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Pew Finds $1.26 Trillion State Retirement Shortfall, Says States Only Have $31 Billion In Assets To Pay For $635 Billion In Liabilities
For those wondering why the Fed's third mandate is so critical, and is arguably about more than padding the brokerage accounts of those top 400 US "taxpayers" who account for 10% of capital gains, the Pew center brings what could be the main reason. Which is that even while factoring an 8% discount rate (for most states, some are probably higher), in other words expecting 8% gains in their assets, "the gap between the promises states made for employees’ retirement benefits and the money they set aside to pay for them grew to at least $1.26 trillion in fiscal year 2009, resulting in a 26 percent increase in one year." The difference is broken down as follows: "State pension plans represented slightly more than half of this shortfall, with $2.28 trillion stowed away to cover $2.94 trillion in long-term liabilities—leaving about a $660 billion gap, according to an analysis by the Pew Center on the States. Retiree health care and other benefits accounted for the remaining $604 billion, with assets totaling $31 billion to pay for $635 billion in liabilities." In other words, states have roughly 5 cents for every dollars in health benefits obligations. Good luck with funding that absent America becoming Weimar.
Some more from Pew:
The $1.26 trillion figure is based on states’ own actuarial assumptions. Most states use an 8 percent discount rate—the investment target that states expect to earn, on average, in future years. But there is significant debate among policy makers and experts about what discount rate is most appropriate for states to use when valuing pension liabilities. This is an important issue because, depending on how those liabilities are calculated, states’ total funding shortfall for their long-term pension obligations to public sector retirees could be as much as $1.8 trillion (using assumptions similar to corporate pensions) or $2.4 trillion (using a discount rate based on a 30-year Treasury bond). How states value long-term liabilities going forward will play an important role in defining the scale of their challenges and the actions they will have to take to meet them.
The Pew center's conclusion:
Far too many states are not responsibly managing the bill for their employees’ retirement.
Which is why the only resolution is for the Fed to recreate Weimar and to cause state asset holdings, which lately are probably shares of 3x beta stocks, in hopes that the state pension plan will not become the next "muni" scare.
And some charts:
Full report:
Pew Pensions Retiree Benefits 1200bn Shortfall 2011
h/t John Poehling
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Oh, SNAP!
p.s. - Ben Caught Stealing Bernank said he doesn't have legal authority to bail out (i.e. loan shark) the individual states. And he would never, ever monetize the U.S. deficit, either!
SNAP indeed and when that is all gone, dog food.
Here is Leo K's whining rant about "underpaid pension fund managers" (don't laugh - Leo K really published this heap of dog shit):
http://www.zerohedge.com/article/public-pension-exodus
My uncle is a retired lobbyist for the Illinois Education Association, and he has a $125000 year pension, plus full benefits.
Should I kill him?
There's some commandment or something about that I think.
Smiting him would be just fine, though. Smite him to death.
No, just steal his money and buy gold with it. Then maybe give it to the schools, from where it was taken.
I am Chumbawamba.
Indeed; dogs are quite edible...
(CAPTCHA: 68 minus two equals __ ...seriously?)
And since you can't buy dog food with SNAP, a day will come when people will go to the black market to trade them for a big bag of Kibbles & Bits.
Also, the Po Folks Consumer Report will come online and begin rating the various pet foods on such scales as protein level, flavor, chewability, digestibility, and of course, price. Ratings will come from the users in exchange for free product.
SNAP food stamp usage at all time record high, while wealth concentration and control is in the fewest hands ever. Well, its all seems highly bullish to me or something...I guess all that matters at all now is further Maniacal Monetization confirmed, party on at the Deadmans Ball!
PS- Ive been saying forever that bailing out states will not happen as Central Banksters gain NO benefit whatsoever in making Mom n Pops pension whole! They cant make money off it, so it will never happen!
Yep, they're priming us for total abrogation. I've said it before and I'll say it again, counting on any form of defined-benefit pension, SS, annuity, etc. is folly.
Ok Genius, where do you put your money?
I pay the taxes and mandatory contributions like everyone else, but what little I have left over, I put into silver and my own land. I plan to work until I die, as much as I am able.
So you'll be in the same boat as everyone else. So why not pretend, like them, that everything will be fine?
