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

Public Finance, Pensions, and Unions News Roundup 16June2011

No preface. Just jumping right into it.

GREECE IS THE WORD

Dammit, will they just default already? I guess the German banks (and others) don't want to take the hit, but they're going to have to eventually.

I'm sorry, but the Greek populace doesn't seem to have digested the concept that they can't have hairdressers retiring at age 50 on someone else's dime. What are the supposed austerity measures the Greeks are up in arms about? Let's see: cutting down the public workforce, a slew of increased taxes, selling off state-owned properties/companies. I'd be curious what companies Greece still owns -- and for all I'm ragging on Greece, they had better be careful in selling off their stuff, because there's a prime opportunity for corruption and graft right there. And I would be cheesed off as a Greek citizen if the country didn't get the best possible price for those properties.

Interesting that it's Socialist parties in Europe having to do this.

And by "interesting", I mean "inevitable".

VDH, as someone familiar with both locales, makes the connections between Greece and California.

PROMISES, PROMISES

U.S. digs itself deeper into a hole with regards to financial promises for the future. I tell everybody not to worry about it: those promises will not be fulfilled. Don't you feel better already?

Iceland gives a counterexample to what might be a better way to go compared to Greece (and the U.S.).

HI HO HI HO IT'S OFF TO WORK WE GO

Get used to the idea of working til you die or are totally disabled.

Somebody else putting a positive spin on the whole matter of increasing lifespans. My own attitude is that it's easy for me who enjoys the work I do, but that many people do have difficulty finding fulfillment in their work and would rather just get it over with ASAP. To those people I say: save up.

For good reason, the main financial worry for Americans is their retirement funds, though, you know, if you were really concerned, you could save more. Just a thought.

Also, annuitize, dammit. But that's a story for a different day.

GENERAL PENSION ISSUES

Hey! Lookie here! A report from NCPERS (National Conference on Public Employee Retirement) saying everything is A-OKAY! If you think 76%-ish fundedness (under the current iffy methods of measuring fundedness) is A-OKAY.

But wait -- look at that "response rate": 17% of the plans that responded were state plans out of 215 respondents - which is about 36 or 37 plans . Now that may sound pretty good to you, but given that some states have more than one plan, this may be not that great a response rate. I rather bet none of the Illinois plans (there are 5 of them) responded.

Let's think of the selection bias here. What is the incentive for poorly-performing pension plans to participate in this survey? Hmm? Right.

And then look at what's reported - they talk about the percentage of active employees and annuitants - but there's a bunch of info missing: how many are close to retirement? And look how popular the 8% asset return assumption is (and given accounting standard, this is what they're using to discount their liability cash flows...)

Anyway, some public employees and retirees really don't have much to worry about. And some local governments really do have good fiscal governance. Way to go, guys! I'm not sarcastic there. Good governance should be recognized. But I can't tell it from this survey, sorry. Too many things can hide bad news...

Boo hoo: public employees have to contribute more to their pensions. Of course, all the money is really coming from the taxpayers, but the issue is that they're getting their total compensation cut.

The space program may be over, but the pensions just go on and on.

UNIONS

From Mish: Illinois unions consolidating power.

Wisconsin teachers unions ready to raise hell. Phrase that rubs me the wrong way: "devout Catholic Democrat". You know, I don't have any trouble with devout Catholics who are Democrats, but ugh on the phrasing. I'm not going to even start to unpack that one.

Considering the Wisconsin law re: public employee unions currently is upheld, could NJ follow Wisconsin's example in taking down the public unions? Hey, if that happens, maybe it's even possible in Illinois! What's St. Jude's direct line, again?

CALIFORNIA

Grand jury in San Rafael cheesed off by backdating of benefits. I find this whole "civil grand jury investigating city council behavior" type of oversight intriguing. This is the fourth such investigation - specifically on pension benefits in California - in the past 6 years.

While corrupt elected officials might get their pensions yanked, that's not necessarily true of non-elected officials.

News flash: people get pissed when money and power gets taken away from them.

Lesson from the California lifeguard story: public employees, stay out of the media if you can help it. Trying to keep your salaries under wraps is a lost cause for the most part, so your best bet is to try to have no one notice you at all. It helps not to have ridiculous-sounding work rules, pay, and benefits, by the way.

