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  #51  
Old 02-07-2010, 09:35 PM
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Quote:
Originally Posted by Wigmeister General View Post
I'm curious to see who will pay the pension promises
To the last person in NJ: please pay the pensions of the public employees who fled the state long, long ago.

That oughta take care of it.

So, I have way too many computers. Alas, the computer I usually use has fully crapped out on me, and I'm too lazy to dig up the stories I had saved up from that one. If I get that computer running again, I have more important things to do with it... so, bye bye stories. I'm sure they will be coming back again and again, though.

One I did have the energy to scrape up again has to do with what's happening in Vallejo:
http://calpensions.com/2010/02/05/ba...-not-pensions/

Quote:
The bankrupt city of Vallejo cut health care payments for retired employees, but an initial recovery plan does not touch pensions.

When the old port city on the far side of San Francisco Bay filed a rare municipal bankruptcy in May 2008, there was speculation about whether bankruptcy would become a way for deficit-ridden cities to shed crushing retirement debts.
....
Retirement costs are by far Vallejo’s biggest debt. The top two creditors listed by the city in its bankruptcy filing were retiree health, $135 million, and the California Public Employees Retirement Association, $84 million.
....
Or does it reflect the widely held view that pensions are vested rights, contracts guaranteed under a series of court decisions, while retiree health care lacks similar protection and some think under a federal court ruling last year can be cut?
....
Like many California governments, Vallejo has set aside no money to pay for future health care promised retirees. The workout plan would begin switching retiree health from pay-as-you go to prefunding, as recommended by a governor’s commission.

“The city’s commitment had been to pay virtually the entire health insurance bill for its retirees and their families for the rest of their lives,” said the workout plan.

The plan proposes to reduce retiree health payments to a flat $300 a month. The big cut would be expected to shrink the $135 million debt or unfunded liability for future retiree health care to $34 million.
OPEBs are definitely low-hanging fruit in this equation. One can make a good argument that back in the 70s/80s/whenever, that when they had set the retiree health benefits, such things as extremely high-tech interventions didn't exist and thus not paying for that part isn't really reneging on the original deal. OPEBs are a nasty thing to deal with as not only is there uncertainty in timing, but there's huge uncertainty in payment amount. Inflation of health care costs seems untethered from inflation in general.

But pension payments, where it's a concrete dollar amount tied to final salary [or last three years of salary, or whatever].... harder to finesse.

I expect OPEBs to be highly altered over the next few years, without recourse to municipal bankruptcy. I don't think bankruptcy is required to change these arrangements, even for current employees or the already retired.


Utah:
http://www.sltrib.com/news/ci_14349490
Quote:
Several hundred public employees and retirees rallied Saturday at the state capitol, speaking out against legislative efforts to restructure the state's retirement system.

They argue that cutting pension benefits for future workers and removing a 1.5 percent 401(k) match for state and school workers would stifle recruitment and retention efforts.

Changes being proposed for future workers are similar to what's happened in the private sector. For years, companies have scaled back and even eliminated pension plans.
Yet public-employee groups say a state-funded pension plan is a powerful tool to recruit and retain workers who otherwise could go to the private sector and earn substantially more. The state's retirement system covers people working for state and local governments.
O RLY?

The "pretty impossible to fire once you're ensconced in your government job" aspect isn't enough of a draw?

I'm thinking that it would be in this economy.

Back to Calif.:
http://www.sacbee.com/business/story/2517424.html
Quote:
CalSTRS officials say controversies at the state's other big pension fund, CalPERS, will complicate the already difficult task of persuading the Legislature to raise pension contributions for teacher retirements.

Staggered by a 25 percent loss in the last fiscal year, the board of the California State Teachers' Retirement System began crafting a strategy Friday to petition lawmakers for higher rates.

The investment loss left CalSTRS some $42 billion underfunded as of last June – an estimate of how much additional cash the fund needs to pay its bills over the next 30 years. The amount of underfunding doubled in about 12 months.
Good luck with that.
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  #52  
Old 02-08-2010, 06:26 AM
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NJ:
http://www.nj.com/news/index.ssf/201..._and_bene.html
Quote:
Gov. Chris Christie and lawmakers of both parties will unveil a series of sweeping pension and benefit reforms Monday that could affect every public employee in New Jersey while saving the state billions of dollars, according to four officials with direct knowledge of the plan.

