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Post by millring on Jun 22, 2017 13:11:14 GMT -5
I've wondered if illinois might be the next black swan. <canary>
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Post by fauxmaha on Jun 22, 2017 13:13:55 GMT -5
Actually, I do have a little experience with public pensions. The state of Minnesota handles its public employee pension account quite well, makes their required payments on time and manages the investment. They're quite solvent, and when my wife retires we should have a reliable source of income. I was involved in a group a few years ago that was studying these pensions around here. The upshot of that effort was we were able to get the state to at least pay some attention to the Omaha Public Schools teacher pension plan. We actually used the Minnesota state employee plan as an example. It's not perfect, but it's generally among the healthier plans out there. That said, this is from their 2016 actuarial report: Reading those reports is an exercise in reading between the lines. The firms that do the reports have a deliberate, measured tone in their text. They are loathe to say "The Sky is Falling!!!", even when it is. What GRS (the firm that does Minnesota's annual report) is trying to bring to decision makers' attention is the fact that an 8% rate of return is actually set in Minnesota law, but they do not think it is reasonable. Their carefully guarded way of saying that was (emphasis added): That's their way of saying 8% isn't reasonable, but they are allowed by law to pretend that it is, but they don't particularly like it, so BTW a 0.5% difference will create a pretty big hole in the plan. In any case, that demonstrates the problem with these plans (and I too am a beneficiary-via-spouse here), even in a comparatively healthy one like Minnesota's: No matter what the actual investment performance, the benefits are mandatory. That means that the taxpayers are indemnifying the plan participants against less-than-projected investment earnings. Which is to say, the plan participants get benefits based on market growth without personally assuming any market risk.
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Post by millring on Jun 22, 2017 13:13:57 GMT -5
Nothing particularly complicated: - Increase taxes - Cut spending - Roll over all defined-benefit pensions into defined-contribution plans Has to happen when a Democrat is governor. It would have to have an advocacy press to work. An adversarial press would blow it sky high.
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Post by fauxmaha on Jun 22, 2017 13:15:19 GMT -5
What would happen if everybody in state government went home? Just close all the offices and walk out, leaving state vehicles where they sit, doors open on all state buildings. Just walk away from the whole mess. I mean wouldn't they rather be in Tahiti. Who would the bond holders sue? The problem in Illinois has very little to do with current spending. It is mostly about bond and pension obligations incurred long ago that have come home to roost. So, to answer your question, lots of retirees and lots of bondholders (who are probably themselves retirees) would be crushed.
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Post by Doug on Jun 22, 2017 14:39:24 GMT -5
What would happen if everybody in state government went home? Just close all the offices and walk out, leaving state vehicles where they sit, doors open on all state buildings. Just walk away from the whole mess. I mean wouldn't they rather be in Tahiti. Who would the bond holders sue? The problem in Illinois has very little to do with current spending. It is mostly about bond and pension obligations incurred long ago that have come home to roost. So, to answer your question, lots of retirees and lots of bondholders (who are probably themselves retirees) would be crushed. But the weather is nicer in Tahiti.
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Post by dradtke on Jun 22, 2017 14:41:17 GMT -5
My point was more along the lines that - in most of the unfunded pension issues that make the news - the biggest problem is the "unfunded" part more than the "rosy projections" part. If you promise to invest people's money on their behalf, it helps if you actually invest it. A problem that is by no means limited to governments.
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Post by timfarney on Jun 22, 2017 14:55:58 GMT -5
IMO, there is no solution that doesn't include paying those pensions. The politicians must accept responsibility for what they, and their predecessors have done, raise the taxes, make the cuts, and take the heat. The retirees accepted pensions as compensation in good faith, and a long string of bipartisan assholes scewed them. Making them the victims is not acceptable.k
Tim
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Post by fauxmaha on Jun 22, 2017 15:05:21 GMT -5
My point was more along the lines that - in most of the unfunded pension issues that make the news - the biggest problem is the "unfunded" part more than the "rosy projections" part. If you promise to invest people's money on their behalf, it helps if you actually invest it. A problem that is by no means limited to governments. Certainly agree with that. There are two perpetual problems with virtually every defined-benefit plan (public or private, although private sector defined benefits plans are pretty much non-existent anymore). The first is that, in times of budget squeezes, it is easy to shave back on the contributions to the plan. The resulting plan shortfalls won't be felt for years. It's sort of an "eating your seed corn" kind of thing. Feels good at the time, and get's you through the winter, but the reckoning will come eventually. That's when the employer (public or private) is making the contribution directly. I don't know how the Minnesota plan works, but the Omaha Public Schools plan is set up that that sort of gamesmanship is basically not possible (short of outright fraud). The dollars that go into the plan are first "paid" to the employee, then deducted from their paychecks and put in the plan. The only way to not make the contribution would be to literally steal the money. The second is that those plans are perpetually underfunded. Not in the "we aren't putting in the money we said we were" sense, but in the "we have no intention of ever putting in enough money to actually cover the benefits we are promising" sense. I can't see a single good argument that any of these plans is ever less than 100% funded. PS: The real problem with public sector defined benefits plans is that the individual participants do not have a property right to their retirement money. All they have is a future "promise to pay" by some governmental unit. In the present case, the State of Illinois could simply pass a law saying "you're pension is cut in half" and I'm not sure there is any legal recourse available to the participants. The Federal government has an agency (Pension Benefit Guarantee Corp) that provides insurance for insolvent private sector plans, but I don't think there is any equivalent for public sector plans.
