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.

Meep

Meep is a member of the Irish Catholic mafia, having a suspiciously high number of green-eyed, red-haired friends. While she doesn’t have red hair herself [except when she goes into the sun (rare for any vampire)], she does have green eyes. She’s a raving Papist and is a life actuary on the side [i.e., she counts dead people]. An amateur pain-in-the-ass [willing to go pro!], she likes covering retirement, mortality, math, and education issues.

D-Day Public Pensions, Finance, and Unions 6June2011

We're not all about dick jokes and bitching about pretty people around here.

Well, not only.

WHERE ARE THE GOONS OF YESTERYEAR

Glenn Reynolds notes that public union clerks don't make for the most intimidating union muscle. Ah, instead of good old-fashioned thuggery, they have to go to the more lawyerly fashion of unaccountable judges... until all of a sudden they are accountable. Funny how that happens.

But let's not let it go at that - Althouse asks if Reynolds is calling the Wisconsin public employees a bunch of sissies, and a commenter points out that he's contrasting the old image of union workers as blue-collar workers with little leverage versus cubicle warriors with huge political war chests.

PUBLIC FINANCE

Muni bond issuance down half compared to last year. And it's not because they don't need the money. I like this: "Restricting bond issuance, though, limits a government's ability to spend." "Though"?! That's the whole point, dude. The credit rating dropping, the interest rates increasing, this is a signal to drop the spending, doofus. Yes, I understand the concern about infrastruture, but I bet there's quite a bit of wiggle room in the operational budget from which cash can be wrestled.

"Fun" interactive graphic: sovereign debt contagion. I recommend putting your cursor on the U.S. first and seeing who's exposed to our debt... and see that the risk isn't reciprocated. Bwa ha ha ha. Suckers.

Ireland has lessons for Obama? Silly Richard Wolf. Obama learn something from an entity outside himself? Surely you joke.

By the way, the euro zone hasn't really had its crisis yet.

CALIFORNIA

Liberal-vs-liberal in pension smackdown of the year! San Francisco treat. I call it just deserts.

A councilman who has cutting pensions as a top priority announces his run for San Diego mayor. Oddly, this is a game of Name That Party! It's odd, because pretty much every other politician has his party named in the article. Why not this guy? By the way, he's a Republican.

Special asst to governor (no, not the one dealing with women issues): you know what really helps prevent pension crises? Actually putting adequate money in the pension funds. It works wonders.

COLORADO

Denver could raise retirement age to 60 for city workers. Oh, the humanity!

More on the same.... and scroll to the bottom for a lovely quote from the council president saying that one shouldn't mess with a successful pension system... after all, they need to attract employees. Employees that have lots of options for DB pensions with a retirement age of 55, apparently.

CONNECTICUT

Bridgeport isn't doing so hot. They're asking for permission to make only a $7 million contribution, when the calculated required contribution is $13.5M....and they really would have to pay $24M to make the fund whole. This is how trouble can start.

ILLINOIS

So after the massive fake-out from the state legislature that they were actually doing something about pensions, it's time to regroup and consider the options. It has been noted by various parties that one really big problem is that contributions to the fund have been way too low for the level of benefits being promised. For a fun look at history (sorry this isn't pretty, but the numbers are inherently ugly) - here are the fundedness ratios (total assets / total liabilities) for various pension plans for the past 10 fiscal years:

System, FY2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010

Teachers’ Retirement System, 59.5, 52, 49.3, 61.9, 60.8, 62, 63.8, 56, 39.1, 40.5

State Employees’ Retirement System , 65.8, 53.7, 42.6, 54.2, 54.4, 52.2, 54.2, 46.1, 33.9, 31.4

State Universities Retirement System, 72.1, 58.9, 53.9, 66, 65.6, 65.4, 68.4, 58.5, 41.9, 40.2

Judges’ Retirement System, 40.7, 33.7, 30.7, 46.2, 45.7, 46.4, 48.4, 42, 31.2, 28.8

General Assembly Retirement System, 34.9, 29.3, 25.4, 40.1, 39.1, 37.1, 37.6, 32, 22.7, 21.7

All systems, 63.1, 53.5, 48.6, 60.9, 60.3, 60.5, 62.6, 54.3, 38.5, 38.3

[Take a gander at GARS: that's the politicians' pension... now I've got an idea to reduce the state's liabilities....and maybe here's a different way to give them an incentive to do their damn jobs. People are unimpressed by the inaction.]