The proposals would require workers and retirees at all levels of government and local school districts to contribute to their own health care costs, ban part-time workers at the state and local levels from participating in the underfunded state pension system, cap sick leave payouts for all public employees and constitutionally require the state to fully fund its pension obligations each year.

Details of the four-bill package to be introduced Monday were provided to The Star-Ledger on the condition of anonymity because the four officials were not authorized to speak in advance.
....
The four officials could not provide a formal estimate of the savings, but said the amount would reach billions over the next decade. The reforms to be proposed Monday include:

• Requiring all current public employees to contribute at least 1.5 percent of their annual salaries toward their health benefits, and all future retirees to contribute at least 1.5 percent of their base pension to their health benefits. State employees were required to contribute at that rate beginning in 2007 under then-Gov. Jon Corzine, but many local governments and school districts do not require any health care contributions. The minimum threshold would be incorporated into upcoming local contracts, and governing bodies could try to negotiate it higher.

• Offering for voter approval a constitutional amendment forcing the state to fully fund its pension obligations in each year’s budget. While the requirement would not yet be in effect, a full payment for the upcoming budget would be about $2 billion out of a budget in the $28 billion range. Payments have dwindled to cope with budget woes, including Corzine eliminating this fiscal year’s contribution entirely. Corzine also allowed local governments last year to postpone part of their pension payments, arguing that covering the full cost would drive up property taxes in a recession.

• Changing how pension payments are calculated, and who qualifies for a pension, for future employees at all levels of government. That includes repealing a 9 percent increase in benefits put in place in 2001, factoring in the highest five years of salary instead of three years to determine pension payouts, and banning part-time workers from participating in the pension system. State employees would have to work 35 hours a week and local employees 32 hours a week to qualify.

• Enrolling future part-time employees at all levels of government in a defined-contribution plan instead, and raising the minimum annual pay to participate to $5,000 from $1,500. Current part-timers would continue in the pension system as long as they remain continuously employed.

• Capping payouts for unused sick leave at $15,000 for all public employees, mirroring the limit already in place at the state level, and limiting stored vacation time. Retirement packages have sparked taxpayer outrage, including a 2008 deal to give a former Keansburg superintendent $740,000 in severance pay, including $184,586 for unused sick leave.
Does that sound like anything requiring anonymity? The reforms are a bit underwhelming to John Bury:
http://blog.nj.com/njv_johnbury/2010...e_problem.html
Quote:
The issue is not whether we can get bipartisan agreement on these 'reforms.' They are so weak that it should be easy, even with the unions screaming in fake outrage. Rather, bipartisanship is the problem.
....
The trick is not to have Democrats and Republicans working together to manufacture feel-good non-solutions acceptable to all sides but to remove them entirely from the process. An independent actuary will tell you that either contributions need to start being in the $10 billion range annually or benefits for all participants, including retirees, need to be cut about 50% to consider this plan actuarially sound. Those are the choices politicians should be deciding between, not their own.

Penna:
http://www.philly.com/philly/busines...nsion_gap.html
Quote:
When Gov. Rendell proposes a new budget for Pennsylvania on Tuesday, he's going to have to stuff something in the wide, ugly gap between what the state has promised to pay future state and school retirees, and what the state has set aside to pay them.

Will Rendell ask taxpayers to pay more? Or future retirees to accept less?

It's almost a decade since Gov. Tom Ridge and the General Assembly, in an act of breathtaking contempt for basic accounting and the next generation of taxpayers, boosted future state and school retirees' pensions, including their own, while cutting the public subsidies that help finance state retirement checks.

Result: "Over the past 10 years, SERS [State Employees Retirement System] has paid out almost

$18.2 billion in benefits and expenses," while bringing in just $14.6 billion from investment profits, state taxpayer "contributions," and tax-funded "employee contributions," said Nicholas Maiale, the Center City lawyer, Harrisburg lobbyist, and South Philly ward leader who is chairman of SERS, in a letter to state House members last week.

The state pension fund that's supposed to help pay for pensions is now smaller than it was in 2000 - $24 billion, down from $27 billion. By contrast, the number of pensioners goes up each year.
Monterey:
http://www.montereyherald.com/local/ci_14352911
Quote:
The gold that California public employees receive in their golden years has lost its glitter for some government reform advocates who say the public pension system is out of whack.

