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Quite simple explanation really; (overwhelmingly) Democratic controlled states make or made large promises to various municipal unions in exchange for "support". Those promises often included generous pension and or wage packages. Because such things are often kicked down the road (pension benefits) those who made such promises are often either out of office or dead when the bills come due. Detroit, MI and Stockton, CA are two glaring examples.
These states *know* they have problems, but they also are caught between a rock and hard place. Average residents are getting fed up with paying ever increasing taxes to fund such "lavish" pensions, especially when they themselves usually do not have. OTOH the last thing any local politician wants to do in such states is anger the unions. Governors like Scott Walker are in states that thus far seem oblivious to all this, however that is not the case for say New York or New Jersey.
Or Illinois. Yep. That "support" is both donations to political campaigns and votes.
In some states, Maryland for one, legislators saw a fully funded pension system out to as far as you could project with money not being "used" and raided it for pet projects and General Fund budget balancing.
That then creates a need to replenish the pension system out of general tax revenues in order to meet obligations.
But, as usual, most of you are placing the blame on employees who, at least in my state's case, have contributed to their pension plan every single paycheck throughout their careers.
IMO, numbers like these are useless due to vast difference in the cost of living in each of these areas.
The chart indicates percentage funded so that has nothing to do with COL. New Jersey had an ongoing battle and Christie just won in court regarding his ability to freeze COLA otherwise they would be insolvent. CT is more complicated with pension caps and lawsuits but still at the heart of it is public pensions.
The Rhode Island Governor, Gina Raimondo, has done great job addressing their pension shortfalls but she had the laws of RI on her side relative to because pensions are guided by statues rather than contracts.
In some states, Maryland for one, legislators saw a fully funded pension system out to as far as you could project with money not being "used" and raided it for pet projects and General Fund budget balancing.
That then creates a need to replenish the pension system out of general tax revenues in order to meet obligations.
But, as usual, most of you are placing the blame on employees who, at least in my state's case, have contributed to their pension plan every single paycheck throughout their careers.
Would such employees get only what their contributions would yield? Or are they promised SIGNIFICANTLY MORE than that?
Would such employees get only what their contributions would yield? Or are they promised SIGNIFICANTLY MORE than that?
Just like any money you put in an interest bearing account you have decades of compounding, so of course the end number will be more than the total actual contribution.
When the system started being raided it was totally self funded with zero needed from the General Fund (except the employer piece. Maryland was real good at keeping that up, unlike some states which kicked it down the road. That is part of the problem with some of the public pension funds, the employer piece wasn't put in).
I'm 62, I will have to live to around 100 to deplete what I have credited as my total pension benefit.
The Rhode Island Governor, Gina Raimondo, has done great job addressing their pension shortfalls but she had the laws of RI on her side relative to because pensions are guided by statues rather than contracts.
I've actually read numerous thing about Raimondo & record is pretty mixed. She has successfully stopped some of the money creep but she also gave away investing responsibility to Wall Street types who have both overcharged for their services and underperformed in terms of returns. Much of that was done in her post prior to becoming governor.
I think the big problem for these states is they are high cost of living, not gaining population at the same rates as other states and they let people claim benefits too early. I would let me work toward the full retirement but not start paying til they hit retirement age. In Rhode Island at one point fire fighters could start drawing at 20 years & when you throw in the last minute/6 month duration promotions some were getting at 19.5 years to spike their retirments you realize it is not sustainable. In theory you could see an 80 year old who collected a pension/retirement benefits for 40 years from a 20 year job tenure.
Just like any money you put in an interest bearing account you have decades of compounding, so of course the end number will be more than the total actual contribution.
Agree, but local and state employees were guaranteed MORE than that, hence the HUGE deficits in blue state public employee pension plan obligations.
I've actually read numerous thing about Raimondo & record is pretty mixed. She has successfully stopped some of the money creep but she also gave away investing responsibility to Wall Street types who have both overcharged for their services and underperformed in terms of returns. Much of that was done in her post prior to becoming governor.
I think the big problem for these states is they are high cost of living, not gaining population at the same rates as other states and they let people claim benefits too early. I would let me work toward the full retirement but not start paying til they hit retirement age. In Rhode Island at one point fire fighters could start drawing at 20 years & when you throw in the last minute/6 month duration promotions some were getting at 19.5 years to spike their retirments you realize it is not sustainable. In theory you could see an 80 year old who collected a pension/retirement benefits for 40 years from a 20 year job tenure.
Places like Kentucky an SC are also grossly underfunded, I think it has more to do with the management of the pensions and bringing them under control. Many states politicians ignore the escalating costs and kick the can down the road, NJ is a perfect example of that. You can't allow pensions to escalate without raising employee donations or increasing taxes, obviously many governors have refused to address the shortfall. They want to get elected and want to have both public servants and taxpayers support them, they cannot have it both ways.
Like I said Rhode Island had options that other states do not in that it could limit retiree pensions. One of the ongoing problems in every state are the 8.25% targets for pension funds and also their reliance on the stock market, in reality some of the funds only returned around 2% at times. RI is still not out of the woods yet but they were on the verge of a disaster but it's always refreshing to see leadership stand up to reality.
NY State re-did it's pension system several times, there are actually people that never paid into the system back in the 1970's, then others that only paid in for 10 years, that has changed
Agree, but local and state employees were guaranteed MORE than that, hence the HUGE deficits in blue state public employee pension plan obligations.
I don't know that is what happened. In my case, beginning in year 10 of employment, I got yearly statements of what my pension would be at various years of service/age markers. Those didn't change , except for inflation adjustments, by more than a couple dollars from the first one until my retirement after 32 years.
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