The Illinois pols' idea of a responsible bet: casinos for Chicago. Double down! Double down!

NEW YORK

Oh, a kerfuffle has poofed in NYC. The Comptroller, who once upon a time claimed to be an actuary (though I can find no record of his ever having had credentials.... I could be wrong, though), has a convenient little report saying that the city pension costs are going to dramatically drop... as a percentage of the city budget. And how does that work out in absolute amount, Mr. Liu? Needless to say, Bloomberg is pissed, because this is taking away negotiation leverage from him....well, if this is at all legitimate.

I haven't read the report itself yet, so I will leave comments on it til a later date. Here's the press release, here's the summary, and here's the full report. People will get hung up on the fund return assumptions (and sure, they should), but I'm more concerned about liability assumptions (so that will take me a while, and I probably don't have enough info to figure out if it's reasonable). But let's see the assumption of the denominator....

To quote the press release:

1.City pension costs will increase nominally through FY 2016, after which they will decline as a percentage of the City’s expenditures and revenues.

Note: In FY 2012, pension cost is $7.3 billion or 11.1 percent of the City budget. By FY 2016, pension cost will rise to $8.3 billion or 11.4 percent of the city budget. The increase in pension cost through 2016 would not be materially impacted by new benefit changes or tiers that are applicable only to new employees

So, basically, there's a projected $1B increase in annual costs projected in a 5 year period. That's quite a bit, don't you think? Almost a 14% increase. So to keep the percentage of the city budget about level, it requires the city budget increasing by the same rate.

And hey, what are the costs as a percentage of salary?

3.The primary reason for declining pension costs is the phasing-in of new employees whose benefits are significantly lower than those offered to municipal workers in the past. Police and Fire Pension Funds will experience the most significant costs decreases over the next 30 years.
■Police will decrease from 65.1 percent of salary in FY 2010 to between 39.2 to 33.4 percent of salary in FY 2040.
■Fire will decrease from 83.1 percent of salary in FY 2010 to between 46.6 to 41.5 percent of salary in FY 2040.

Yeah.... that still sounds pretty high. That's just the pension cost. How much do you put away in your 401(k)? I'm thinking it's not 40% of your gross salary.

RHODE ISLAND

Moody's downgrades R.I. debt based on pension cost issues.

A little bit of history behind Providence's cushy retirement benefits that have all of a sudden become unsupportable. Except it was really 30 years in the making, not something that "just happened".

In particular, there are these nice disability pensions that it seems some rather non-disabled people are collecting.

TENNESSEE

Governor signs bills that squashes collective bargaining for teachers

UTAH

The state wins an award for facing reality. [Yes, it's all politics.]

WASHINGTON

Gentlemen, start your lawyers! Unions look to sue over COLA-removal law.

WISCONSIN

The benefits battle continues, this time with the public safety workers [usually considered untouchable]

Meep

Meep is a member of the Irish Catholic mafia, having a suspiciously high number of green-eyed, red-haired friends. While she doesn’t have red hair herself [except when she goes into the sun (rare for any vampire)], she does have green eyes. She’s a raving Papist and is a life actuary on the side [i.e., she counts dead people]. An amateur pain-in-the-ass [willing to go pro!], she likes covering retirement, mortality, math, and education issues.

Three Day Hangover Public Pensions, Unions, and Finance Roundup 31May2011

Others had their weenie roasts. I'm eating pork barbecue.