Escalating pension costs for government workers in cash-strapped California, its cities and counties are triggering a rollback movement that could leave the issue to California voters.

Monterey City Manager Fred Meurer said local-level public administrators recognize the mounting financial fissures and are trying to tackle pension reform after a paralyzed state government dropped the ball.

"In the meantime, the people of California may try to fix it themselves," he said.

Three proposed initiatives to trim public employee pensions are being circulated by proponents hoping to put them on the November ballot. One would cap annual pensions at $100,000; the other two would create a two-tiered system, in which future public employees wouldn't get the same level of benefits now received by many state and local government workers.

If any of the measures qualify for the ballot, it could trigger a tidal wave of campaign spending in a battle between powerful public employee unions and taxpayers seeking to reduce benefits for millions of union members.

One reform advocate says the issue may generate a taxpayer revolt like Proposition 13's cap on property taxes in 1978.

"With the current recession ... people will become angry and angrier about anything that is difficult to change that they view as unfair, and some will view this as unfair," Meurer said.
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  #53  
Old 02-10-2010, 12:23 PM
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Greece:
http://www.google.com/hostednews/ap/...Wj5WQD9DOP5D00
Quote:
ATHENS, GreeceGreece took further steps Tuesday to calm global markets spooked by its debt crisis, pledging to increase retirement ages, accelerate reforms and reform its ineffective tax system, on the eve of the first nationwide strike against new austerity measures.

Prime Minister George Papandreou told a cabinet meeting that the reforms "must go ahead now ... with greater speed."
....
Labor and Social Security Minister Andreas Loverdos announced a two-year increase in the average retirement age, to bring it to the age of 63 by 2015. Papandreou had said he would increase the retirement age, but not by how much or by when.

"The situation is dramatic, and our response is clear. We are changing the country's social security system to keep it alive and allow it to have a future," Loverdos said. "The reforms ... will add life to the system and allow it to endure for the coming decades."
Loverdos said the changes would bring Greece's average retirement age above the EU average of 61.1 years.
Um. Hmmm. Maybe the Grecian government should encourage the population to take up smoking in greater numbers.

More on Greece:
http://pensionpulse.blogspot.com/201...n-reforms.html

Quote:
As you read this comment, remember that what's happening in Greece is emblematic of what's plaguing most developed countries, albeit in varying degrees. Pension woes are not going away, will get worse over the next decade, and will undoubtedly require tough choices and compromises ahead by all stakeholders.
Now onto the New Jersey section:

http://www.nj.com/news/index.ssf/201...fits_pens.html
Quote:
TRENTON -- Over the strong objections of labor unions, lawmakers today introduced reforms they said could drastically remake public worker pensions and benefits in New Jersey and save a pension fund in crisis.

Each piece of the four-bill package had at least 23 sponsors in the state Senate, above the 21-vote threshold needed for passage, Democrats and Republicans said. The state Assembly was preparing to introduce a companion version later this week, en route to possible approval by the full Legislature by the end of the month, officials said.

"Something must be done and fast, if we are to save the system from collapsing under the weight of its debt and failing to deliver on its promise to provide long-term security for people who have dedicated their lives to government work," said Sen. Barbara Buono (D-Middlesex), one of the sponsors of a bill that would cap sick leave payouts at $15,000 for all new public employees. "Pensions under attack? Quite the contrary."
....
The proposals would require workers and retirees at all levels of government and local school districts to contribute to their own health care costs, ban part-time workers at the state and local levels from participating in the underfunded state pension system, cap sick leave payouts for all public employees and constitutionally require the state to fully fund its pension obligations each year. They would also eliminate multiple pensions and change how pensions are calculated, including for police and fire personnel.

While most of the reforms would apply to future workers, current employees would have to contribute at least 1.5 percent of their base salary towards their health care costs.
More coverage of same proposal:
http://www.nj.com/news/index.ssf/201...aises_pen.html

Quote:
TRENTON -- Gov. Chris Christie today said he is encouraged by a bipartisan package of pension and benefit reforms poised to speed through the state Senate, calling such changes "the best kind of property tax reform you can have."

