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According to CPER, the "unfunded liabilities are 0.22 percent of projected GDP over the next 30 years." That is hardly a crisis.
Moreover, they are unfunded because politicians decided not to fund promises that they already made so they can keep taxes low or divert the money to pet projects.
According to CPER, the "unfunded liabilities are 0.22 percent of projected GDP over the next 30 years." That is hardly a crisis.
Moreover, they are unfunded because politicians decided not to fund promises that they already made so they can keep taxes low or divert the money to pet projects.
Remind us again why politicians should be running retirement schemes or anything for that matter
A lot of public service employees are going to get a rude awakening when they go to retire. These states need to do what Florida did, require employee contributions to the state pension plan.
Across the nation, cities and states are watching Detroit's largest-ever municipal bankruptcy filing with great trepidation. Years of underfunded retirement promises to public sector workers, which helped lay Detroit low, could plunge them into a similar and terrifying financial hole.
A CNBC.com analysis of more than 120 of the nation's largest state and local pension plans finds they face a wide range of burdens as their aging workforces near retirement.
Great thread topic.
Illinois is already having difficult conversations about thier state pension plan which is as a % of GDP in the bottom 2-3 in the nation. I have MANY relatives that would be impacted by this.
California uses hillariously terrible interest assumptions and claims it's pensions are only 200bil in the red while independent analysts say the number is more like 750billion.
There is going to be some pain for anybody in these plans.
According to CPER, the "unfunded liabilities are 0.22 percent of projected GDP over the next 30 years." That is hardly a crisis.
Moreover, they are unfunded because politicians decided not to fund promises that they already made so they can keep taxes low or divert the money to pet projects.
That's right.
But private sector has rules, regulations, oversight and minimum funding requirements.
And private sector has had multiple pension reforms over the past 10+ years.
Private sector has PBGC for additional protection.
All this came from government to protect private workers' penions.
Yet..public pensions have no equivalent.
There is no watchdog for public pensions because that would be like the fox guarding the chicken house.
You could have at least had the Fed overseeing state pension funds and mandating a minimum funding level. But they didnt' do that.
So here you sit with several states at 50% or less funding.
That number could be worse because the Fed is 2 years behind in reporting..2011 figures are what they have today.
Yet corporations are held to an 80% min funding level.
With wages and hours declining you are not going to get the extra tax money to fund those public pensions.
If public employees were smart they'd take a cash payout and buy their own annuity with that and get the city/state government out of the picture. I don't work in the public sector so I don't know if they have that choice; private workers with pensions do.
Be careful what you wish for ? LOL..it's either going to be that or they will be SOL with nothing like municipalities have already done.
I would say if you are a public sector employee close to retirement then take the lump sum and get yourself an annuity.
i think you're looking at the worst-case examples, like the state of IL or the city of Detroit, and applying that across the board to everyone.
Quote:
Originally Posted by HappyTexan
So here you sit with several states at 50% or less funding.
That number could be worse because the Fed is 2 years behind in reporting..2011 figures are what they have today.
Yet corporations are held to an 80% min funding level.
With wages and hours declining you are not going to get the extra tax money to fund those public pensions.
If public employees were smart they'd take a cash payout and buy their own annuity with that and get the city/state government out of the picture. I don't work in the public sector so I don't know if they have that choice; private workers with pensions do.
I don't feel sorry for public sector workers; they know the deal, or at least, they ought to. If you don't trust your employer -- like the state of California or the state of Illinois -- then you go work for someone else.
On the other hand, here in North Carolina, public pensions are pretty reasonable, well-funded, and noncontroversial.
If you ask me -- what gets states in trouble is assuming an unrealistic rate of return. THAT is something that should be more-heavily regulated by the Federal Government. These idiot politicians at the state level shouldn't be allowed to assume that their pension fund will return 8% or 10% per year; the whole idea is predicated upon the assumption that they can "predict the future."
That assumed rate of return should be pegged to the prevailing interest rate, or something.
According to CPER, the "unfunded liabilities are 0.22 percent of projected GDP over the next 30 years." That is hardly a crisis.
Moreover, they are unfunded because politicians decided not to fund promises that they already made so they can keep taxes low or divert the money to pet projects.
1. The US GDP is around 15 trillion. So the percentage of the shortfall is somewhere in the 6-25% range of a single years GDP.
2. Using a 30 year GDP to water down the % is both fair and unfair considering it's a PAYGO system but at the same time there will be additional entrants and accrued liabilities.
(IMO The real crisis is more cashflow related given the boomer surge.)
3. The shortfall is only 1 trillion if you believe the state estimates which use interest rates of 7% or more to discount their liabilities. Um.....yeah......that's not happening. If you use more reasonable assumptions the problem is closer to 4 trillion.
4. Looking at the problem in total is IMO not a good thing. Milwaukees public pension is in awesome shape as are several others around the country. Illinois' is in terrible shape and they are already discussing benefit cuts to retirees. That's the crisis, Milwaukee isn't going to start singing kumbayah and mail the IL pension fund a fat check to level out the problem. It's a fund by fund crisis.
According to CPER, the "unfunded liabilities are 0.22 percent of projected GDP over the next 30 years." That is hardly a crisis.
Moreover, they are unfunded because politicians decided not to fund promises that they already made so they can keep taxes low or divert the money to pet projects.
So the Fed is going to cover state/city/county pensions that are not funded ?
That article is misleading.
Each city/county/state is responsible for their own pensions. The Fed has nothing to do with it and neither does the GDP.
i think you're looking at the worst-case examples, like the state of IL or the city of Detroit, and applying that across the board to everyone.
I don't feel sorry for public sector workers; they know the deal, or at least, they ought to. If you don't trust your employer -- like the state of California or the state of Illinois -- then you go work for someone else.
On the other hand, here in North Carolina, public pensions are pretty reasonable, well-funded, and noncontroversial.
If you ask me -- what gets states in trouble is assuming an unrealistic rate of return. THAT is something that should be more-heavily regulated by the Federal Government. These idiot politicians at the state level shouldn't be allowed to assume that their pension fund will return 8% or 10% per year; the whole idea is predicated upon the assumption that they can "predict the future."
That assumed rate of return should be pegged to the prevailing interest rate, or something.
All employees, private or public, that have pensions should be aware of what's going on.
You get an annual statement so there should be no surprise.
Yet we read about how many can't manage their 401Ks or even know how to invest so I'd wager that annual pension funding statement gets put "in the pile" and forgotten.
The reason they are underfunded is that the people who promised them did not make contributions required over the years that were required to keep those promises. They reneged. They failed in their responsibility as public officials. That is what I meant.
They cooked the books - they also did that with the Union leaders permission. The Unions and the Governments had/have a quid pro quo relationship - these Pensions are local, they are going to have to be solved locally. The Unions supported these "local officials" and the members followed along like blind sheep.
Union members fail to understand that there is NO MONEY for some of their Pensions - it doesn't matter what they were "promised", they failed to keep an eye on the ball ..... the "ball" is to make sure the money is going to be there when they need it.
Throwing a tantrum is not going to provide the money for retirees - holding Union leadership and local officials accountable is the place to start. There is going to be some pain for all of them. Perhaps the Union leaders should not have been spending Millions of dollars a year on Boondoggle trips to Vegas and on Contributions to Politicians and Political parties.
Clean up your House.
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That's the crisis, Milwaukee isn't going to start singing kumbayah and mail the IL pension fund a fat check to level out the problem. It's a fund by fund crisis.
