POWIP Piece of Work In Progress

Easter Pensions, Unions, and DOOOOOOOOOOM 24April2011

Hallelujah! He is Risen!

Guess what's not?

But the good news is that it will not require the Second Coming to fix this mess. Yeah, none of the below is particularly fun, happy, or joy joy joy...but all it will take is a little bit of reality and castor oil and we'll get through this.

Feel good?

Yeah, I thought so.

SOVEREIGN AND MUNICIPAL DEBT

Considering making muni bonds taxable - as Girard Miller of Governing Magazine notes, this proposal is DOA, but Miller tells the munis to consider this...because they're going to need all the financing options they can get.

From Kevin D. Williamson, the four national debts: ranging from the short-term to the long-term. As Williamson notes, it's those medium-term notes where the action is, and those turn over in the 1- to 10-year range, and as interest rates rise in the medium term, that's really going to hit. And can hit hard. Because some of the holders of said notes aren't too happy about the situation.

Governmental accounting -- the kind of tricks the federal government is up to would put private entities in the slammer, according to Deroy Murdock.

More on federal debt from William H. Gross at PIMCO.

Fed claims muni bond defaults unlikely. I don't exactly disagree, but I think that the munis are going to find a tough time of it in rolling over their bonds or issuing new ones. The power to tax isn't infinite, especially when one's population keeps moving away (ask Detroit about that). Here's the Chicago Fed letter on this.

Want to feel better (relatively)? Take a look at how Greece is doing.

And plunging you back into despair: a history of the U.S. debt ceiling.

UNIONS MAKING FRIENDS

Grocery workers' union attacks non-union grocer trying to compete with non-union Wal-Mart.

Girard Miller considers public employee pay.

Indiana unions paid for Indiana Dems to bravely run away from their jobs.

Hey, Boeing, you thought you could site your factory in a different state? Sorry, you're shackled to Puget Sound and to its unions. Until the court cases are resolved, at any rate. More on same from Tom Bevan.

Free Enterprise Nation sends out an email, gets replies from (purportedly) public workers.

Much to our surprise, this seemingly innocuous email has produced an inordinate number of negative and downright nasty email responses to FEN. Many replies claim to come from public sector workers (although we have no way to verify their true identity) who say that the facts stated in our communiqué are overblown, preposterous and/or just plain untrue. Because of those charges, we would like to make our sources available for verification. Ironically, the facts we used all came directly from the government’s own websites.

Florida unions pulling money from banks supporting FL Chamber of Commerce.

Seattle city union blocking free effort to clean city parks. They are probably correct - I bet the company is trying to get the city to outsource further city services to them. I don't see why the taxpayer would care if the trash service is from a full-time city employee or provided by a private service, though. If it's cheaper, it's cheaper.

A similar debate in Costa Mesa as employees are laid off and services outsourced... and a raucous public debate ensues.

SEIU trying to get non-union workers in on their "actions". I guess I can see the theory behind it, but I'm not seeing this as a winner. It's really not going to work when the class war is seen as government workers with job tenure against private sector workers who have no guarantees at all.

GENERAL PUBLIC PENSION ISSUES

How the rate of return affects required pension contributions and assets.

Is 8.5% a reasonable discount rate for what is essentially an annuity? More on why an 8.5% assumption is not exactly prudent in today's world.

Public workers decide to get ahead of massive layoffs (and benefit cuts) by retiring in droves. Hey guys, don't assume that means you'll never get cut. Thing is, just because older, more expensive workers are retiring, doesn't mean it's necessarily cheaper for the government -- now they've got to pay for medical benefits they'd pay for anyway for that person, plus perhaps a replacement worker; and then underfunded pension plans start to liquidate which can end in a death spiral.

Last year we got Pew's Trillion Dollar Gap study. What will the number be this week?

GENERAL RETIREMENT ISSUES

Tom Blumer says retirement expectations need to be managed -- I agree. I tell everybody to expect to work til they die (or total disability) unless they save up for it.

Michelle Malkin on making 70 the new 65. Frankly, 65 wasn't the old 65 -- people on the whole start taking Social Security benefits within the first year of eligibility (when they're 62)...though that has been falling. And they do that because generally they haven't been working for a few years at that point. People may change that behavior, and I think they should, but merely changing the "normal retirement age" on these plans will reduce the overall cost, not necessarily get people to change when they retire.

