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Day of Reckoning on California Pensions?
The LA Times posted an editorial, Day of reckoning on pensions:
The
housing bubble and subsequent Wall Street collapse wreaked havoc on
the nation's retirement savings, as many pension funds and 401(k) plans
suffered losses of 30% or more. State and local governments are now
facing huge unfunded pension liabilities, prompting policymakers to
scramble for ways to close the gap without slashing payrolls and
services. But a new report from the
Little Hoover Commission in Sacramento makes a more troubling point:
Many state and local government employees have been promised pensions
that the public couldn't have afforded even had there been no crash.The
commission's analysis of the problem is hotly disputed by union
leaders, who contend that the financial woes of pension funds have been
overblown. The commission's recommendations are equally controversial:
Among other things, it urges state lawmakers to roll back the future
benefits that current public employees can accrue, raise the retirement
age and require employees to cover more pension costs. Given that state
courts have rejected previous attempts to alter the pensions already
promised to current workers, the commission's recommendation amounts to a
Hail Mary pass. Yet it's one worth throwing.A bipartisan, independent agency that promotes efficiency in government, the Little Hoover Commission
studied the public pension issue for 10 months before issuing its
findings Thursday. Much of the 90-page report is devoted to making the
case that, to use the commission's blunt words, "pension costs will
crush government." Without a "miraculous" improvement in the funds'
investments, the commission states, "few government entities —
especially at the local level — will be able to absorb the blow without
severe cuts to services."The problem is partly demographic.
The number of people retiring from government jobs is growing rapidly,
and longer life expectancies mean that a growing number of retirees will
collect benefits for more years than they worked. But the report
argues that political factors have been at least as important in
driving up costs, starting with the Legislature's move in 1999 to
reduce the retirement age for public workers, base pensions on a higher
percentage of a worker's salary and increase benefits retroactively.
The increases authorized by Sacramento soon spread across the 85 public
pension plans in California.Compounding
the problem, the state has increased its workforce almost 40% since
the pension formula was changed and boosted the average state worker's
wages by 50%. Local governments, meanwhile, raised their average
salaries by 60%. Much of the growth came in the ranks of police and
firefighters, who increased significantly in number and in pay.There's
nothing inherently wrong with generous pension plans. Pensions, after
all, are just a form of compensation that's paid after retirement, not
before. The problem, particularly for local governments, is that the
plans are proving to be far costlier than officials anticipated or
prepared for. By their own reckoning, the 10 largest public pension
systems in California had a $240-billion shortfall in 2010.When
the funds don't have enough money to cover their long-term liabilities,
state and local governments are compelled to increase their
contributions. In Los Angeles, the report says, the city's retirement
contributions are projected to double by 2015, taking up a third of the
city's operating budget. It projects that governments throughout the
state will have to raise their contributions by 40% to 80% over the next
few years, then maintain that higher rate for three decades.The
more tax dollars governments have to devote to pensions, the more
they'll have to take from other programs or from taxpayers. That means
more layoffs or pay cuts for public employees, higher taxes, fewer
services, or all of the above.
The situation won't be so dire
if the plans earn more on their investments than expected. But with the
plans typically counting on annual returns near 8%, or twice the
"risk-free" level suggested by some analysts, it seems just as likely that they'll earn less than that, forcing local governments to contribute even more.The
Legislature and some local governments have sought to ameliorate the
situation by reducing benefits for new hires and persuading current
workers to contribute more to their pension funds. The commission's
report, however, argues that these moves aren't sufficient. The savings
from the lower pensions for new employees won't be realized for many
years, and the increased contributions aren't nearly enough to close the
funding gap.The only real solution, the report contends, is to
reduce the benefits that current employees are slated to earn in the
coming years. That's hard to do. California courts have held that
pensions for current employees can be increased without their approval,
but not decreased unless they're given a comparable benefit in
exchange. Nevertheless, the commission calls on the Legislature to give
itself and local governments explicit authority to trim the benefits
that current employees have not yet accrued, without touching the
amounts they have already earned. It also calls for a hybrid retirement
plan that combines a smaller pension with a 401(k) plan and Social
Security benefits, as well as the elimination of a variety of loopholes
used to inflate pensions.The commission is right about the
importance of reducing the liabilities posed by current employees. And
though picking a fight with unions over unilateral reductions in
pensions probably isn't the solution, the report should persuade both
sides to do more at the negotiating table to prevent pension costs from
swamping state and local budgets. As the commission notes, public
employees in California enjoy some of the most generous pension plans
in the country. Those plans won't do them much good, however, if their
employer can't afford to keep them on the payroll.