Just like I am to pretend that the Creator cares about me personally? Well I don't, just like Thomas Paine, Thomas Jefferson, and Ben Franklin. And, just like those men, I look at present reality and engage with it. I have accepted my fate, and that of my nation, I try to warn those that will listen, and I try to make my own pathetic preparations for myself and my family. What more can be done? More and more people share Indiana Jones' horror, in "The Temple Of Doom", when he realizes that there is no one at the controls of the plane, and they are heading right for a Himalayan mountain. So here I am puttering around on an Internet comments section, but if one person is able to improve his preparations for the future because of my insights, it's worth it.
SNAP has added a million mouths in 5 months.
One way they may benefit is complete control of states through Washington. Washington can hold the debts paid over every state's head and basically tell them how things will go. More control and power gets concentrated in Washington and that is a bankster paradise.
So, to keep their freedom from the Federal Government, states should tax enough to meet their liabilities? In other words, before a state can prove it can handle autonomy, it should have its house in order?
The public sector unions are a powerful special interest in their own right. I wouldn't be suprised at all to see a state bailout. But maybe after they have canabalized private sector retirement funds.
Forbes in January of last year featured an analysis that was much more stark, as it used 10 year Treasury yields to depict the state of the states, instead of the typical 8% return estimates.
http://www.forbes.com/2010/01/20/states-debt-pensions-interactive-map.html
You are correct, they can't legally bailout a states pension. They would have to change the law, but I don't think they should even though they will via printing. Because as soon as you bailout one state or open the door to this, then the other 49 states will want a bailout too and eventually it will be in the trillions not 630 billion. The states are in alot worse shape than they are letting on. What the guy quoted was statements that the state have to give to the public, but much of that data can be massaged. When this whole thing implodes, it will make people insane with rage when they find out that they don't have anything. And if you don't believe me google Prichard, Alabama, their town just stopped paying retirees pensions and benefits because they have no money.
http://www.nytimes.com/2010/12/23/business/23prichard.html
Part 6 Bear vid out within hours.
www.silvergoldsilver.blogspot.com
Come on Tyler,
Show us a picture of a headless Arab!
Please!
This is why the Govermnet should be Prohibited from, any health and retirement issues!
My uncle just took the job as head of retirement for the state of SC...should be interesting.
depends what your aunt does in her spare time...if she has any to spare from her rose garden.
69% funded?
Ouch.
the term "bagholder" came up in conversation...
Pinata fits better. He won't be holding the bag that gets swattted. He will be the bag.
most of these states are absolutely FUCKED
How would you like your 50 fucks? Sunny side up? deep fried? or scrambled?
I will take them rectally as prescribed by Dr. Geithner and Nurse Bernanke.
And not the way we like it either.
This data is old, but should be noted. Any surprise that New York has everything covered? The financial sector remains a cancer that the broader sectors of the economy can no longer sustain. Hedge accordingly.
Hedge against all inevitabilities, almost all probabilities and as many possibilities as you can
where have all the flowers gone...along with all the money...long time spending!
Leo K said that Pension Fund Managers are woefully underpaid in an article earlier today.
I responded by telling ole' Leo that 99.99% of what are overpaid Pension Fund Managers would have done far better to have invested in Vanguard No-Load Index Funds and then fired themselves.
Here: http://www.zerohedge.com/article/public-pension-exodus
Even far better, they could have merely bought gold, that "barbarous relic."
Leo is a dork.
QE1 and QE2 already took care of this problem. This report is misleading in that it evaluates the assets as of June 2009. We all know most pension funds are 60% plus allocated to stocks which we all know are up nearly 50% since the PEW last valued the asset side of this asset/liability mismatch. Soon stocks will be at a new all-time high and then will move higher at a 45 degree angle until all of these funds are 105% funded. Problem solved.
Good thing they BTFD.
Now, only the pensioners (need real returns) are screwed, and not the fund managers (need nominal returns). Thanks, Ben!
what happens when more and more boomers start retiring and more and more funds hit some bids to raise some cash to meet current obligations?
You mean the entire system is a ponzi?
Ah, there you are, Mr. VanWinkle. Enjoy your nap? How about a shot of O.J.?
The Fed uses wealth effect to justify the success of QE2. Most of the wealth effect goes to a small subgroup that doesn't really notice the increased wealth - at least not in terms of additional spending. What little wealth effect the average person gets is completely wiped out by the realization that they will not be able to receive the retirement or health benefits they expected. That is the poverty effect Bernanke is missing.
good point, reminds me of some research i readthat indicated GDP impact of rising equity levels is incredibly small. Here is the moneyshot info:
"it's well established - on the basis of both U.S. and international data - that the "wealth effect" from stock market changes is on the order of 0.03-0.05% in GDP for every 1% change in stock market value, and the impact tends to be transitory at that"
here is the link: http://www.hussmanfunds.com/wmc/wmc110425.htm
thanks
That is the poverty effect Bernanke is missing.