It's a good start that the UK abolished its mandatory retirement ages, but as we've seen in the U.S., that does only so much.

An interesting method to get people to save more for retirement: make them think of themselves as older (and poor), using virtual aging.

The Economist's case for raising the retirement age to 70.

Hey - it's not just public pensions that are troublesome! Taxpayers may be asked to bail out private pensions, too! Yay!

ALABAMA

DROP benefits -- dropped in Alabama, and for very good reason.

CALIFORNIA

Orange County loses court fight over retroactive boost to deputies' pensions. So what's next? All I have to say is that if the pension debt isn't real, that means the pension promises aren't real, and don't need to be paid. Want to make that legal argument?

I knew this was coming -- one of the parties that will get blamed in the public pensions mess will be actuaries. Or, hopefully, specific actuaries as opposed to the entire profession. There's a reason that item #2 on the Society of Actuaries' list of strategic initiatives for 2011 is looking at the reputational risk from public pensions. A little too late, perhaps, but hey - at least they realize there's a risk there.

The dispute between current services and pensions for past services coming to the fore again and again and again in San Francisco. Jeff Adachi had tried something last year, and it looks like he's trying again... just as others are, as well.

Those generous pension benefits cost a lot? Ooops! Our bad!

FLORIDA

This is an interesting turn to the public pensions debate: a firefighter who has been doing his own investigation into his local pensions was ordered to undergo drug and psychiatric testing.

Florida politician defends the draconian proposal to have state employees contribute 3% of their salaries to their pensions. The bastard!

ILLINOIS

This inspires confidence: pensions to be paid without borrowing for the first time in two years. If you can stand the excitement, here's a 19-minute video of the state treasurer talking about borrowing to pay off the bills and pensions.

But are they really? Seems they're not exactly current on their regular bills.

Meh, forget about constitutionality: let's just pass the damn pension bills and let the courts sort it out. Allrighty then.

Evanston fire chief accused of double-dipping. I assume lots of boomer-age (and younger!!) public workers are double-dipping at this point.

MICHIGAN

Michigan passes a mutual assured destruction bill, where all sorts of contracts, collective bargaining, etc., will be dissolved in the event of Really Bad Fiscal Stuff (TM) occurring. Primarily, Detroit is the target of this. And of course, various parties are not sitting still for this -- time to lawyer up!

Hey, it's a better idea than the pension tax. They definitely don't need something to spur more people to leave. I mean, what exactly is the attraction to stay?

NEW JERSEY

John Bury says that politicians doing nothing may be the best option for NJ pensions.... given what happened when they did meddle with the pensions. Of course, doing nothing doesn't end up with happy results, either.

As per the previous story above, NJ is seeing more retirements as Christie talks cuts. Thing is, here's the progression: first, those not yet hired get whacked (less generous benefits, etc.), then current employees, but if the money is too tight, current retirees also get hit. So sure, retiring will prevent getting hit by certain things, but it doesn't mean you're safe.

NEW YORK

Ex-comptroller Hevesi was sentenced for corruption related to pay-for-play and the NY state pensions... he was sole trustee of the plan. The pension governance set-up hasn't changed, by the way, since he was found out.

As long as this crap goes through one office, through one person, you're going to get cases like this.

TEXAS

Talk about needing a resurrection: Texas pension fund needs 21% return just to get to 80% funded ratio. Or, you know, y'all could PUT MORE MONEY IN.

Disputes over pensions enter the Fort Worth mayoral race.

VIRGINIA

Double-dipping doesn't play well in Virginia... or anywhere else, really.

UK

The hot topic on the other side of the pond is teachers pensions. Teachers say they will quit if told to work longer (or contribute more to their pensions). Fine. See what you can get elsewhere. It's a free choice.

Oh, you won't quit your jobs outright, but will strike? Whatever.

And they show their class (har har) by heckling and jeering the schools minister! Huzzah, guys! Next time, throw your poo! That'll show him!

Let me l'arn y'all some Americanisms that may help you deal with your situation: Tough shit. Suck it up. You ain't got the money of.