POWIP Piece of Work In Progress – Former Abode of Dan Collins

Mountains of Public Finance, Pensions, and Unions DOOOOOM 26April2011

For all that Monty has been doing his fiscal DOOM posts at AoS (and check them out, they're good and depressing), I still claim I've been doing them longer (albeit focusing on the pensions stuff mainly).

But there's plenty of room for more people with sandwich boards proclaiming THE END IS NIGH. So it's all good.

GENERAL PENSIONS STUFF

The people who brought us the classic Trillion Dollar Gap report last year now follow up with an even bigger gap:

The gap between the promises states have made for public employees’ retirement benefits and the money set aside to pay for them grew to at least $1.26 trillion in fiscal year 2009—a 26 percent increase in one year—according to a Pew report.

The Widening Gap: The Great Recession’s Impact on State Pension and Retiree Health Care Costs analyzes 2009 and 2010 data on states' funding of pensions and retiree health care. The report shows how states’ retirement systems—many of them already on shaky ground—were affected by the Great Recession:

-Pension funding shortfalls accounted for $660 billion of the $1.26 trillion gap, and unfunded retiree health care costs accounted for the remaining $635 billion.

-States had only about $31 billion, or 5 percent, saved toward their obligations for retiree health care benefits.

-State pension plans were 78 percent funded, declining from 84 percent in 2008.

Use our interactive map below to see state-specific data on funding for public sector pensions and retiree health care.

If Dan can yank that Flash-enabled interactive map at the link and embed it here, that would be great. If not, hie ye over to the Pew site and play with it yourself. What's really annoying, of course, is the huge lag in info -- they're telling you the balance sheet position as of 2009 -- but given how long-term these liabilities are, 2 years really isn't that huge of a lag.

Of course, 2009 was the last time the pensioners of Prichard, Alabama got paid. Ask them if two years is a long time or not.

And I want you to note how much money has been stashed away for retiree health care -- basically none. Up until recently, government entities could account for these liabilities on a pay-as-you-go basis, without figuring in any future costs. As you can imagine, given former demographics, this understated the liability. GASB (the Government Accounting Standards Board) changed this only a few years ago... and states are playing catch-up now. But you'll see many still aren't putting by any provision for this.

Luckily, many states don't have a constitutional provision protecting retiree health care. So guess what? The moment it really becomes unsustainable, it will be dropped. I think that may fix all those too-early-retirement ages (unless some idiot listens to Robert Reich and drops the Medicare eligibility age below 65).

Here's P&I's coverage of the Pew Report from above.

Here's some government group trying to talk happy. Yes, it's propaganda. Please, mister, don't take away our DB pensions!

Speaking of, Michael Barone asks if the U.S. can afford DB pensions at all (public or private). I think we can, actually, but it requires more modest benefits. At the very least, I think some longevity risk can be diversified away.

Unless Aubrey de Grey is successful. Work til you're 200! Talk to Lazarus Long...

Andrew Biggs explains valuation rates and how the value of a liability does not decrease simply because one funds it with riskier assets. More on valuation rates.

Oh look, the once untouchable current pensions are very touchable (NYT link).

Conventional wisdom and the laws and constitutions of many states have long held that the pensions being earned by current government workers are untouchable. But as the fiscal crisis has lingered, officials in strapped states from California to Illinois have begun to take a second look, to see whether there might be loopholes allowing them to cut the pension benefits of current employees. Now the move in Detroit — made possible, lawyers said, because Michigan’s constitutional protections are weaker — could spur other places to try to follow suit.
....
Pension funds can run out of money. In Prichard, Ala., a small city outside of Mobile, the fund ran out in 2009. The city stopped sending pension checks to its 150 retired workers, defying a state law that requires it to pay what it has promised. In the 19 months since the checks stopped, 18 retirees have died while waiting for their money.

GENERAL UNION SHENANIGANS

Gov. Haley of South Carolina challenges Obama and the NLRB for yanking prospective jobs from her state over union issues.

More on the NLRB complaint against Boeing.

Union of federal workers urging their members not to vacation in "anti-union" states. Guys, the high gas prices will prevent your members from vacationing at all. Win-win.

ALABAMA

Bill to require employees to contribute more to their pensions, to take effect May 1.

ARIZONA

Pension bill headed to governor's desk (presumably signed by now) - modifies benefits down.

CALIFORNIA

Jerry Brown whines at GOP.

Marin county seeing rising pension costs

More on SF pension reform proposals: Adachi finalizes his proposal for ballot; unions have a competing proposal...watch for the fireworks. Adachi pleads his case.

Bell, Calif., trying to claw back some money from its corrupt officials
via their pension funds.

The evil conservative California population looking kindly upon capping public pensions.

CONNECTICUT

A review of pension spiking

FLORIDA

Fire chief resigns before his pension changes.

GEORGIA

Atlanta mayor details pension reform proposal, threatens service cuts without benefit cuts.

Atlanta firefighters make their own proposal.

ILLINOIS

State employee union bitches that it may be asked to contribute to its own pension fund. More bitchery on same.

Editorial: it's going to go through the courts at some point, so just pass the laws, start amending the state constitution, and do it you weenies.

KANSAS

At least 10 years of pension pain projected for Kansas.

MASSACHUSETTS

Corrupt official gets his pension back, while he's still in the slammer.

MICHIGAN

An argument for the pension tax, conveniently ignoring that people would just leave Michigan to not pay the tax. Idiot.

And yet another pension tax variation. Dude, give it up. Taxes aren't your salvation.

NEW HAMPSHIRE

Alderman notes the obvious: as cuts are proposed, people will retire to avoid proposed cuts.

NEW JERSEY

Pension talks being somewhat quiet... after the very public warning of what may happen if nothing is done (i.e., current retirees will see payments lower)

Mr. Bingley's own little slice of DOOM: salaries go down 2%, benefits go up 20%.

NORTH DAKOTA

Negotiations with ND teachers pension fund ongoing...they need to increase payments to the fund in the short term.

OKLAHOMA

Looking into ending unfunded pension mandates - to wit, cost-of-living increases. Evidently, they didn't have a minimum retirement age stated, either...so they raised it to the oh-so-high age of 60 for new hires.

RHODE ISLAND

Benefit growth is getting to Cranston police and firefighter plans.

The unfunded liability in RI climbs 27 percent. William Jacobson of Legal Insurrection reviews the situation.

EUROPE

Greek pensions loaded with Greek sovereign debt.

UK teachers told they need a reality check. They're suing and striking.