Bullshit. Ben isn't "Missing" it. He Get gets paid to IGNORE it.
The Fed is in essence owned by the David Rockefellers / Rothschilds.
He works for THEM, They pay him to IGNORE people being destitute and to mumble in front of the camera.
So the question is does the Fed lets the states go to the shitter so they can then blame states and claim we need more centralization...order out of chaos...problem, reaction, propose a "solution"....or is chaos and disorder and anger this would cause too great to bear for TPTB?
Well, DUUUUHHHHH!
This has been the 401K bubble since the 201K gallows humor jokes started 2 years ago.
Big deal. Nominal promises mean nominal requirments. Print it up and hand it out. There's your worthless money, pilgrim.
ITG,
+55.
Greenscam was quoted as saying they could guarantee your Social Security payment, but not that it would be worth anything.
The States haven't started printing their own money yet, though. It'd really be something to see the Feds bail them out, wouldn't it?
Hah.
What's all the fuss about? A few years of 20% ROI and all will be forgotten. It was just a nightmare dear, now go back to sleep and dream about Chinese solars.
Hopefully, this means in the near future we will quit wasting taxpayer money on lavish public sector compensation packages. Nah.
Disclosure: I know garbage men making $120k/yr.
The big joke here is that the total net worth of the investments does not match the current dollar value. As soon as the big funds start to draw down their assets the whole market will collapse to nada.
Shhhhhhhhhhh! People are just getting there 401K and other retirement fund reports! And didya hear?!?! That house down the street sold! Everything is gonna be just fine in a few years...
Not one in 1000 reads the mice type....
All I have to say is that the 2011 'Bernanke Put' under equity markets will work out as spectacularly as the 2007 one did.
Friends act incredulous when I say it will all come crashing down and you will be left with nothing. They see their 401Ks, 20 years of hard work in their portfolios with a nice nest egg and it makes no sense to them.
sschu must be crazy they say, he hates Obama/Bush, loves/hates war, is a birther/911truther/JFK nut. Whatever.
The path is before us, but Bennie etal have some tricks up their sleeve for sure that may be able to extend this for a while. At some point someone in the game calls BS and the crash will be monumental. All that paper wealth will evaporate in seconds.
The French Revolution is the model, the 3rd Estate, guillotine, Napoleon and death in Russia are likely in our future.
sschu
Action on Muni Bonds = Burried under the Sea
Citizens' Austerity = Government Unfunded Obligations Default
Learn how to fend for you and yours. Eat a Bureaucrat Today!
I thought we fixed this with a 2,000 page bill that "bent" the cost curve... What are we paying the CBO & HHS for if their estimates didn't include more than $600 BILLION in underfunding less than 2 years ago?
Hey, I got a pleasant surprise with my annual health insurance premium notice.
Premiums went DOWN 10% and my deductible went down 33%.
Was I wrong about Obamacare?
35/635th´s is a deflationary number.....
However if all shifts to 35/635th´s....
Everybody´s equal .....
......................................
Question is even though the top 400 people in the US got 10% of the total gains....
Just how would that spread out....
................................................
The bottom line is that the US govt. cannot create oil or jobs.....
However it can construct proper tax policies such that the jobs required can be formed....which will also enable US labor to overide BRIC´s labor advantages....
............................................
The truth is 35-635th´s is what it is....
This means that the remaining 600/635th´s is make believe counterfeit fiat money and accounting tricks....
So.....
Which would be the best policy from here on out....
Counterfeiting and accounting tricks ....
Or an actual enduring rebuilding of the US .....
The elimination of the corporate-individual taxes to be replaced by a 10% consumption tax would enable the US to truly rebuild.....
Good points.
Anyone notice that Alaska has a 17 billion dollar liability and only 700K people in the entire state? $24K for every person. Um, WTF?
Its tough for states without natural resources to balance their budget.
I guess the only thing to do is just laugh at how everything everywhere has gone completely mad.
They can see Russia from there - they need to start charging a premium for their residential views
Public pension managers get their fees, year in and year out, regardless of performance.
Very nice work if you can get it. Heck, you can spin toxic assets into "Guaranteed," "stable income", or 'fixed income' and make the dumb cluck captive 'beneficiaries' think they really have a retirement. The stated 'assets' are marked to fiction.