You can read the Little Hoover Commission's report
for details. It basically sounds the alarm on pensions and states
outright: "pension costs will crush government". From the report:
The
problem, however, cannot be solved without addressing the pension
liabilities of current employees. The state and local governments need
the authority to restructure future, unearned retirement benefits for
their employees. The Legislature should pass legislation giving this
explicit authority to state and local government agencies. While this
legislation may entail the courts having to revisit prior court
decisions, failure to seek this authority will prevent the Legislature
from having the tools it needs to address the magnitude of the pension
shortfall facing state and local governments.The situation is
dire, and the menu of proposed changes that include increasing
contributions and introducing a second tier of benefits for new
employees will not be enough to reduce unfunded liabilities to
manageable levels, particularly for county and city pension plans. The
only way to manage the growing size of California governments’ growing
liabilities is to address the cost of future, unearned benefits to
current employees, which at current levels is unsustainable. Employers
in the private sector have the ability and the authority to change
future, unaccrued benefits for current employees. California public
employers require the ability to do the same, to both protect the
integrity of California’s public pension systems as well as the broader
public good.Freezing earned pension benefits and re-setting
pension formulas at a more realistic level going forward for current
employees would allow governments to reduce their overall liabilities –
particularly in public safety budgets. Police officers, firefighters and
corrections officers have to be involved in the discussion because
they, as a group, are younger, retire earlier and often comprise a
larger share of personnel costs at both the state and local level.
Public safety pensions cannot be exempted from the discussion because of
political inconvenience.
There is no doubt that pension
reforms are needed in California and elsewhere in the US. But all
stakeholders need to do their part. It's not just about cutting
benefits. How about amalgamating all these dinky underfunded city plans
into one large defined-benefit plan and introducing better governance on
existing large plans, including better compensation for pension fund
managers.
Finally, I invite readers to carefully go through a recent presentation by Jean-Claude Ménard,
Chief Actuary of Canada, to the Board of Directors of the Canada
Pension Plan Investment Board. I quote Mr. Ménard: "Overall, the
results confirm that the current legislated rate of 9.9% is sufficient
to sustain the Plan over the long term, with assets projected to
accumulate to $275 billion by the year 2020."
If US states want to bolster their public pension plans, I urge them to contact the Office of the Chief Actuary of Canada.
I consider this to be one of the best departments in the federal
government of Canada made up of truly top-notch professionals who take
great care in researching their findings. Moreover, they are transparent
and welcome exchanges with actuaries from around the world. There is no
reason why US public pensions can't be fixed. All the doomsayers who
want to scrap public pension plans are just peddling fear and nonsense.
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The fix is so simple, cut the pay, benefits and pensions of the state elected officials the same amount you cut the civil servants' pay, benefits and pensions, and there would be no cuts. The elected officials are the sleeziest, slimiest, dirtiest crooks our country has to offer. I, as a civil servant, always hear complaints from my private sector peeps who complain about my pension. And, every time I remind them they literally make twice and much as I do and can easily quit and work for the state for that golden pension, they look at me like I am crazy, then they go right back to complaining about my pension.
The real issue is that all the workers have been ripped off. Private companies promised golden pensions then went banrupt, or refused to fund the pensions as they went along. Many workers in the private sector lost their retirement, but instead of working with union members on pension reform, they blindly attack union members to destroy their pensions as well. Its a race to the bottom while the bankers laugh at the stupid angry people fighting amongst themselves. If we are not smart enough to stick together to ensure a safe, properly paid work force, then we deserve the shit sandwich that was prepared for us.