That's the way we North Carolinians do it.

(If I can find where Stu hid it in the fridge)

PEOPLE ARE GETTING OLDER AND THAT MEANS STUFF

Such as some people get less productive as they get older, and (warning: NYT link) get demoted, and they don't like that. I agree that it's not just a matter of age... lots of people just don't keep up, period. I am appalled at people my age, which isn't even 40 yet, who act like they've got nothing new to learn, and then are shocked to find they're not exactly a hot property on the employment market. I think it's a lifelong temperament, not a generational or age thing.

The greying of Maryland and Hawaii.

GREECE

Just a matter of when and how, not if: what will happen when Greece defaults. Yes, a little short-term prognostication (I consider a two-year horizon to be short term, myself. Look, when I consider public finance, long term is at least 50 years.)

Breaking news: the Greeks are unhappy. Beware of any large wooden horses on the horizon.

The Greeks didn't appreciate being called lazy by the Germans. Though they are. Amusingly, the "lazy Americans" have the same retirement age as Germans, and far less paid vacation.

And yes, they threw another fit. Let me know when that makes money magically appear, guys. It didn't the prior dozen...twenty?... times.

OUR ILLUSTRIOUS PUBLIC SERVANTS

IRS employees committing tax fraud. Well, hey, you'd think they'd be the experts. So yay them, I guess.

News flash: public employees lack accountability. Well, knock me over with a feather. Well, let's check out a couple examples.

Corrupt Californian ex-official strikes a plea deal on a felony charge. Keeps his pension.

A shrink for Milwaukee County manages to retire with backDROP bennies under a cloud of suspicion. "You can't discipline me! I quit! And give me my retirement shtuff!"

And another person who retired before being charged with anything. Lesson: if you do something questionable, be sure you're close to a legit retirement age.

GENERAL PENSION ISSUES

Getting all actuarial-ish on you for a moment: does market value of liabilities make sense for public pensions? This is coming from Segal, an actuarial consulting firm that does public pension work. I agree that there's really no such thing as "MVL" for public pensions... if anything, public plans need far more conservative assumptions due to the number of parties with different interests who need to be protected from politicians (namely, the workers, bondholders, and taxpayers). I'm thinking Treasury rates minus a spread to use as the discount rates. This is for balance sheet valuation of the liabilities, mind you, not figuring out how to fund them. There is a distinction there.

More actuarying: a Capitol Hill briefing on Social Security by the American Academy of Actuaries. An excellent run-down of the principles of the trade-offs and the reform choices. Take a look.

This doesn't really fit anywhere else, so I'm throwing it here -- odd consequence of shutting down the NASA Shuttle program: having to pay off pension costs of private subcontractor.

CALIFORNIA

Great investment: Arizona land sells for 8% of its original sale price. Calpers was one of the investors.

San Marcos: pension consultant recommends town to boost pension contribution even higher than Calpers requirement.

The ongoing San Fran pension scrum: trying to keep Adachi from running his own, stiff proposal.

Yes, people do understand what happens when you've got "tiers" of pensions, and you especially get a generational divide. The younger guys aren't going to give a crap what happens to the retirees with the cushier benefits. There will be no solidarity.

Gifts to state pension officials under investigation. This will be interesting, I'm sure.

Daniel Borenstein asks for an honest accounting of Calpers plans. Let us know how that goes.

GEORGIA

Atlanta Mayor Kasim Reed directly calls for pension reform. Yes, the debate is rather heated.

ILLINOIS

Low-hanging fruit: high pensions for politicians. Let's just whack it. The base assumption should be they're all base. I know John Adams could probably be a perpetual motion source at this point to see what "public servants" are, but he saw the Lee boys in action back in the day, so none of this should be new to him. [there are some excellent comments on this piece]

Did you know that Illinois is having trouble paying its regular bills? Again? The Repubs aren't allowing $6B (yes, billion) in borrowing to cover the the backlog (but it looks like quite a few Dems voted against it, too), to force the issue.

