Two of the nation’s toughest investigative journalists–David Sirota and Matt Taibbi–join forces to examine the widespread effort to pin the nation’s economic word on public workers’ pensions. If the critics have their way, who wins? One guess.
Two of the nation’s toughest investigative journalists–David Sirota and Matt Taibbi–join forces to examine the widespread effort to pin the nation’s economic word on public workers’ pensions. If the critics have their way, who wins? One guess.
The authors of this article state that 1) if the returns on invested funds had been higher, there would not be a shortfall in pension assets, 2) the shortfall in pension assets can be made up by increasing taxes on current taxpayers, and 3) governments should not pay too much to manage pension fund investments. This all seems reasonable to me.
The difficulty is that current taxpayers may be unwilling to fund the gap.
TE:
Nicely and neatly put. This is the “magical solution” I referenced below: higher returns, lower costs and endless funding from taxpayers. The taxpayer assumes the role of absorbing all the risks when there is nobody around to assume their risks. That is, they are guaranteeing the income of others when nobody is guaranteeing their income. This is not a smart position to be in.
Fair enough but consider:
Underfunding is also the result of states not making their annual required contributions by law even before 2008, thereby creating the shortfall due to their own actions.
Underfunding is also the result of states often using the money from pension funds for unauthorized purposes. In my state, the public pension was raided multiple times to make up for general fund shortfalls. The money was “borrowed” but never replaced.
Not arguing with your responses but let’s not limit the pension problems exclusively to the items listed in your posts.
Steve K:
The States are or should be governed by some standard guidelines concerning funding of pensions. In some instances those with fiduciary responsibilities for the pensions can be advised that their pensions are “over-funded”. This has happened multiple times in the past and happened during the run-up of equities in the dot.com bubble in the late 90s. At that point choices can be made. Those making the choices should be accountable for the choices. Alas there is a mismatch between the tenure of the politicians making those decisions and the liabilities being assumed.
None of this alters the fact that the Sirota and Taibbi piece is seriously incomplete.
Yves Smith, the Naked Capitalism blogger, often references to this 1995 column when she discusses pensions: http://www.nytimes.com/1995/02/22/opinion/in-america-whitman-steals-the-future.html In the column Bob Herbert foresees the problems NJ would eventually encounter because of then Governor Christie Todd Whitman’s decision to use funds for the pension to balance the operating budget. Of course her fiscal magic meant taxes did not have to be raised in 1995…. and it also meant that nearly two decades later her successor could be one of the many legislators who blame the unions. Oh… and if you read the article you’ll see that the NJEA took the governor to court because they thought she was acting imprudently.
This analysis is way over simplified, points the finger of blame in too few directions and assumes the existence of magical solutions for problems that stem from many different sources. I suggest the following recent pieces to get a fuller and more complete look at the overall situation.
http://www.publicfundsurvey.org/publicfundsurvey/summaryoffindings.html
and you can see that large companies are also wrestling with the same issue:
http://ww2.cfo.com/retirement-plans/2013/04/the-great-pension-derisking/view-all/
Nobody believes that assuming the liabilities of a defined benefits pension plan is a wise decision. I suspect that the strategies used by private companies will soon be adopted in the public sector in order to mitigate the financial risks of such plans.
Diane:
Is it one link or two that puts a comment into moderation?
Note that the pension battle may be heating up in California. San Jose’s Democrat [sic] Chuck Reed decided this week that he wants to mirror Illinois’ pension theft plans. Here’s a PDF of Reed’s proposition for placement on the 2014 ballot, and the letter the prop writers sent to AG Kamala Harris. (Worth watching the Sacto Bee’s State Worker blog for updates.)
Patrick:
Is this an accurate statement:
The situation at the California State Teachers’
Retirement System (“CalSTRS”) is much worse. In September 2013, CalSTRS
reported that, under currently accepted Governmental Accounting Standards
Board standards, its pension plan was only 44.7 percent funded.”
If it is reasonably accurate, how do you propose that this shortfall be addressed?
1. 10 years of tax cuts +
2. 10 years of unfunded wars+
3. A recession brought on by the frauds of Wallstreet=
Reducing pensions, Medicare and Social Security.
I certainly don’t buy it but I’m sure the Masters of the Universe think it’s a grand idea since they will profit from it.
As far as I’m concerned, this is the basics that anyone needs to know before delving deeper.
Yet again: “Why Nations Fail” explaining why throughout human history and every area in the world shows that when money and power are in the hands of a few, that nation eventually succumbs and people suffer. This is clearly happening to our country now. The percentage monetary divide between the rich and poor places us with the Third World nations.
No one is talking about how this happened and why it has not been fixed. Bill Clinton made this happen starting in 1994 with NAFTA and WTO. That was the end of good paying jobs here and corporations being paid to offshore and tough luck to the citizens. Then in 1996 he signs the Telecommunications Act which wiped out the “Free Press.” Now for the “Grand Banana” Clinton joining hands with Phil Graham and we magically have the 1999-2000 Banking Deregulation Acts. The game on each of these did not come down when Clinton was in office but he made it happen and the continuing world wide financial results. Does Obama do anything about this? Are you kidding, he is bought and sold by the same people who owned Clinton, Bush and Obama, the congress and the Supreme Court as if it is not obvious by now. When you have an unstable, by design, financial system how do you expect it to work? By magic? Until we reinstall the Glass-Steagle and such legislation from the 30’s we are dead in the water and it is impossible for it to get better when the underlying structure is worse now than ever with too big to fail. Then you have the not properly funding the system by cheating by corporations, cities, counties and states that it is a mess not created by the workers. They gave up income for benefits long term and now they do not want to pay the untaxed income, benefits, and want to blame the workers for their purposeful robbery. Now, how twisted is this. Can’t anyone see this? Such a simple thing to see if you just stand back for a minute and look. I have to go to Russia Today to see any sense at all about finances and money. Al Jazeera does good also as doe the Guardian, but here, are you kidding except for those like myself who spend the time to find out the truth with their documents. I don’t trust anyone unless I have known them for a very long time and they never mess up. You shouldn’t either.