alert July 2012 | PARS

http://www.pionline.com/article/20120409/REG/120409899

I am pro pension, not just for public workers but for everyone.

However, just limiting the discussion to the public worker sector, I think we need an overall grand bargain. Something like for every year work you gain 1% in pension (40% after 40 years), and that both the employee and employer fund it at something like 4% each of the employee pay. I also support a supplemental 401K type of plan for employees, but I'm more reluctant to support this until I see something done about the unequal treatment of capital gains in retirement accounts vs everyday investment accounts.

[TVC15]

Originally Posted by NewToCA

I am pro pension, not just for public workers but for everyone.

However, just limiting the discussion to the public worker sector, I think we need an overall grand bargain. Something like for every year work you gain 1% in pension (40% after 40 years), and that both the employee and employer fund it at something like 4% each of the employee pay. I also support a supplemental 401K type of plan for employees, but I'm more reluctant to support this until I see something done about the unequal treatment of capital gains in retirement accounts vs everyday investment accounts.

I personally am not sure what I think about being for or against the pension system.

I have never worked for a company that offered a pension system.

But from what I have seen with pension systems is that they don't seem to work out well for the company. Most are too big and mismanaged. Also if the company folds there is a mess that ensues to collect the pension.

They do seem to be hurting CA severely.

All that I have seen come from pension systems don't seem to look positive for anyone other than the employee. I have also met many a person who hated their job but hung in there just because it had a pension system.

Just my observations.

I came very close to taking a job in Australia at the beginning of this year. They have a very interesting retirement system that I would also have been able to benefit from. They told me that upon going back to the states that I was entitled to take my full year of superannuation with me! Superannuation in Australia - Wikipedia, the free encyclopedia

I don't understand why we are not taught all through our school years how to save and invest money for retirement. It shoud be a required curriculum for all kids at some point in school.

[Phil306]

"I don't understand why we are not taught all through our school years how to save and invest money for retirement. It shoud be a required curriculum for all kids at some point in school."

Because that is NOT the responsibility of a school. That is the responsibility of the PARENT. Oh, I forgot, its never someone's personal responsibility to take charge of their kids and teach them something. We are, after all in California, its always someone's else's responsibility.

[ryuns]

Originally Posted by TVC15

Please help it not to go in that direction.

Feel free to add valued insight about the topic.

Fair point! Yeah, sorry, I was just being a douche. I long for nuanced talk around these topics, but I've become a bit calloused from reading the back-and-forth on similar threads that pit those reveling in the schadenfreude derived from any trouble Kommie Kalifornia and Obummer (ugh) seem to face vs the pollyannas. My own lack of time to craft a sufficient number of well thought out responses to seem to make a dent in that discourages me. To be fair, there's some really good discussion here.

Anyway. Pragmatically, we may need an alternative to pensions. History has shown that, generally, governments are not good stewards of them. They overpromise them to employees to make up for stagnated wages when they can't afford to give a proper raise, they waive requirements for employee contributions when expected returns are good, and they arguably overestimate their own expected return (this is a hugely difficult issue though, and it's not as simple as saying the 30-year bond return is "correct" and historical averages are "wrong"). And this is me as a liberal talking. I'd like to see more government services (better infrastructure, more mass transit, universal health care) and the pensions issue is a huge ball and chain for well-meaning governments trying to do their jobs in the present, saddled with the debts of the poor decisions of their predecessors.

Re: expected return. Super tricky issue. If you save for retirement personally (401k, etc) and have done the calculations yourself, you know the degree to which your projected return on investment your projected retirement date is. Pensions are only slightly less susceptible because they can invest, theoretically, for time infinity. They can weather financial crises arguably better than an individual retiring at the "wrong time" because of this. (This can be mitigated in large part by individuals who reduce the risk and expected return of their portfolio as retirement approaches. How many 60-year old were on the news in the last 5 years complaining about how half their savings was wiped out? Partly their fault, as they should have been mostly invested in bonds at that point, but I digress...).

Do we need to shift away from pensions? Probably, but I don't know how. The huge unfunded liability will have to get plugged somehow, and moving new employees (who have proportionately higher contributions due to Brown's legislation) to a defined contribution scheme won't help. But taxpayers would surely benefit by moving that liability off the books. Even if the "unfunded liability" were zero, the state (which is to say taxpayers) still bears the investment risk, and it would be a huge benefit to move retirement off the books at the end of the fiscal year.

Assuming we lack the political will or desire to do that, I think there are some additional steps to take. While CalPERS/STRS projections for expected return are understandable, I think they need to dial that back a little to reduce the risk of taxpayers getting stuck with the bill. Maybe not to the super low "devil's advocate" number (30 year bond rates while bonds are at record low seems a bit unfair), but lower than the historic averages. And Brown's legislation should have gone farther. Increase gradually the contributions from EVERYONE (mostly from new employees, but gradually from current employees too, as well as, gradually, the state's contribution), and delay the retirement age with less than X number of years of service, gradually increasing said delay until you get to zero years of service (ie, new employees).

I personally prefer a defined contribution plan. The money in my 401k and IRA is mine immediately, and I take it with me no matter what. It's not a political football.

Just my two cents.

[tetka_grunya]

Originally Posted by NewToCA

No, but it was a significant step in the right direction, and all analysis of the public pension issue(s) should be done with an awareness that this substantial step has already been taken to narrow the funding gap.

More needs to be done, nobody on either side of the political divide disagrees here. However, much has already been done and it should help address future shortfalls.

You know that one of the most significant contributions to the pension funding shortfall is the poor performance of the overall stock market. The S&P 500 index actually is slightly lower than it was over 12 years ago. This impacts the pension funds significantly, and the fault for poor financial performance by the stock funds doesn't lie with the state workers nor the pension fund managers.

Are CA taxpayers responsible for this?