Even the state treasurer has gotten into the game, saying he is going to make borrowing more expensive for the state by asking rating agencies to downgrade state debt (that's not what it says explicitly, but read between the lines), to try to make the legislators a little more responsible and cut spending. (Okay, it is more complicated than that -- but the point is to make new debt issues more difficult for the state, and that includes rolling over debt.) Isn't public finance fun?

Sharing the pain: Chicago retirees will see a 15% hike in their health premiums. And they begin to see that an unfunded liability is not just a danger to taxpayers (and bondholders), but also to the people who were promised something.

Speaking of unfunded liabilities (and their causes), I would like you to consider the following report from the Commission on Government Forecasting and Accountability. I draw your attention to Appendix M, at the bottom of page 104 which shows the total for the 5 Illinois state-funded pension plans -- a breakdown of the sources of the unfunded liability change over the period from 1996-2010:

Now, that's not the full unfunded liability, by the way, but about 2/3 of it. That's merely the increase over 15 years... and the largest percentage is due to (begin EDIT:) "employer contribution shortfall" - as noted by Bill Zettler in the comments, this is mostly coming from interest on the already accrued unfunded liability not being covered...but the main point is the pension not being funded when the liability is being accrued, more than the investments going south (end EDIT). In short, these plans have been systematically underfunded for at least 15 years, and while yes, crappy investments did a number on the fundedness, you have to actually stick some cash in there from time to time, and the pols were loathe to do that.

I think you will find in many of the cases of the worst-funded plans across the country that the reason almost always has been underfunding as opposed to only investment problems....though there are wacky investment things going on at various points, but I'll save that for a different time.

In any case, this is why the pols in Illinois are actually working together to pass pension reforms, over the objections of the public unions who had good reason to think they had bought the pols.

But according to the report linked above, the combined plans are less than 40% funded, so political contributions can't keep fiscal reality from hitting Springfield. The unions have got to realize the three options being offered are what they have to work with: keep current benefits but have to pay more for them; don't pay more but get less in benefits; or get thrown to the DC wolves. Make your choice, guys.

But wait! Unions win! They make the pols put off a reform til fall. I don't know if I'd call that a win, guys. As Marc Levine says, you may regret this. The choices may become more harsh as the state's finances deteriorate. Cook County employees are seeing furlough days, and I bet there's going to be more fiscal pain shared ith public employees before this is over. And don't expect a federal bailout... remember who holds the purse strings now.

So what were the Illinois pols doing instead of fixing the pension mess? Betting on casinos.

KANSAS

Gentlemen, ready your lawsuits! The employees of Illinois may wish to look at what is going on in Kansas as employee groups there seek to sue over a law that intends to force employees to either contribute more to their pensions or receive less in benefits. Though this involves COLAs alone it seems, and not the general benefits.

MICHIGAN

Biggest change to tax code: taxability of pensions.

I still think it's dumb. Who the hell wants to retire to Michigan in the first place? Great way to drive people away even more, dumbasses.

Emergency finance manager stirring debate.

NEVADA

Double-dipping law under fire. Unlike most states, "double-dipping law" here means a law that allows for public employees to collect pension payments and also remain public employees. In most places, it's a law to preclude such behavior.

NEW HAMPSHIRE

Negotiations ongoing.

OREGON

Pension reform poops out.

PENNSYLVANIA

After all that work to get the numbers to dance, the state may end up taking over the Pittsburgh pensions after all. Well, expecting money to magically appear was never much of a plan.

RHODE ISLAND

The governor is getting a bit tetchy that the treasurer has all the press over the awful state of RI pensions. Dude, just let her have the issue. There's not going to be a huge amount of glory there.

Meep

Meep is a member of the Irish Catholic mafia, having a suspiciously high number of green-eyed, red-haired friends. While she doesn’t have red hair herself [except when she goes into the sun (rare for any vampire)], she does have green eyes. She’s a raving Papist and is a life actuary on the side [i.e., she counts dead people]. An amateur pain-in-the-ass [willing to go pro!], she likes covering retirement, mortality, math, and education issues.