The placement agent thing is being taken care of in pieces, I'll just link to the stories, but I don't think they're worth quoting
http://dealbook.blogs.nytimes.com/20...-fund-inquiry/

http://www.bizjournals.com/sacrament...08/daily7.html


San Jose, California
http://www.mercurynews.com/bay-area-...828?source=rss

Quote:
Facing crushing deficits driven in part by soaring retirement costs, the San Jose City Council voted unanimously Tuesday to replace most pension trustees with outside financial experts.

The approved makeover was a compromise forged by Mayor Chuck Reed between the city manager and labor unions.

City retirees and union leaders, most of whom are facing difficult contract talks amid a $100 million deficit, hailed the deal as a model of cooperation and offered rare praise for Reed's leadership on the matter.

But business leaders and at least one resident who spoke felt the council should have gone further to protect the interests of city taxpayers, who bear all the downside risk when pension fund investments come up short.
Editorial on same
http://www.mercurynews.com/opinion/c...nclick_check=1

Quote:
It's encouraging that San Jose's elected leaders have worked out a compromise with labor groups over the makeup of the two boards governing employee pension plans. But in one key area, the reforms going before the City Council today fall short: They fail to ensure that taxpayers — who must cover pension shortfalls — have majority representation on the boards.

The plan makes significant improvements. Most important, it replaces the two City Council members on each board with council-appointed financial experts, and it requires other council appointees on the boards — one representing police and firefighters, one for other city workers — to have financial expertise as well.

Council members generally lack financial knowledge, and they face serious conflicts when they serve on these boards. They're supposed to act in the best interest of the pension funds, but that can conflict with what's best for the city — or for labor groups on whom some rely for re-election. The reforms will limit politics on the board.

The plan's shortcoming is that it calls for taxpayers to have the same number of representatives as workers and retirees. The deciding additional member is to be nominated by those already on the board.
More at link.

Chicago/Cook County and borrowing for benefits
http://newsblogs.chicagotribune.com/...ion-costs.html
Quote:
The Cook County Board today approved a short-term borrowing plan to cover $104 million its owes to the employee pension fund.

If accepted by the pension board, the county would pay $108 million --- the amount it owed the pension fund, plus 2.75 percent interest, said Laura Lechowicz Felicione, the county attorney who has been negotiating with the pension board. The original pension payment was due in December 2008.

The county will use $30.4 million it has on hand and take and take out a three-year loan for the rest of the payment. Once paid off in 2013, Felicione said the county will have paid about $112 million to cover the original debt of $104 million, meaning the cost for the late payment is about $8 million.
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  #54  
Old 02-13-2010, 11:14 AM
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Let's slip on our Bad Idea Jeans this morning... oh man, this pair is really old....

Calstrs, Calpers, and a questionable benefit:
http://calpensions.com/2010/02/11/ca...-unaffordable/

Quote:
CalSTRS officials are wondering if a $1 billion home loan program, booming in the wake of the real estate crash, is too risky for the pension fund and putting teachers into homes they can’t afford.

The program that allows teachers to buy a home with a low down payment, 3 percent of the purchase price, did more business last year than the previous five years combined.

Teachers qualify for mortgages based on 80 percent of the value of the home. The key to the program is that 17 percent of the purchase price is covered by a second mortgage, on which payments are delayed for five years.

But in the post-crash world, the California State Teachers Retirement System can no longer get insurance for the second mortgages or resell them on the market.

New accounting rules require that the second mortgages be carried on the books at market value, now an estimated 90 percent less than their cost. And by law, the home loan program is supposed to turn a profit like other pension fund investments.
....
CalSTRS board member Carolyn Widener suggested that CalSTRS join with other public pensions to seek federal relief. She was told that CalSTRS and the California Public Employees Retirement System are among the few that have home loan programs.

The CalPERS program begun in 1981 had issued 133,000 home loans worth $21 billion by the end of 2008. The CalPERS program has several low down payment options, one requiring “as little as $500 from your own funds.”
What an awful idea. There are often questionable uses of pension funds a[look below for the McArdle piece], and it has been brought up many times about union pension funds being used for political ends of union leaders as opposed to the best interests of the covered employees. I wonder if there's ever been a class action lawsuit by retirees against the trustees for these types of shenanigans. It doesn't sound like fulfilling fiduciary duties to me.

