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Public Pension Funds Face $2 Trillion Shortfall, Moodys Warns
"Despite the robust investment returns since 2004, annual growth in unfunded pension liabilities has outstripped these returns," Moody's warns in its latest report on the state of public pension systems. As Bloomberg reports, the 25 biggest systems by assets averaged a 7.45% return from 2004 to 2013, but liabilities tripled over the same period leaving them facing a $2 trillion shortfall as investment returns can’t keep up with ballooning obligations. The top 25 funds account for 40% of the entire US public pension system with Illinois, Kentucky, Connecticut, and Louisiana at the top of the 'most underfunded' list.
As Bloomberg reports,
The 25 largest U.S. public pensions face about $2 trillion in unfunded liabilities, showing that investment returns can’t keep up with ballooning obligations, according to Moody’s Investors Service.
The 25 biggest systems by assets averaged a 7.45 percent return from 2004 to 2013, close to the expected 7.65 percent rate, Moody’s said in a report released today. Yet the New York-based credit rater’s calculation of liabilities tripled in the eight years through 2012, according to the report.
“Despite the robust investment returns since 2004, annual growth in unfunded pension liabilities has outstripped these returns,” Moody’s said. “This growth is due to inadequate pension contributions, stemming from a variety of actuarial and funding practices, as well as the sheer growth of pension liabilities as benefit accruals accelerate with the passage of time, salary increases and additional years of service.”
U.S. states and cities are contending with underfunded worker retirement systems. The 18-month recession that ended in June 2009 wiped out asset values and forced cuts to contributions. Now, liabilities are crowding out spending for services, roads and schools.
...
The largest systems included in the Moody’s report manage about 40 percent of the $5.3 trillion in U.S. public pensions. They include the California Public Employees’ Retirement System, the California State Teachers’ Retirement System and the New York State and Local Employee Retirement System. The New York plan had the best 10-year average return among the 25 systems, at 8.67 percent.
Ranking the most underfunded pension funds in the nation...
Source: Bloomberg
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Uh Oh..
What???
You mean you cant rely on your government?
Tax hikes coming bitches!
I hope most of these unfunded pentions were for Union Members.
Public usually implies union.
Just pointing out the obvious here: those ratios are at recent market highs.
Regards,
Cooter
Turns out Meredith Whitney wasn't wrong, just a little too early.
All we are is dust in the wind...
https://www.youtube.com/watch?v=tH2w6Oxx0kQ
According to the Illinois court system, it doesn't matter, we must keep paying into the system no matter how much damage it does or whether or not there are funds to give. Don't you love it when gov't employees rule in favor of more extortion for the benefit of gov't employees?
Guys, sorry to make things worse, but if these numbers were generated in line with public sector accounting practices, they're way understated compared to the private sector data. Way over simplified, but Public plans report close to what would be called an "Accumulated Benefit Obligation" while Private plans report "Projected Benefit Obligation". The difference being the "Accumulated" cuts reality off as of today, right now. No more hires, no more wage growth, no more funding. The Public assumes ("Projected") continued growth in employment rolls, wage increases, etc. The Accumulated numbers are but a portion of Projected.
Why do they report like this?
Because it's the LAWS
Who make the LAWS?
The Public Sector.
Don't wanna scare us taxpayers now, do they
So the number they're showing us are probably way less worrisome (Shows far greater funding) than reality (realistic assumptions) .....
Public Unions Should Not Exist.
Whole purpose is to fuck the taxpayer
... AND private sector plans measure their liabilities at/near market rates, but public sector plans use a basis that undervalues their liabilities by 20-50%+. Corp discount rate ~4-5% and public sector discount rate ~7-8%.
Not sure if Moody's has made an adjustment for that in their table or not.
There are still experts here among the chaff.
Thanks, guys.
the good news is that these estimates are based on general actuarial lifespan estimates. Since the average .gov employee is fat and lazy, they usually live shorter lives than average.
....and if you think I'm just being mean....go watch the herd coming into work at your local City of X or County of X.