Public Pensions, Finance, and Unions 15May2011 Deadline Edition

It's deep into publication deadline season for me (working on life reinsurance! Woo! This weekend! Awesome! Not!) so my editorial comments will be at a minimum.

Yeah.

Right.

EUROPE

Greece: their finances suck. Response? You know. The experts do not see this ending well, not just for Greece, but the entire eurozone (I like the restructuring option built into the bonds to begin with - if you were a sucker to trust Greece, or expect a bailout, you get what you deserve.)

UK: public employees to hold a more restrained set of strikes over pension cuts. Guys, doesn't matter if you go the violent route or the civilized route -- you're not getting your goodies. Because there's no one to pay for them.

Ireland: not doing so well, either. What are they going to do? Tax private pensions. A 60-basis point tax on assets. Per annum. "Temporarily". Uh-huh. Pull on the other one, it's got bells. Oh, but some people get better treatment than others. Surprise.

Some reactions to the Ireland plan. Pension professionals not pleased - well, duh, it would kill many private pensions. Leo Kolivakis rounds up more, and is also skeptical of how useful this will be.

The Irish people have been told to shut up and not to whine, because FISCAL ARMAGEDDON would result if they didn't go with the EU-IMF bailout. IMF, huh? Those guys have a good reputation, don't they?

OUR UNDERPAID PUBLIC SERVANTS

California lifeguards, making over 200K.

Illinois assistant superintendent of Education making over 300K, making 60K more than his supposed boss.

High-paid public employees is not just a U.S. thing. What was that about austerity in Ireland again -- evidently not everyone gets hit.

A public hospital CEO given $4M in pension benefits.

SOCIAL SECURITY

A report came out. Social Security is in the red from now on...til something changes. And something will change. The problem is now, not when the lie that is the Trust Fund is depleted.

GENERAL PENSION STUFF

USPS ain't doing so hot - it's not just a pension thing, but hey -- it's a big part of their problem.

Remember the injustice that the Wisconsin public employees were having their God-given rights to collectively bargain yanked away by harsh, unfeeling Republicans? Well, weep for this group of government employees who have never been given this right, and who might get their pensions cut.... federal workers.

Oh, and it's not just undercontributions and overgenerous benefit designs that got us into this mess. There's also pension fund corruption.

Just take a look at this graph... the horizontal axis is only a 11-year period, so why would that slope be so steep? Think about what's going on there.

Oh, all this public pension foo-fa-raw is pure envy on the part of the have-nots. Hmmm. What was that about class war, again? Didn't expect to be in the "have" class, now did we, union agitators?

CALIFORNIA

CHiPs get real and negotiate, bumping retirement age up to the ancient 55 years old. Hey, it's better than their prior eligibility age at 50. (and 3% per year? Holy crap, that's generous at any age.)

San Jose mayor declares fiscal emergency, pensions play large role.

A review of the pension pain precipice in Santa Cruz.

Cutting police and jail services to pay for pensions.

Sacramento County must hand over pension info to media, says court.

UC system benefit perk still paying out when it can least afford it (WARNING: NYT link).... this will play out interestingly.

CONNECTICUT

Step up, ladies and gentleman, and let me introduce you to your next version of Prichard, Alabama. I do not see the pensioners of Hamden, CT, doing well over the next five years. Why, do you ask?

The town’s pension is 25% funded, and the mayor only allocated a $3 million contribution, or around 15% of the $19.85 million recommended by the town’s actuaries, for the upcoming fiscal year. The pension was closed to new enrollees in 2008, but supports 664 retirees and 568 active employees. The fund has only $75 million in assets and $242.3 million in unfunded liabilities. The pension pays out around $20 million each year to current retirees.