"Private companies promised golden pensions then went banrupt, ..."
Exactly what your golden pension is going to do to your employer.
"And, every time I remind them they literally make twice and much as I do ..."
You couldn't get a job in the private sector, so any comparison is meaningless.
Private sector employers see government work history on your resume and it goes right in the trash can.
Right, so let's point the fingers (guns?) at the right people in this clusterfsck: The Fed and Washington DC.
"Private companies promised golden pensions then went banrupt, or refused to fund the pensions as they went along."
Private companies had to follow strict rules and regulations for properly funding pension benefits. Private companies cannot just print money or raise taxes to make up for underfunded pension plans as federal, state, and municipal entities can....or at least as they thought they could.
I agree. And, who made those strict rules and regulations that the government itself could not follow? The scam is that when ever there is a perc for some group, there will be regulation to stomp it out. Its all part of the plan....grind the people under the heal of the super rich. Do not fight each other, eat the rich http://www.youtube.com/watch?v=n3kIBBen62s&feature=related
I doubt you could make twice as much in the private sector. That is a tired old canard put forth by people who would probably never make it outside of a sheltered government workshop. It takes more than an equivalent degree to assume you would make twice as much in the private sector. There is a huge.difference in skill, personality, drive, flexibility and work ethic between people who choose most government jobs versus people who have talent and shun them.
You've completely missed the point, topsy. Some people choose the crap gov job for the stability and benefits and some want to roll the dice in the private sector. Pretending that those who would prefer the pension are getting over on you is BS. You could've worked for the government too.
Do let us know when you're ready to fight wildfires, guard violent prisoners, take a bullet to stop a thief, teach the children of ignorant assholes, or spend some quality time at the DMV for less pay.
"take a bullet to stop a thief" lol. Man, there is every kind of kool-aide drinker on here, if you read enough.
Thanks for the laugh, and may G0d bless our boys in blue, our selfless protectors.
"Do let us know when you're ready to fight wildfires, guard violent prisoners, take a bullet to stop a thief, teach the children of ignorant assholes, or spend some quality time at the DMV for less pay."
You can quit and try to get a REAL job in the private sector anytime you wish.
You lazy incompetent govt trough-feeders are finally getting what you deserve, and I'm glad to see it.
"Do let us know when you're ready to fight wildfires, guard violent prisoners, take a bullet to stop a thief, teach the children of ignorant assholes, or spend some quality time at the DMV for less pay." -
I will when you gummint types dig coal, stoke blast furnaces, drive gasoline tankers, work nightshift at 7/11, drive cabs, do stoop labor in the fields, fish for cod, clean septic tanks, milk cows, work high voltage lines, work in a slaughterhouse, and dive on oil rigs.
Therein lies the problem - this is an unnacceptable thought process that leads to collapse.
Gov't has a monopoly on these responsibilities - to our detriment.
/sarc tag missing or what?
There's nothing unacceptable about being willing to do a job that needs to be done, if less fulfilling than astronaut, brain surgeon, or mine: videogame programming.
No one is preventing you from fighting fires: give it your best shot. We'll watch...from a safe distance.
Privatized prisons abound...it's a huge growth industry and part of CA's budget problems (when combined with idiotic 3-strikes laws and 36M peeps).
Home schooling and private academies are available to you: no monopoly there.
The DMV: I don't want to see the results of pay-to-drive private driver testing. It's bad enough as it is.
The unacceptable thought process, to me, is the excluded middle meme of no unions or overpowering crony unions. A better approach would involve finding a balance between fiscal responsibility and fair compensation for people doing unpleasant but necessary work for society. Rant all you want about how zero government would be preferable, but you sound like fools shouting about how green the grass must be over there.
I want to live in a world where the cops, firefighters, teachers, etc are valued and incentivized to do their jobs well so I don't have to forego work to protect my home, watch my possessions go up in flames, or live in a world full of un-, if not poorly educated boobs.