So there's this big ballot battle going on in San Fran, and all sorts of things have been popping up along the way. One: Social Security costs not necessarily factored in comparisons between proposals. Two: some rich guys are throwing shitloads of money at this.

GEORGIA

Atlanta pension reform, a kind of hybrid plan, gets out of finance committee. This has been a long slog.

ILLINOIS

When last we checked in with Illinois, they punted on reforming their pension system in favor of considering casinos as a revenue-booster. Now they're considering pimping out space on license plates. My, aren't they getting creative in avoiding dealing with their core issues.

Easiest pension reform proposal ever: no pensions for people who can vote on their own pensions. Obviously, one would need to make it a state constitutional amendment to keep the inevitable from occurring. Or have an electorate that's paying attention.

Of course, there's local tax money being used to lobby the state government to try to suck off state funds. This is an interesting parasitic situation.

Not exactly news: Cook County and Chicago pensions are in a sucky fundedness state.

A two-part analysis by Bill Zettler -- looking at what is "fair" to pay to part-time employees with partial careers - i.e., teachers, who work fewer hours than your usual full-time employee and then the other participants of the Illinois state pensions, who really don't do all that much work, either. Especially the politicians.

I'm still sitting around for a verdict in the Blagojevich trial, but in the meantime, Mark Kirk thinks Blago shouldn't get a pension, and a new law that would yank pensions from corrupt pols is being considered in Illinois.... and would do bupkis about Blago.

MICHIGAN

This is what you get for writing a complicated tax law. In trying to tax pension benefits, they tried to keep it "fair", in realizing that many of the pensions were of people who do not get Social Security benefits, and then they tried this complicated thing of carving out non-taxable bits, yadda yadda.... so now there's a constitutionality question on the table for Michigan's pension tax.

I've got a very modest proposal to fix the whole deal: dump all your tax code right now, Michigan, and implement something extremely simple. You're a state, so just implement some flat tax scheme. Don't worry about fairness. Just make the damn thing easy to figure out. And cut your frigging spending.

You're welcome.

Remember that active employee/retiree pie chart from the NCPERS report earlier? And why it's crap? Because it doesn't give info about the near-retired population:

Yeah, that's a hella scary graph, eh? [sorry to mix the regionalisms....] That's just general census figures, not public employees, btw. But that makes it scarier with the pension tax - that potential tax base may just up and move away to avoid said pension tax.

NEW HAMPSHIRE

Because of what has happened in NH, I've been thinking of not posting all these "so-and-so proposed this!", "reform gets out of committee!", etc. stories: NH gov vetoed pension reform bill. I've been reading stories for weeks about the negotiations going on, and =pfft= nixed.

Of course, there was that huge Illinois tease, but that was pretty much a foregone conclusion.

NEW JERSEY

John Bury has been carving apart the most recent proposed NJ pension changes. He notes that what's been put out there will do not much at all in keeping the money from running out, then he takes apart a local editorial which had some credulous authors.

Something may or may not be going on in NJ re: pension reform, but no matter what, the public employee unions there are pissed. John Bury grades the proposals in the bill -- and disaster still looms.

NEW MEXICO

Double-dipping law in NM teaches teachers that all is fair game when the state needs revenue.

NEW YORK

Cuomo proposes pension reform: for new hires. Dude, you're a couple years behind other states at this point. That's the easy step.

Pointing out that it may not be good optics to fire asset managers just because their politics differ from the politicians hiring them.

OHIO

Disgraced officials getting disability pension payouts. Hey, they had no shame when in office, you think they're going to have any compunction once they're being booted out? People tend to be rather consistent in their behavior as adults.

PENNSYLVANIA

Talk about slow on the uptake: Philly is just now getting around to considering altering their DROP benefit....by making it a skosh less generous. Wake me up when you actually consider dropping the damn thing.

A LITTLE WEINER

Others may have dropped the Weiner, but POWIP has no shame -- and there's a public pension connection. Though lil Tony has been in Congress since only 1999, he'd be eligible for a federal pension. The earliest he could get that is in 10 years -- so he'd still need to figure out something to do til then...good luck with that. And he'd better hope for no hyperinflation between now and then.