Yeaaaaaaaah. That's what we call unsustainable. This is a completely foreseeable disaster. It does not take fancy math to see that the money will run out in short order.

We see this on a relatively small scale - a town with a less than a couple thousand people impacted by the money running out. So what do we do when it's Illinois or New Jersey? Prichard retirees have not gotten bailed out, Hamden employees will not get bailed out, and when it's order of magnitude larger -- it's not going to get bailed out because there's no money of. Tough shit.

ILLINOIS

There's been a lot of politicking by state employees lately in Illinois. I don't think it's going to work -- because the hole is too big. But let's take these things one by one.

Don't break pension promises, say those from the public union side.

A TRS trustee writes a letter and Bill Zettler has some pointed questions to ask those on the teachers union side. (I will pick only a couple):

4. Why are teachers allowed 2 years of sick leave credit when they retire adding enormously to the pension cost? No one in the private sector has that.
....
9. If pensions are reasonable how can a 54 year-old Music teacher retire on a pension of $130,000 after working only 33 years and contributing only $193,000? Since he retired in 2009 he has already received more than he contributed ($225,000). That does not seem reasonable to the 95% of IL workers who are not in the state pension system. The cash value of his pension is 8 times what Social Security would be for the same salary and years worked. Why does any public employee deserve more than 8 times Social Security?

There is a lot more at the link.

A police union leader again reiterates that pension promises must be kept.

From the business side, a call for reality -- and explains measures he had to take to make his private pension plan sustainable.

Overview of proposed pension changes, the main change being that employees would have to contribute a lot more to the pension fund...and the unions claim this to be unconstitutional. Oh, this should be interesting.

Picking low-hanging fruit: cutting a benefit for local pols.

KANSAS

Making the case that Kansas police retirees have a modest pension benefit. I'm going to go all actuary on your ass for a moment:

Our retirees live to an average age of 72 — six years below the national average, according to the Centers for Disease Control and Prevention.

Let's go to the life tables, shall we? Life table for 2006 from the CDC, and historical life expectancy (go to table 22 if it doesn't take you there automatically). Now, these are general population mortality tables, which includes all sorts of sick people, but let's assume it's okay. First thing that's deceptive about his statement: I bet most of the retirees are male. There is a major life expectancy gap between males and females to begin with, which makes for a couple years difference between the general population life expectancy and male life expectancy. Secondly, that 76-ish life expectancy in the general population is 1. from birth and 2. assuming you were born after the 1990s (so it involves guesswork on mortality patterns). Well, were you?

In any case, the life expectancy stats include people who died in infancy and childhood and is not the proper number to compare against for pension plans. You should either use life expectancy from age you enter the plan (say, age 25 or 30), or retirement age (say 50 or 55).

Now, I don't have enough info to do a good comparison of the life/death stats on that pension plan and other pension plans/general population. I don't know what time period that life expectancy was calculated over... but more to the point, it might be irrelevant.

Sir, your retirees might die young, but I bet many of them have spouses/ex-spouses who get joint benefits. What are their ages? What have their death age distributions been like? You can have a policeman die at age 60 and his widow collects full benefits til she's 95. Let's talk relevancies.

Ok, enough actuary talk for this post. And if I screwed up any of the details above, I'm sure one of my fellow actuaries will set me aright.

MICHIGAN

Looks like that pension tax (oh, sorry, "curb on pension tax breaks") passed. Let's see what happens.

NEBRASKA

Not a generic public pension issue, but interesting trivia: criminal's pension protected from being garnished to pay for money he owes sexual assault victim. This is an ex-state patrolman child molester, if one wants to get more specific.

NEW HAMPSHIRE

Employees rush to retire. But hey guys, just saying -- being a retiree won't necessarily save you from fiscal pain.

Why are they rushing to retirement? Because of ongoing pension reform discussions.

NEW JERSEY

John Bury notes that New Jersey needs minimum funding rules on its pensions, and supports the passing of PEPTA, a federal bill requiring greater
transparency in public plan reporting.