Exactly, at these low low prices its a problem but in a couple years when all that money they have created hits the markets and the SPX is trading over 10,000 payouts will not be an issue. The issue at that time will be the $10/gal gas and $20/lb meat making those pensions unable to even cover the cost of subsistence eating.
If any of that is even still available.
OTOH, on the pension plus side, Ebola will kill half their beneficiaries in a couple of years. Something Obama wants to accomplish before he leaves the throne to Hillary. You can be sure this will be included in the private reports at the management level.
How is Wisconsin doing it?
No kidding, what the heck are they doing right? Cheers to them. I'm actually impressed that NY state is at 90%, I thought they'd be worse. IL is just abominably BAD. Lordy, you can tell where the criminality is...
It does an admirable job of mapping out government corruption levels. Good point, Alabama Steamer (I know that's what your real name is).
The main reform in Wisconsin was to sever the former public employee health insurance entity from the public money. The public employees' union was purchasing healthcare through their controlled health insurance firm, at ridiculous over-the-top-surcharges. With Walker's reforms, school districts were able to cut their budgets because the healthcare gouge was stopped. Folks in Wisconsin see the positive changes but still, the mobsters running Milwaukee and their stooges in the Journal Sentinnel are cooking up false charges to go after Walker supporters.
Fascism is alive and trying to advance in Democrat-controlled areas of Wisconsin.
There's always day-trading:
'This Pension Fund Is Daytrading Your Retirement Funds, With Up To 500% Leverage'
http://www.zerohedge.com/news/2014-09-19/pension-fund-daytrading-your-re...
Seems like just a few years back everyone was screaming about an election in Wisconsin dooming their pension plans because they might require public/union folks to pitch in...Oddly, the ONLY state with 99.9% of its obligation covered is that state.
Good observation.
Must have been that the political class wanted to spend some of that money!
Regards,
Cooter
I don't necessarily agree with everything that Walker said but, it is the only state in recent memory to make any REAL effort to address the problems of 'promises colliding into reality'. (Actually i believe Detroit did as well by simply 'going under'.)
And the State of Michigan is issuing bonds to help fund Detroit:
'Michigan OK's bonds to fund Detroit's bankruptcy plan'http://www.reuters.com/article/2014/09/26/usa-detroit-bankruptcy-loans-i...
And Orr has returned control back to the City Council - the same people that helped drive the final nails in the Detroit coffin.
Whoever issued the bonds will hire the politicians that put this together, and the City Council is back in the money.
Another day in Corruptionville.
Austerity, FTW!
Excellent!
No, the number of public workers belonging to a union is 35% with most of those in the police, fire, and teaching.
In the end, I will laugh with they find out their pensions were stolen through inflation and lies. Public sector workers were all paid through theft at the barrel of a gun pointing at the private sector workers. It will be fun to watch.
Just ask any low-level pensioner that retired over 10 years ago about their purchasing power. You can find them easily enough in the pet food isle at a grocery store near you.
Recently retired public sector worker here. Yeah, I'm hoping in ten years time the gold and silver I've hoarded will at least get me the premium pet food.
They are staff normally get matching 401
Another reason to hold rates down pensions calculate on 8% gain they have not been hitting it lately
Indiana reduced the annuity portion to 5 and 3/4% and will set it att "market rate" a year from now.
I was told by SS that I would receive 3/4 of what I am owed, aka, paid into the system. 3/4 of devalued dollars = theft. I would like to press charges, to which attorney general do I speak with?
Mebbe you can catch Mr. Holder before he walks out the door.
No problem here. They'll reneg and it'll be okay since paying the geezers will cost their kids their jobs, and you don't want that now, do you?
In Detroit one day the Municipal pension holders were told they will be getting 16% of what they thought. Debts that can't be paid, don't get paid.
For folks that haven't figured it out yet, America has been carved right down the middle ... by age demographics.
What is coming is a very consistent block of voters who will demand their due vs the young who will have to be the tax donkeys wearing the yoke.
Regards,
Cooter
Quite right. We are roughly ten years behind Japan on this road, so watch there for a view of our future.