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Post by fauxmaha on Jun 26, 2017 11:10:03 GMT -5
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Post by Marshall on Jun 26, 2017 13:25:16 GMT -5
Yeah, that's sweet.
I looked up some people I know. He's a retired Jr High PE teacher. Never coached after school stuff. Did his Continuing Ed bonuses. Never went into administration. Punched the clock. Was home every day by 4:00 pm. Did his daily 3 mile run. He get's $80k. His wife went back into teaching grade school when their kids got out of elementary school. She pulls in $60k. They retired before age 60 and travel the world, taking 4 or 5 trips a year.
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Post by RickW on Jun 26, 2017 13:45:41 GMT -5
It's certainly sweet, but again, it was part of their compensation plan. They were probably paid pretty good during their working years as well. No one would go back to them now and demand that they pay back their salaries. But because this is still coming due, it seems to be fair game.
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Post by fauxmaha on Jun 26, 2017 14:11:08 GMT -5
It's certainly sweet, but again, it was part of their compensation plan. They were probably paid pretty good during their working years as well. No one would go back to them now and demand that they pay back their salaries. But because this is still coming due, it seems to be fair game. To put in perspective how messed up those plans are, the highest paid retiree...the guy pulling in nearly $600k annually...contributed a total of just under $800k to the plan during his entire term of employment. He was a highly compensated professor at some state university. Nothing wrong with that. Top talent costs money.
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Post by Rob Hanesworth on Jun 26, 2017 14:15:19 GMT -5
The problem in Illinois has very little to do with current spending. It is mostly about bond and pension obligations incurred long ago that have come home to roost. So, to answer your question, lots of retirees and lots of bondholders (who are probably themselves retirees) would be crushed. But the weather is nicer in Tahiti. But, you can't walk from Illinois to Tahiti.
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Post by Doug on Jun 26, 2017 14:17:09 GMT -5
But the weather is nicer in Tahiti. But, you can't walk from Illinois to Tahiti. Speak for yourself.
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Post by Rob Hanesworth on Jun 26, 2017 14:29:22 GMT -5
Indiana has never paid state employees well. Our state troopers are frequently poached by small town police departments that pay better.
The rationale for staying in a low paying state job has always been the prospect of a secure, stable pension.
Seems unfair to yank on that rug.
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Post by Marshall on Jun 26, 2017 14:30:40 GMT -5
Yeah, that's sweet. I looked up some people I know. He's a retired Jr High PE teacher. Never coached after school stuff. Did his Continuing Ed bonuses. Never went into administration. Punched the clock. Was home every day by 4:00 pm. Did his daily 3 mile run. He get's $80k. His wife went back into teaching grade school when their kids got out of elementary school. She pulls in $60k. They retired before age 60 and travel the world, taking 4 or 5 trips a year. He actually retired at age 55. Been on the dole for the last 17 years. He smiles a lot.
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Post by Marshall on Jun 26, 2017 14:34:43 GMT -5
A friend of mine from HS worked for the state. He busted his butt for 35 years. He gets $62k.
A friend of my wife who was a judge just retired and gtes $175k/yr. Single woman. Never married. Anybody interested in a date?
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Post by Rob Hanesworth on Jun 26, 2017 14:37:03 GMT -5
Yeah, that's sweet. I looked up some people I know. He's a retired Jr High PE teacher. Never coached after school stuff. Did his Continuing Ed bonuses. Never went into administration. Punched the clock. Was home every day by 4:00 pm. Did his daily 3 mile run. He get's $80k. His wife went back into teaching grade school when their kids got out of elementary school. She pulls in $60k. They retired before age 60 and travel the world, taking 4 or 5 trips a year. He actually retired at age 55. Been on the dole for the last 17 years. He smiles a lot. I retired at 67 and manage an annual trip to Vinton, Iowa. I don't smile that much.
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Post by Marshall on Jun 26, 2017 14:38:24 GMT -5
Indiana has never paid state employees well. Our state troopers are frequently poached by small town police departments that pay better. The rationale for staying in a low paying state job has always been the prospect of a secure, stable pension. Seems unfair to yank on that rug. True that. That's always been the argument. And it's valid if the regular pay is low, AND if the state makes the investment to support the nut down the road. But when the low paying job becomes a well paying job, and the state sloughs it's payment into the fund, you get an untenable situation.
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Post by Marshall on Jun 26, 2017 14:41:59 GMT -5
He actually retired at age 55. Been on the dole for the last 17 years. He smiles a lot. I retired at 67 and manage an annual trip to Vinton, Iowa. I don't smile that much. I'm 68 and still working. Somebody's got to pay for all those pensions. (I've seen you smile before )
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