Of course, even without those requirements, the bond markets are waking up to their risks.

And the various NJ unions are trying to remain relevant and hold onto what they've got in this debate. Good luck with that.

RHODE ISLAND

Pension reform goes out with a whimper... I guess when they run out of money will be the bang. More on the death of reform efforts this year. Pony up, taxpayers.

Looks like investigations into possible disability pension fraud is ongoing, though.

Meep

Meep is a member of the Irish Catholic mafia, having a suspiciously high number of green-eyed, red-haired friends. While she doesn’t have red hair herself [except when she goes into the sun (rare for any vampire)], she does have green eyes. She’s a raving Papist and is a life actuary on the side [i.e., she counts dead people]. An amateur pain-in-the-ass [willing to go pro!], she likes covering retirement, mortality, math, and education issues.

Public Pensions, Finance, and Union Spew 5 May 2011

Cinco de Mayo!!!!!

WOOOOOOO!!!!!

And you know what's the perfect thing to kill the party spirit -- yeah! DOOOOOOOOOOOOOM!!!!!

Okay, kick it.

UNIONS AND THEIR FRIENDS

Washington Examiner opinion piece -- Abuses Happen When Unions Have Government Friends.

A letter: public employees are just like you. Yes, when I screw up majorly, I get protected from firing and I can retire with a DB pension in my mid-50s. Just like me. Oh, and I can opt out of Social Security. There are services that perhaps should be controlled directly by the government, but it seems to me that much of this stuff can be outsourced to private companies, just as my company outsources its payroll operations, for example. If the public employees are just like the private ones, seems like if the private ones are cheaper, it's in my interest as a taxpayer to get the cheaper one that gives me the same service.

Way to shoot yourself in the foot, dipwad.

Want to see other ways public employees are just like you? Just check out the various perks some get, like million-dollar home loan concessions.

BOOMER (NON-)RETIREMENT TWADDLE

Sure, one of these things is not like the other, but thought I'd throw it in here. A too-precious NYT review of a book on the "encore stage" for Boomers. For we Xers, this is the "dammit, do we have to get out the hook to yank them off the stage?" stage.

FINANCE SINKING US ALL

Steve Forbes on middle class tax hikes to bailout public pensions. And you can't tax the rich because 1. there's not enough of them and 2. the middle class has more money, collectively.

PENSIONS ON THE WHOLE

Just a note -- we've been seeing a lot of public pension fund managers leaving to go into the private sector. HMMMM. You think they know something? I think what they know is that the private sector pays more, is less political, and is actually a lot lower-profile.... especially as some ugly financial battles are upcoming.

On the Pew report on public pensions: state pension gap continues to grow.

CALIFORNIA

John Dickerson at YourPublicMoney.com has been detailing the failure of public financial management in Mendocino County. Check out his latest issue (currently on the three levels of financial problems - how, once the county got into debt, it wasn't dealt with... my never heard anything like that before.)

California employees trying to defend their "modest" benefits. Thing is, guys - if it's $1,000 for 1,000 people, that's $1M. A lot of little "modest" benefits can add up, and if proper provision is not made, even "modest" benefits can be unaffordable. And here's the kicker: something can look like a small amount of money, but if it's going to be paid out monthly over a period of 40- 50 years.... and inflation-adjusted.... yeah.

Interesting: a councilman requests a legal analysis of San Bernadino's pension obligations, which the council as a whole rejects. But as some of the councilmen note, it's becoming a squeeze between current services and benefits paid for past services.

Now is not the time for a $4-million retirement package. Dude, you picked a poor time to be in the public sector.

That said, politicians look out for their own as they nix a proposal to yank benefits from corrupt officials. Hey, =they= could be those corrupt officials in the future!

DELAWARE

Governor signs bill that requires employees to contribute more to their pension and health benefits.

FLORIDA

More modest pension reform bill sent to the governor.