By the way the USA has the biggest % of its population in the "free world" behind bars! Next comes France. Both countries subscribe to the so called human rights agenda! What does that tell me? That big state is a sham just as much as big business is! The only way to avoid these public/private, self serving, politically corrupt, bureaucratic monopolies is to have transparency, accountability, responsibility AND ANTITRUST regulation in place. Nobody should have the right to enjoy DOMINANT POSITION. That should be a rule in all areas outside state's regal responsibilities (army, police, justice), obviously exercised under control of watchdog bodies and civil society 'whistle blowers'. Something is wrong is a country where there are so many people behind bars. Why don't they have the same situation say in Germany or Sweden or Canada which are of similar sociological profile?
In short, because we like putting people in prison for non-violent crimes, unless they have a white collar or work in Hollywood.
That's cultural/professional racism. Anybody who feels Bankstas and actors are more 'kocher' than plumbers and postmen, must feel very insecure about leaving his wife at home. Just in case the postman rings twice...or the plumber calls, once for kitchen, once for the bathroom. A man can't do an honest job without making the big wigs suspicious.
yeah, take that troll. Even I hate the DMV. I worked in high school, kolledge and ever since I graduated kolledge. I started in the private sector as a consultant. I quickly realized no one in the consulting firms understood why they were doing what they were doing, they just responded to the directives from the government regulators. So, I figured if I was going to make it big in the private sector I had better learn what the government regulators were doing, or were trying to do. I started with one gov agency and learned a lot, learned most of the private consultants were ripping off their clients with cost over runs, unnecessary work, shitty work, and so on. After learning what I needed to know I helped a lot of businesses, big and small. I trashed a few of the shittiest and most crooked consultants in the process and those crooks deserved it. I felt I was doing more by working for the gov, but since no one likes the gov workers I will soon enter the private sector again and charge the shit out of those stupid buinesses so I can make ashit load of money. I will just blame the fat, lazy, over paid, over pensioned goverment workers that could not make it on the outside. This is America after all.
Ah Mr. TopTroll,
Thank you for pointing that out. However, the answer lies in the "compensation package," not just the salary. I really can make twice as much, however I could not accumulate as much vacation as I have (and I have a lot because I am always at work and do not take vacations), I could not have the same number of holidays, and I would need to work an average of 12 hours per day instead of the 8ish I work now. But, if salary were the only factor, I could make twice as much. In the private sector you can get promoted easily, in the gov sector there are many tests (unless you are in the CEA- level, that's were all the fraud is and both the dems and repubs abuse that). In the private sector I could get a bonus, not in the the state gov. In the private sector the business might pay all or a significant part for additional education, in the state gov the they have does not cover the text books. You have to look at all the perks and drawbacks of both systems, I have worked in both and seen terrible abuses in both, so no the private sector is not some shining beacon of honesty or productivity.
What is funny is it is the states that are better funded with their state pensions like Florida etc that are going to make changes while states like California and Illinois do hardly anything about it.
Wrong - Illinois raised my fucking taxes by 60% percent to pay for all of the bullshit, and they are now trying to borrow another billion dollars, the mother fuckers. But we have Rahm fucking Emmanuel as mayor so all is sunshine and roses. Makes me fucking sick.
But at least I'm not bitter..................
In MN, the tax rate is effectively 6+% (at least for me and my wife!). For IL, it was raised to around 5% (from my understanding).
Welcome to the working week! :>(
I'll see your income tax, and raise you my property taxes, sales taxes, amusement taxes, gasoline taxes, etc.
At the national level (not necessarily every state level) the 2-party oligarchy appears to be from the pit of hell.
I know a lot of CA firefighters. Some are ultra-right wing Republiscum neo-con war mongers. They have abject hatred for Nancy Pelosi, Dianne Feinstein, mayors like Gavin Newsom, and Democrats in general. I guess the fact that Republicans are generally union busters, while all or most of their ultra-generous public-financed union benefits accrued from the Democratic Party doesn't bother them in the least. It sure seams hypocritical to me.
Me-I have no sympathy for either party.