Yet another reason they have to have global warfare as a distraction. Otherwise, the youth would be unpatriotic enough to tell DC to go pound sand.
You notice, New York State's pension system is 104% funded. If a crooked state like New York can have a fully funded pension system, imagine the goniffs who run the Illinois state pension system.
Please sir,...may have some MOAR?
This is what happens when the FED gets so focused on creating bubbles and pumping markets that they forget about things like this.
lol. this is how the fed gets everyone to leverage up. and then pop the bubble. the bottom 90% gets destroyed as their money goes up the ladder. its the fed's #1 objective.
Pensions are the bag holders now that retail is out.
Regards,
Cooter
Somebody's math is off. Help me understand where the FUCK 7%-8% unemployment comes from. The big bamboozle.
http://www.weeklystandard.com/blogs/1-4-americans-25-54-not-working_8061...
So, sheeple
Who will provide $2 trillion in GOODS AND SERVICES to public retirees?
Answer: NOOOOOOOOOOOOOOOOOOBODY
"But we wuz pinky-promised!!!"
The TAXPAYERS! Someone has to pay for the bloated public union promises.
Tax payers can pay with money, but not with real output if there is no real output expansion
Money is not edible
Taxpayers are currently mostly on low wage jobs.
Who is paying taxes in USA at this point? No many left to squeeze from
Retirees need health services, medication, entertainment etc etc etc
Who will provide those and at what wage level?
That which cannot be sustained, won't be, period.
Remember all the names on the Bilderberg list, that should be the new menu.
:-)
'To Serve Man' . . . "It's a cookbook!"
Now whenever I hear a politician, "I'm here to serve my constituentcy . . ." I know who's for dinner.
And when Obama says, "I'm here to serve the United States . . .", I wonder who's sitting in front of the good china and silverware waiting for the first course.
Ponzi. Certifiable. And Weimar.
Precisely right. The US is increasingly short genuine production to back its consumption.
Something is gonna give sooner or later ... and I suspect it will be general standard of living for all (except the upper crust).
Regards,
Cooter
I've always been a fan of cooter.... so no surprise I like you....
That's vajay-jay here in these parts, Farmer.
Don't worry, CALPERs beneficiaries. All of the those immigrants you invited in from Mexico to help entrench your political party, have totally got you covered!
yea right. They came for the welfare. They are not stupid
No shit. This is one reason why we have had to endure debasement for the sake of equity levitation. This "revelation" probably means that they will now go full retard and full banana republic.
(Reuters) - The London Bullion Market Association (LBMA) said on Thursday it appointed Citigroup as a market maker, underscoring the bank's ambitions to expand into the precious metals sector while others are exiting due to regulatory concerns.
LBMA said it named Citibank NA, a unit of Citigroup, as a spot market-making member effective Thursday.
Currently, LBMA has 12 market makers which serve in either one, two or all three of the spot, forwards and options markets. They make markets by quoting two-way prices in both gold and silver products to other market makers.
http://www.reuters.com/article/2014/09/25/lbma-citigroup-idUSL2N0RQ2A820...
Funny how one can become a spot market-maker without physical.
BTW, your link is double posted. Here's a working link.
http://www.reuters.com/article/2014/09/25/lbma-citigroup-idUSL2N0RQ2A820...
When the bubbles burst, it be many more trillions in the hole.
yeah, any m2m figures before then seem sort of silly.
I see the public unions forcing it down the throats of taxpayers. Infinite amount of taxes are fine with the public unions as long as they get what they want.
Some states cater to public unions.
LOL, it's for the children.
I have several neighbors, nice people, retired from public unions, that get downright viscious when they talk about homeowners having to pay whatever it takes to keep them in the money.
Along with the old/young tax fights, there is going to be one hell of a fight between the union pensioners and everyone else. Considering they get paid substantially more than the old folks on SS, I have to think the union pension benefits fight will be the first to light up.
My Brother has a public union pension. He is the most greedy entitlement minded gimme, gimme up on my high horse person I know. The asshole is in better financial shape than I am and tries to bully me into giving him things. I just bitch slap him right down every time he plays the bully card on me.