GEORGIA

The case of the missing pension docs

ILLINOIS

Public employee unions trying to make PR case to avoid getting hit by budget cuts. Here's a thought -- let taxes be raised just on you guys to cover the expense, and you don't get cut! I'm all about the win-win.

And here are the unions trying to protect their pensions. Guys, you should've thought of that when the pension obligation bonds were being issued instead of real contributions being made. Blog post on this from Capitol Fax. It looks like this will be a very interesting legislative season in Illinois.

Oh look what ex-mayor Daley is up to: dumping all his pensionable service into one bucket. Read the comments on the story for some fun. A Daley spending any time off the public teat? You must be joking. Special extra bonus Daley puke: Daley's farewell speech.

One of the worst pension funds in the country -- Illinois Teachers Retirement System. Always been in crappy financial position...follow the timeline from 1973 (before I was born).

KANSAS

In current negotiations, a 401(k)-style pension option for state employees is off the table. Lots of negotiations ongoing, stalls, etc.

MICHIGAN

Mayor Bing of Detroit has unveiled his deficit-cutting plan. Changes to retirees benefits (medical and pensions) are a big part of this plan. More on Detroit budgeting.

NEW HAMPSHIRE

Negotiations are ongoing in the state legislature over pension reform. (I know, I know... exciting!) The House is cramming its bill with all sorts of reform measures that the Senate has rejected (ain't that the way). This part is unlikely to pass, but this is the most intriguing reform measure I've heard of:

The House added two controversial items to the Senate bill. One would punish public workers if unions sue over the reform, forcing them to absorb a major hike in their pension contribution rate they take a challenge goes to court. Opponents have called it a “poison pill” clause. If employers challenge the reform, there would be no similar penalty.

NEW JERSEY

A very short video courtesy of John Bury and a recent actuarial meeting - don't worry, no scary number-crunching, though it is scary. Here is a key exchange:

John Bury says: "What tools do the actuary need or should the actuary have to handle New Jersey?"

NASRA's Keith Brainard: "New Jersey would make a terrible place to make a pension policy"

....
Mr. Brainard ended his response to my question by saying:
“We get the government we deserve and New Jersey voters ought to stand up and demand better.”

[Dan, if you could embed the video, that would be great]

Yes, the voters of NJ got the government they deserve good and hard.

Of course, who am I (New Yorker ... BY CHOICE... to talk).

OKLAHOMA

Legislators approve plan to require pension cost-of-living adjustments to be funded. You'd think that would already be required, but you'd be wrong. Many COLAs are "funded" by being amortized over a very long period... and the person who received the bump may be long dead while the benefit is still being paid for. Yay. An opinion piece approving of the move.

RHODE ISLAND

News flash: fixing the pensions may mean CHANGING THE BENEFITS! whoa. Never thought of that. (yes, and this includes current employees.... and though she doesn't say it explicitly, current retirees.) More from the state treasurer on this issue.

Criminal investigation of a disability pension being paid to a firefighter - looking into whether it's fraud. Fun factoid: accidental disability pensions such as this on make up more than half the pension payments the Providence FD makes this year -- almost 60%, in fact.

WASHINGTON

Even in Washington State, double-dipping isn't looked upon kindly.

WEST VIRGINIA

After Pew released its updated report on state pensions this year you're going to see more of these stories as each state sees where it falls out. And West Virginia gets to shout We're #2! We're #2!

CANADA

There was an election in Canada recently, and a bunch of MPs (not me!) lost their jobs. But don't worry about them! They've got cushy pensions to fall back on. No, really, they'll be okay.

Meep

Meep is a member of the Irish Catholic mafia, having a suspiciously high number of green-eyed, red-haired friends. While she doesn’t have red hair herself [except when she goes into the sun (rare for any vampire)], she does have green eyes. She’s a raving Papist and is a life actuary on the side [i.e., she counts dead people]. An amateur pain-in-the-ass [willing to go pro!], she likes covering retirement, mortality, math, and education issues.