Ed Ring of Union Watch writes today:
“The entire nation is watching to see what happens in Wisconsin. Will Wisconsin voters realize that the occupation of their capitol building by union protesters is not just spontaneous civil disobedience, but a carefully orchestrated, massively financed effort? Will they realize that public sector unions from throughout the United States are prepared to spend literally hundreds of millions of dollars on ground operations and media campaigns to assure the outcome they desire? Will they realize that this is money collected by unions directly from taxpayers, whenever these unions force government workers to join as a condition of employment, and then force them to have money deducted from their taxpayer-funded paychecks to pay for these operations?
“Despite union claims that ‘rich corporations’ are behind the efforts to reform public sector unions in Wisconsin and elsewhere, with rare exceptions, it is their side that has the wealth. And that wealth is confiscated from taxpayers, and converted into an avalanche of funding for them to buy our elections. It is opposition to unions that is the underfunded, grassroots effort, arising spontaneously across the United States, that seeks to rein in public sector unions and reduce public employee compensation before it bankrupts
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"Will Wisconsin voters realize that the occupation of their capitol building by union protesters ..."
I liked Reagan's way of solving the problem. Fire them.
And no, the air traffic control system didn't shut down. Lots of non-union ATC people were glad to step up and take those jobs at lower pay and benefits.
the reason this is a bad idea, and what the unions push, ie firing instead of benifit reduction; is because we'll continue to have pension liabilities that can't be met, and if the solution is to keep firing people, soon 100% of budget will go to pensions and healthcare with ZERO public employees.....and WI can't operate like that. Like what the Fed is facing, where just a year or two away from social security, medicare and medicaid = 100% of government revenues, and growing
Those pension plans will be taken over by the federal government (who doesn't give a rat's ass what your state law says) ...then turned over to Wall Street ...then looted and dissolved.
You better find another way to fund your retirement ...unless you're ok living on the street.
Oh, man. Still nailin' it.
Cherry-top of Friday night.
As a union member I could care less if the unions are broken. Everyone will pay the price. In fact I look forward to seeing the masses going back to working 12-hour days seven days a week. I look forward to child slave labor in this county again, our kids need to toughen up and lose some fat.
The real issue with breaking the unions is this - Democrats get a significant portion of their politica contributions from unions. The Dems only have to convince a few union leaders to give large sums of money and tell the union members who to vote for instead of trying to convince each individual democrate to contribute and vote for them. The democrats are notoriously difficult to organize and coordinate. Whereas the Republicans get a significant portion of their contributions for private companies. The republicans only have to convice a few CEOs to contribute large donations and the republcans are more fanatical about organizing and voting as a block.
The GOP figured out that they can defund the democrats nation-wide by breaking collective barganing and stopping the large union contributions. From a political strategy view point its a great idea, I get Karl (Turd Blossom) Rove is behind it.
Thanks to technology and robotic factories there is not enough work (and jobs) for the masses and their children to work at for 12 hrs a day. The late 19th century factory is not the factory of today. One need only consider how many man-hours it takes to manufacture an automobile now vs. a MUCH LESS complicated one 100 years ago to ascertain the truth of this. Pick cotton or tomatoes? A machine will do the work of hundreds or manual workers.
In order to work a 12 hour day you must first have a job to go to.. there are no jobs
Unions destroyed the steel industry in America.
Unions destroyed the auto industry in America.
Unions are now destroying governments in America.
No amount of laws can overcome bankrupt governments (bankrupted by unions) who simply don't have the money to pay into those huge union pension plans ...plus Wall Street criminals selling them worthless investments.
Government retirees can give up part of their monthly pension check or lose all of it, their choice.
Freetrade and the deatgrip of corrupt financiers on Washington destroyed the steel industry, etc.
the "Unions" did not destroy the Country... by demanding a fair wage...
Wall Street DESTROYED!!!!! the Country by Robbing the Country Blind!!! While Washington DC did NOTHING!!! to stop it and enjoyed the LOBBY Dollars!!!
As a matter of FACT!!!! They still do enjoy the same.
Is that what fired union air traffic controllers shouted when they picked up their pink slips on the way out?