I'm going to laugh my private sector ass off when his sacred god-state union pension goes tits up on him.
Can I come over for thanksgiving?
CalPers, dismayed at paying the 2 and 20 for mediocrity, is terminating its $4.5 billion hedge fund affiliations.
http://www.nytimes.com/2014/09/27/business/in-calperss-departure-a-watershed-moment-for-hedge-funds.html?_r=0
What I don't understand is why, if they wanted exposure to the hedge strateg(ies), they didn't just use their immense scale to in-house that shit. You'd think it'd be cheaper than adding the extra layer of fees.
you forgot about the POLITICS involved.....the hedge fund buys the politicians..they tell Calpiers to use the Hedge fund....its all good...
You also forget that CALPERs managers were all hoping to rotate out of government, into fantastically remunerative positions at those same hedge funds. I guess they've given up on that dream.
Now is the time for full-retard rotation back into Moonbeam bonds.
The big question is who is going to issue the High Speed CA Rail bonds? That's who Moonbeam is hoping to work for when he retires. Hell, his sister works for the Squid.
This is what Obamacare is for.
Killing'em them quicker, but it's "all supervised."
Getting "zeked" (Ezekiel Emanuel).
Now if they can turn on "normal and customary" care at 59.5 and trade treatment for "comfort care" then the stakeholders got it made.
Somehow I don't the boomers are going to let it all go without a fight.
I'm going to guess that as a class, they're waaaaaay to medicated to put up much of a fight. Nope, they'll do the only thing they know, vote for the next version of evil incarnate.
Hopium, it's what's for dinner.
Kids have student loans and migrants live on the system. They don't support themselves. Pension funds expect them to support ten retirees?
You clearly don't appreciate the mindset of people who work in government. They are used to having power; they expect to get their way by using force.
This is coming from the same Robosigning mortgage settlement. Largest in the history. This is rich, do you remember this calamity dumb ass?
http://www.gpo.gov/fdsys/pkg/CHRG-110hhrg51103/html/CHRG-110hhrg51103.htm
Moody's must be running their monthly menstrual cycle. I know Mrs Atomizer is.
/ sarc
What's a couple trillion amongst friends...??
But liberals told me it was only right wing conspiracy theorists (aka "accountants") who believed public pensions were not sustainable.
Just a while back the union goons from Illinois were being bussed to the Capitol of Wisconsin to rally against Governor Scott Walker because he was 'anti-union'.
Wisconsin's pensions are the best funded at 99.91% whereas Illinois is dead last at 40.37%. Fucking useless idiots.
Illinois is hopeless. The ultra libtards will get Quinn reelected and with Madigan and Cullerton they'll strip anyone that's residing in the state with money clean.
I know people moving out, and others that moved out some time ago. They all say it's the best move they ever made.
"Unfunded liabilities" has such an impersonal sound to it, like something that fell out of the sky and happened to us somehow. How about "mathematically impossible promises, dishonestly made, without any intention of ever keeping them."
Tell it, tell it.
http://www.youtube.com/watch?v=c80ErUAIaVs
"Things Goin' On"
Have you ever lived down in the ghetto?
Have you ever felt the cold wind blow?
If you don't know what I mean,
Won't you stand up and scream?
'Cause there's things goin' on that you don't know.
Too many lives they've spent across the ocean.
Too much money been spent upon the moon.
Well, until they make it right
I hope they never sleep at night
They better make some changes
And do it soon.
They're goin ruin the air we breathe
Lord have mercy.
They're gonna ruin us all, by and by.
I'm telling you all beware
I don't think they really care
I think they just sit up there
And just get high.
Two scenarios I can foresee:
1.) Tax the shit out of anybody still working and paying them = Revolution
2.) Dramatically cut back the obligations that people were already promised = Revolution
Either way, shit's gonna get real. Tick tock, tick tock....
Also, 7.45% annualized return from 2004-2013.... that's fairly impressive. I highly doubt that's in any way sustainable.
Sure it is -- a very large portion of those gains are from Fed open market action pushing stocks higher.