When the victims find out what has happened, the whole notion of letting 3rd parties handle one's money will be dead for a generation.
Oh, and people, I can't believe you haven't jumped on this new meme. It's okay. State pension liabilities were killed today and in honor of bankster tradition buried at sea.
I agree- it's hard to get anyone to acknowledge that there's a real house-on-fire problem. They nod their heads when I trot out the figures, but then shrug it off. They just can't see the Matrix. I suppose I should stop trying.
The even worse estimates by Rogoff in Forbes show combined liabilities that rival family incomes for the citizens of the states.
What is frightening is that JUDGES have these quarantees of health and pension coverage and can enforce payment via property taxation.
Don't worry about fellows that are oblivious.
Plan ahead. Look ahead for the dangers. Then act.
Interesting. WA, my home state, has a fully funded pension program but has put nothing aside for retiree health costs. Apparently, they're counting on the old people all moving to AZ to escape the cold and rain.
nope, you will still be on the hook to the public leeches and they will spend their checks and pay taxes in Arizona, that is until the checks stop coming.....as this PONZI will fall like a bunch of dominos......dumb dumb public employees
I've got a spare $5 from my last holiday to Amerika - do you think the US Government wants to borrow it?
I also have some change...
We'll take it, thanks.
You got any odd jobs for america to earn some spare change? Clean your house? Maybe patrol your country?
The states are abosolutly screwed........Ive got 275 stories from around the country on the dire condition of the states and cities..........the 2012 state budgets are starting to come together and its not GOOD........
Im not trying to get anyone to leave the ZH website but if one wants to get a sense of how bad things really are, I invite you to peruse the headlines at
http://nakedempire2.blogspot.com/search/label/the%20states
cop, firefighters, hospitals, teachers, public employees.............it is going to be a bloodbath....
Naah.
Those selfish boomers will pile more debt and taxes on their children and grandchildren.
I really need to get out of Illinois.
If only Chicago would secede, the rest of the state might not be so bad. Well, except Springfield, but hopefully all of the cockroaches there would scurry off to Chicago once the plundering season ends.
That's what everyone from UPSTATE new york thinks about NYC. (Upstate is everything North of Westchester Co.).
If we could get rid of NYC and have it be a City State, Upstate NY would be great.
At least you have plenty of fresh water, top-quality soil, and some very smart business minds in metro Chicago. Now, Maine....
We do have top-quality soil, I just wish we'd stop using it to grow corrupt politicians and taxes.
Too many pinky-ring wearers (just like Mass. and N.J.) I suppose. Once "The Boys" take over a state legislature, it's terminal.
The second bite is what does the trick. If once bitten are twice shy, twice bitten either get enraged or despondent.
The second bite will sting much greater.
This is true - as it was in 1931.
The investing public (or as I call them - cannon fodder) will run away from the stock market if it screws them twice in a decade.
Light blue touchpaper and stand well back - NEVER return to economy once it's lit.
With a 50/50 allocation between stocks and bonds it means a 5% return on bonds and 11% return on stocks.
Anybody who has kept up with the debate knows that is impossible.
Record profits already as percent of gdp...regression to mean.
Trailing PE of 15 gives us returns in the stock market in the average to low range.
Underfunded and overoptimistic equals disaster.
Madoff made 12% each and every year, and even during the biggest times of bubbles, massively wealthy people ran to him with bags of money because of that 'sure thing.'
Harry M, the whistleblower, knew that 12% was statistically impossible year after year (data suggest that 8% is just as farcical).
I believe Shiller has demonstrated that after survivorship bias, but before taxes, and other costs are taken into account, equities have returned less than 2.2% annually, over a 80 year+ history.
Yep.
I think the pension system will panic or implode if the Bernank does not keep their stocks growing. Otherwise they might (gasp!) have to buy gold.
Everybody who does not already have a self directed IRA, should.
Everybody who does not already have a self directed IRA, should.
Anyone with a hefty 401k offered severence and a buyout should take a really hard look at that advice and jump on it.
Agreed. What do you mean by Hefty in Dollar or Ben Dollars? Will 250K do or does it need ot be higher to leave the USA.
You pick the right place and that will get you a nice apartment and fulltime house servant by only withdrawing 5 percent per year. If you get bored then teach english for extra money.
You will get laid all the time by younger ladies.
Where is this great country you speak of? And what investment is going to allow me to withdraw 5% per annum on $250k...?