Is that what terminally laid off union steelworkers shouted when the plant closed?
Is that what terminally laid off union autoworkers shouted when the plant closed?
Is that what union govt employees will shout when their employer bankrupts?
I am not aware of california republicans ever opposing these generous pension increases.
The repulicans never opposed the increases, that's because every time there was an increase for the pensions (the democrats) there were equal handouts to the private sector (republicans). This whole pension issue is total bull shit as both parties are equally guilty, its just the people are too stupid to pay attention and the republicans are far better at framing a phoney issue and the democrats are too lame to recast the issue in a better ligth. Same shit every day. The Los Angeles times does a decent job at reporting the fraud, corruption, and government handouts to corporations, but the people do not care. Schwarzennstupid did not take a salary ( a measly $225,000 a year) beacuse he accepted tens of millions of dollars in contributions to a special fund to pay for his private jet - he lived in Santa Monica and flew to Sacramento several times per week. He needed the money to pay for the pilots and jet fuel. The Arnold creis about global warming and CO2 emissions (but of course not from his private jet).
You have your head up your ass just like the rest of them. Sure, there's no problem with the pension funds. There's no problem with social security. There's no problem with medicare. The budget deficit is no big deal. The economy is just fine. Look at the stock market. Keep the band playing
++
The Reps didnt target the law enforcement / firefighter pensions until this Tea Party stuff really took off...
They are public servants, not public masters. Put them on a 401k just like the rest of us. Clawback on the banker bonuses from 2003-2010. Put congress on social security and a 401k too.
What are you smoking? Try to fire a "public servant". Or withhold payment of your taxes to them. See how well that works out.
so here it really is ........ that 401K's were just another invention (scam ) by GREENSPAN / WALL ST. to siphon wealth from the main st. guy to the top of the pyramid.
truly, i'm old enough to remember the days of NO 401K'S......... we didn't need no fuckin' 401K's because you simply went to your trusted local bank, allocated money from your paycheck into a SAVINGS ACCOUNT THAT EARNED INTEREST & (pre-1970) your money sat in that account (the wonders of compound interest) VOILA !! YOU HAD MONEY ! ....
it just all boils down to the same thing ..WALL ST. & CENTRAL BANKS stealing citizen's money.
Leo, I think it's possible that Canadian pensions have a brighter future simply because Canada seems to have less corruption and public fraud than the US. I'm aware of the good ol' boys networks and soft corruption in Canada, but it always has looked like less than we have here, and lately it's looking like a lot less. Put simply, I don't think US pensions are in trouble for lack of capable actuaries - I think the trouble is a creation of politics and various forms of self-dealing (some not necessarily illegal) which make intelligent, fully honest decisionmaking impossible here.
Don't worry, I'm sure this blessing will work its way north before too long, and you can share in the fun too.
The USA is clearly more corrupt. However the California pension issue is beyond corrupt and to the point of delusional.
I am somewhat glad to live in a state without government unions. We survived the great depression with only minimal changes in living standards and my state can do so again if necessary.
The people dependent on government benefits in california will burn the place down if they dont keep getting their government.checks.and.welfare benefits. It is.going to be very sad to watch these next 20 years.
What state do you live in? I'm considering fleeing California soon. I am sick of it here anyhow. I was thinking of moving back to Rochester NY, where $200,000 buys me a very nice house. Here in silicon valley, it either buys me a shack in the worst part of Oakland, or an 800 square foot condo with $300/month HOA fees.
But Rocheseter, is in New York..
Drive over the hill to Los Banos, Dos Palos or Patterson. There's plenty of nearly new houses for $50 a sq ft. or so. Real estate taxes are cheap. Sales and income taxes are about what you'll pay in NY and the weather is even better than Rochester's.
You probably can't get a job if you need one though, unless you can compete with the Mexicans doing farm work. They're pretty good at it.
property taxes on that 200k house will run you 12k a year
Actually, $4K in the area I'm looking.
Taxes are no better in Silicon Valley, but a 200,000 home here, well, sucks. I'm sick of it here.