What will be really impressive is when then have 7.45% returns per quarter, and then per month, and then per week in just a few years from now.
That game has to be nearing its end....
Short of that point we probably get a lot of fast 7.62 ---just sayin
Your avatar is very distracting. I'm not even reading your comments, I'm staring at ass. It's like talking to a chick with her tits hanging out. Yeah, like I'm going to make eye contact with you....
So that means they have to sell all they have and still will be $2 trillion short.
That's a helluva lot of downward pressure on prices. And once the prices start to fall, that $2 trillion will skyrocket up and up and up.
The Fed's gonna need a few more printers.
http://www.youtube.com/watch?v=MYvy3kBYN4Q
Anybody ever wonder how Federal pensions will get paid? What pot of money will that ultimately come from?
The inflationary Pot.
Fines and licensing fees.
Air tax.
You can't levy enough taxes to fix this. Maybe prolong the inevitable a little at best.
While you are mostly correct... in monetary terms.
If there is no way ‘they’ can pay ‘them’... they become their butler for a few hours a day. They take care of them after work, then go home.
Call it ‘community services’ for the people who can’t afford the Air Tax.
Umm, where is it coming from right now, at this very moment, and for the last six years? That's where.
Time to sell those bonds and go daytrading I guess.
Roughly $20K per taxpayer (and 6.6K per person in the US.) That's basically 75% of the median per capital income... just for public penson obligations.
Another way to look at it, they'd need an extra 1K per taxpayer for about 20 years to cover the shortfall, which would take raising income taxes about 11.5% (again, just for this shortfall.)
Throw this in with SSI etc, no doubt they'll have to print and/or fail to meet the shortfall.
This ship is going down with all the others.
OK, but when you way "taxpayer", do you mean:
1) Required to file federal (and optionally state) income tax forms?
2) Part of 1), but actually pays net taxes, versus receiving net benefit? (smaller group)
3) Part of 2), but actually pays non-trivial amount - like over $1000? (much smaller group)
Ha! 2 $Trillion. The Fed can print that before lunch.
Won't happen -- it's not like we're talking about something important like banks here.
MyRa will save us!
Lol...
Worst. Idea. Ever. Look what our government did to fuck up social security. And they expect us to turn over more of our money to "invest" for us...? HAHAAHAHAAHAAHA.....!! Fucking muppets.
Did that even get off the ground at all...?? Or was it just a failed catchphrase...??
If I owe $2, but only put in $1, that's 50% funded. If someone owes $100M but only puts in $70M, that's 70% funded. Fuck % !!! how much is each state short in $$$$$ is all that matters.
Let's reframe the issue: there is no underfunding problem, there is a pension - union fraud / mismanagement problem.
The taxpayers are all paid up, they've all paid all taxes due under the current budgets and required tax rates. If anyone owes taxes, the revenue departments are on them like white on rice.
If some public employees' pension funds are short of money, then the union management responsible for those funds is at fault. After all, they haven't blown the whistle calling their workers "short-paid"; they have apparently agreed to any problem-causing diversion, but that doesn't make the public / taxpayer liable for their duplicity and negligence. The public union employees are responsible for their own future, pension operations included.
Union leadership has a fiduciary duty to the workers to see that pensions are properly funded and managed. If they are not properly funded and managed, it is the workers and their unions' fault, not the taxpayers. Looking for taxpayers to bail out failed union programs is as wrong as depositors and tax payers bailing out big banks.
No to the big banks and no to the big unions.
Exactly, "poor stewardship".
Guess who you play in the vid –
Wheres my Money Stewie & Brian (Hd)
http://www.youtube.com/watch?v=ZomwVcGt0LE
I am in Kentucky (second on the list) and my cousin and her husband are both retired from the state govt. They are 47 and 49. He is working a part time job with the state govt and she stays home. I wonder how long they will be able to do that before benefits start to get cut. Probably longer than I can stay employed at my current job.
Here in The D, police have begun to aggressively “fining” ‘Johns’ for cash to make-up the shortfall.
It’s funny because the hooker will be let go on the spot while the guy’s car is taken – for cash.