Where do you suggest? I've heard good things about Uruguay, but it doesn't seem that cheap these days, at least if you want a well-built and managed apartment.
ENRON should have already taight people that sad lesson...but I guess it hasn't.
Hmmmm, time to buy more silver.
Bend over America's Pensioners. You will live like the rest of the fucking commoner and you will know what it feels like.
so many people at so many levels for so many years have shirked their duty to get involved and keep an eye on the workings of govt. i'm guilty also. part of me thinks that i elected people that should have acted on our behalf and been our vigilant watchguards against such destructive imbalances. if i was to take the necessary time to figure out all of the rube goldberg systems, and rules, and regulations, i could not have held a full time job and supported my family.
So you are faced with the choice of knowing that the elected won't protect you (and you wind up financially destroyed) or you quit your job to be the watchdog (and be financially destroyed). The only way to "win" the game was to be a part of the elected that set the rules...they always take care of themselves. That, in effect, is giving up and becoming the destroyer we so despise.
the size and complexity of the federal govt and all its working that have a massive impact on the average citizen, simply got too big for the average citizen to understand and excercise diligent control over.
It's so effing large and convaluted with so many agencies and bureaucracies that it's grossly unfair/unreasonable to expect the average citizen to be able to effectively understand it well enough.
WTF? How did we get here? I know how we did, it's a rhetorical questions.
Yes, the people we elected are both greedy and foolish, but the far bigger problem is that government has grown too large. We need to start shuttering whole government departments, starting with the EPA, the FDA, the Fish and Wildlife Service and the Dept. of Education.
When the boomers wake up they are going to be sooooo mad.
Tough titty. If they couldn't get rich in one of the greatest boomtime periods in american history, they deserve an austere old age.
Yeah.
And they are going to take it out on their grandchildren by loading them up with debt before they can vote.
No, the boomers are going to load you up with debt. Then you'll try to pass it to your children, but I expect it will all blow up in your face. Apres the boomers, le deluge.
Ron Paul: So Ben, I really hate the idea you're intervening in the markets.
Bernank: Well, Congressman, you do know that if we didn't intervene, equities would crash, and this would take down pensions, 401(k)s, IRAs and many other forms of retirement classes. It would also cause major contraction of tax revenues. And since we have little in the way of organic domestic investment, and our manufacturing base has been wiped out stateside, it could cause a complete depression.
Ron Paul: So Ben, are you saying we have to do what the Soviet Union did in its waning days?
Bernank: Precisely, Congressman. Precisely.
the percentages are likely overstated for all states with a significant part of their pension pool invested in private equity. Valuations for those illiquid investments lack objective standards and are basically what the con artists, excuse me, PE operatives say they are. If reality ever hits the PE world, then knock some more percentages off the pensions' performance.
Ever heard of moral hazard? Unlike corporate pension plans, government plans (state and federal) are exempt from the Erisa Act of 1974, which would require them to keep their pension plans properly funded ... as well as to appoint trustees with a fiduciary duty to the beneficiaries.
When government exempts itself from its own prudential rules, a financial hole predictably opens up.
The sovereign privilege of exempting itself from its own laws is a doomsday mechanism for both the economy and civil liberties, starting with the Federal Reserve's exemption from fraud and counterfeiting laws.
Dear Proletariat:
With this report, let me introduce you to one of the primary purposes behind QE2...regardless what comes out of my mouth.
QE2 is all about preventing a middle class revolt by inflating the stock market to mollify aging and feckless baby boomers (i.e. voters) about their diminished retirement funds.
This is why your hypocritical, self-serving, and profoundly stupid members of Congress have hardly objected to QE2, and not raised the obvious objection that I am breaking the law by violating the only two mandates of the Federal Reserve Act -- price stability and full employment. These politicians ALL want a centralized government to solve the problem they created -- so "free market capitalism" is dead until I say otherwise.
Love,
BB
You forgot the p.s.
p.s. - or until I lose control of interest rates and/or the rate of the USD decline, at which point, welcome to WeimarAmerika, Bitchez!
Must.Plant.Corn.
Duh, did anyone honestly think that governments would stay out of large pools of money? Back in the 1990s I read a report by the Clinton administration that said the last large source of money was retirement accounts, including SS, and the government had to figure out how to access that money. Bam! about 20 years later pensions and SS are going broke. Welcome to the real world morons, the government borrowed/stole your retirement money to pay for pork projects, to give to the top 1%, to pay for the defense of the rest of the free world and now the tax payers don't want to pay it back. So, SCREW YOU !