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Goldman Sachs, in a research report last week, acknowledged the pension issue but concluded the states were very unlikely to default on their debt and noted the states had 30 years to close pension shortfalls.
The above is from the link
As has been noted previously this topic has more bark than bite. Pension funds are loaded with years worth of payouts. It is a long term what if question in most states. Reform is needed but not panic!
Sorry the link won't work. It is from the NYT today
State finances are usually controlled by politicians so be sure that changes needed will not happen until the projected default happens within the term of the elected officials.
We have known that SS has needed additional adjustments for the past 10 years but almost all pols have been in denial (yeah, I know Bush tried to get a conversation of the subject a few years ago it was a failure).
Until we find a way to take financial decisions away from elected officials we will surely bankrupt every pension in the country.
CSPA just did a segament o sate epnsion funds that actaully showed that they are doing much better than privte funds. Most are run by professsionals on a board and not direct tied to the state government.Most are very conseravtively invested compared to private pensions and therefore came out uch better in this recession.The average state pension fund targets 8% over a very long term in their projections and has done in many cases much better .
CSPA just did a segament o sate epnsion funds that actaully showed that they are doing much better than privte funds. Most are run by professsionals on a board and not direct tied to the state government.Most are very conseravtively invested compared to private pensions and therefore came out uch better in this recession.The average state pension fund targets 8% over a very long term in their projections and has done in many cases much better .
State finances are usually controlled by politicians so be sure that changes needed will not happen until the projected default happens within the term of the elected officials.
We have known that SS has needed additional adjustments for the past 10 years but almost all pols have been in denial (yeah, I know Bush tried to get a conversation of the subject a few years ago it was a failure).
Until we find a way to take financial decisions away from elected officials we will surely bankrupt every pension in the country.
Much of the issue with state pension funds was a result of accounting law changes comparable to mark to rule in the financial market.
Tax Receipts Rebound as 15 Biggest States See Gain (Update2) - Bloomberg.com
March 30 (Bloomberg) -- The two-year slide in tax collections that opened a $196 billion gap in U.S. state budgets has stopped, easing pressure on credit ratings and giving leeway to lawmakers as they craft spending plans for next year.
The 15 largest states by population forecast a 3.9 percent gain in tax revenue in fiscal 2011, budget documents show. The 50 states on average may increase collections by about 3.5 percent, the first time in two years the figure is expected to grow, said Mark Zandi, chief economist at Moody’s Economy.com,
I know that Nevada has some shortfall, but part of that is the way its accounted per federal law. Also its protected by law from being raided (though that could change at the whim of the legislature and governor) and the Nevada constitution has a clause concerning contracts that has been challenged concerning employee and retirement benefits. The Nevada Supreme Court ruled that the state has an implied contract with employees and cannot change benefits after you are vested. I feel pretty safe. I tell my wife that if my pension goes away, that will probably be the least of our concerns as the country has probably collapsed completely. Besides, why worry about something you have no control over.
"In a recent AEI working paper I've shown that the typical state employee public pension plan has only a 16% chance of solvency. More public pensions have a zero probability of solvency than have a probability in excess of 50%. When public pension assets fall short, taxpayers are legally obligated to make up the difference. The market value of this contingent liability exceeds $3 trillion. "
"In a recent AEI working paper I've shown that the typical state employee public pension plan has only a 16% chance of solvency. More public pensions have a zero probability of solvency than have a probability in excess of 50%. When public pension assets fall short, taxpayers are legally obligated to make up the difference. The market value of this contingent liability exceeds $3 trillion. "
Did you link the working paper and solvency over how long a time period? What rate of return does it assume and how have individual state funds done since the March low?
AEI - Papers
This paper first uses a Monte Carlo simulation of current pension assets and projected market returns to calculate the probability that public sector pension assets will be sufficient to fund accrued benefits. The typical public sector pension has only a 16 percent probability of paying full accrued benefits with assets on hand. A larger number of public pension plans have zero probability of paying accrued benefits than have a probability in excess of 50 percent.
The above is from the link, not sure what the Monte Carlo method is.
American Enterprise Institute - Wikipedia, the free encyclopedia
The American Enterprise Institute for Public Policy Research (AEI) is a conservative think tank founded in 1943. Its stated mission is "to defend the principles and improve the institutions of American freedom and democratic capitalism—limited government, private enterprise, individual liberty and responsibility, vigilant and effective defense and foreign policies, political accountability, and open debate."[1] AEI is an independent non-profit organization supported primarily by grants and contributions from foundations, corporations, and individuals. It is headquartered in Washington, D.C.
AEI scholars are considered to be some of the leading architects of the second Bush administration's public policy.[2] More than twenty AEI scholars and fellows served either in a Bush administration policy post or on one of the government's many panels and commissions.[3] Among the prominent former government officials now affiliated with AEI are former U.S. ambassador to the U.N. John Bolton, now an AEI senior fellow; former chairman of the National Endowment for the Humanities Lynne Cheney, a longtime AEI senior fellow; former House Speaker Newt Gingrich, now an AEI senior fellow; former Dutch member of parliament Ayaan Hirsi Ali, an AEI visiting fellow, and former deputy secretary of defense Paul Wolfowitz, now an AEI visiting scholar. Other prominent individuals affiliated with AEI include Kevin Hassett, Frederick W. Kagan, Leon Kass, Irving Kristol, Charles Murray, Michael Novak, Norman J. Ornstein, Richard Perle, Radek Sikorski, Christina Hoff Sommers, and Peter J. Wallison.[4]
I have linked the references made by cdelena along with info about the source. If you are of the Wolfowitz, Richard Perle, Lynn Cheney and John Bolton school of thought then you might buy into their reasoning. Others may not but lurkers can evaluate for themselves. That is what it is always about thinking for yourself.
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