We’re all Ferguson now.
Too stupid to retire rich ?
Get smarter.
See http://andreswhy.blogspot.com/2014/09/prodigies-update-i.html
For those of you wondering whether government has a plan to deal with this, here's the plan that they've put into place in California:
So, the plan is to skim 3% of the earnings of small-business employees, in order to bolster the finances of the doomed CALPERs fund.
Hmm, just another (in a long list!) of reasons to slip on out of Kalifornia!
Well funding ratio is the right measure anyhow. In pensions the boards plan unrealistic investment returns in order to minimize payments from the employer and employees to look nice to them and if things go wrong the employer = state has to pay up.
That danger is acknowledged at private companies but state pensions have no stakeholder with own money.
That is why some pension plans step into daytrading as mentioned at ZH.Not the daytrading pension plan manager must be fired only but his supervisors too.
The stupidity of pension plans is huge despite all th Ph'd they employ.
Let’s try another perspective.
Many years ago, I began to examine financial statements issued by cities and counties, special districts and state governments. I found that they had amassed surpluses in the trillions. When I studied this for California, I found surpluses (about the year 2000) that divided out to $20,000 for every man, woman and child in the state; you read that right, every man, every woman, every child. Then I factored in numbers included only in footnotes and the dividend ballooned to over $40,000 for every man, woman and child.
These surpluses are in the form of cash and bonds, real estate and stocks, domestic and international; and represent an over-collection of taxes. See, ‘Who Owns City Hall?’ and ‘Of Lords and Cattle’.
Public Employee Retirement Systems (PERS) were/are a major part of these surpluses. By my estimate (as of 2000), PERS of all states owned $3-$6 Trillions of all publically owned corporations (Microsoft, General Motors et cetera). Members of PERS are, essentially, foot soldiers for the elite criminal class: without these foot soldiers, there’d be no one to carry out genocides and general plunders of the criminal class.
I can guarantee these useful idiots watch stock markets with more than a little interest: they know a rising market means more certainty they’ll receive constantly increasing pay and pension checks. And, when PERS sustains losses, public employees are really vocal about stiffing taxpayers to make up for losses in their PERS.
Thus, the primary reason the stock market is rigged/propped-up is to keep these foot soldiers happy and, thus, obedient to commands of the class characterized by, for example, Goldman Sachs, munitions makers and big banks.
Quite frankly, I really don’t care about their pay or pension checks. As far as I’m concerned, the only questions of importance are, ‘Who owns those surpluses?’ and, ‘When do I get my dividend?’ and, ‘How is it to be done?’
Nice analysis. A lot happened since 2000. That surplus in California evaporated right after 2000 when energy delivery companies discovered they could game the state's new de-regulation scheme, and they promptly siphoned $40 billion out of state coffers. Then the 2008 financial crisis hit California with a thud, plus we had a few bad fire years, and by 2012 we were operating with deficits and funny accounting to make up the difference. We broke even last year because we raised taxes and cut spending and froze hiring. However, if there is any surplus it is measured in thousands, not billions. How much are those PERS retirees counting on? I don't think they will get it.
Maybe prices of replacement knees and hips will come done.
OR the current 55 and under crowd will be euthanzied when they touch 67 because in 15 years most of the baby boomers won’t vote and the young vote will.
Or society collapses and you, the others and me are left to fend for ourselves while Bush types flee to Portugal.
Retirement funds... a social ponzi scheme. Who joins late will get nothing when it all ends (badly). Hedge accordingly. Good luck to all.
When is a plan "underfunded"? According to the Pension Protection Act of 2006 you trigger underfunding stipulations if you are only 80% funded or less.
So the good news is that 12 states are above water. The bad news is that the country is fucked.
Detroited...
Thinking the parasites better not come back at the working folk for more taxes.
We taxed some folks.
You better bet your ass I am not paying this shit. I'll fudge my tax return. These government folks are already twice as overpaid as the rest of us. Not only do they not need a pension it is completely overvalued in relation to their nonsense bullshit work.
Not only is NJ has stopped funding, they also borrowed from it.