That sure would be fun to watch.

From Megan McArdle at the Atlantic, chasing alpha that's really beta...
http://business.theatlantic.com/2010...sion_funds.php
Quote:
One of the mildly surprising things about the Stuyvesant Town debacle is the kinds of investors the deal attracted. What were entities like CalPers and the Church of England doing plowing their money in along with real estate moguls like Tishman Speyer?

The answer is "looking for alpha". Underfunded pension funds have been looking for extra return in order to make up the holes . . . and the problem is worst among public pension funds, because until recently, their accounting wasn't very good, so politicians were fond of making unfunded promises in lieu of wages.
....
The fees are hardly the worst part; more worrying is that many public pension funds and other public trusts are assuming risks they don't necessarily understand. They think they're gaining alpha--higher expected value on their investments. But often they're confusing alpha with beta, which is to say they're getting higher returns not because they're making good investments, but because they're taking on more risks.
....
Public pension funds shouldn't be trying to make up their deficiencies by chasing unrealistically high returns. Of course, if politicians and their appointees had the courage to pay for the gifts they gave public employees, rather than looking for loopholes, we wouldn't be in this mess in the first place.
Early retirement? Ya! That saves money!
http://hosted.ap.org/dynamic/stories...TAM&SECTION=US
Quote:
More than 1,000 state workers are expected to retire early under a package of incentives signed Wednesday by Gov. Chet Culver.

The deal is expected to save the state about $60 million and is a key part to Culver's plan to cut $340 million from the fiscal year budget that begins July 1.

State workers have already been forced to accept unpaid furloughs, and some have lost their jobs. Danny Homan, president of the local unit of the American Federation of State, County and Municipal Employees, said the retirement incentives were among the only good options for workers.

"If we don't have these people go out the door, we're going to have massive layoffs," said Homan, whose union is the largest in state government.

Under the measure, workers can get cash payments of $1,000 for every year of service to the state, up to $25,000. The state also will continue to pick up its share of health insurance costs for up to five years.

The incentive package begins immediately, and Homan predicted many would act quickly.
Ok, it can save money to the extent that those retiring are overpaid for what they do, and you can get someone who is cheaper in their place [and keep it that way]. And you also reduce the retirement benefits appropriately.
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Old 02-14-2010, 12:00 PM
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California stuff

While waiting for a verdict, nibbling at the edges in Contra Costa:
http://www.mercurynews.com/breaking-news/ci_14376275
Quote:
A divided Contra Costa County pension board Wednesday took a small step toward controlling runaway retirement benefits, deciding to consider changing guidelines for new employees.

The move came as the board has been considering advice from counsel Harvey Leiderman over whether its inclusion of pay received at retirement and other items in computing final salaries violates state law. The board may change the policy for new workers while it decides whether it should consider it a vested right for current employees and retirees.
The stakes are high for current employees who might lose thousands of dollars a year in benefits if trustees take the next step and apply the new rules to them.

The county has a major interest, because Administrator David Twa has told supervisors they may be on the hook for $100 million or more in extra contributions over the next six years to keep up with current benefits. The county on average covers 75 percent of the pension payments and employees 25 percent.

San Francisco and its unfunded liabilities
http://articles.sfgate.com/2010-02-0...etirement-fund
Quote:
n Francisco city government is treating its growing unfunded pension debt like the grasshopper in Aesop's fable who tells the hardworking ant "Why worry about the winter? There's plenty of food."

Losses suffered by the city employees' pension fund have caused the city's payments into the fund to explode. Just five years ago, the city was paying $175 million in retiree pension and health care costs. Next year, as the city faces an unprecedented $522 million deficit, it must pay $525 million - an increase of 200 percent.
....
Every year, city officials have negotiated salary raises and benefits that have increased the city's pension costs. How did this happen? As former Mayor Willie Brown recently explained, "We politicians, pushed by our friends in labor, gradually expanded pay and benefits ... while keeping the job protections and layering on incredibly generous retirement packages."

However, politicians aren't the only ones to blame: Most of the benefit expansions were approved by voters.

San Francisco's pension fund is also subject to "spiking." The city's civil grand jury recently found that police and firefighters systematically promote some employees in their last year of service to increase their pensions, costing taxpayers $132 million.
....

With 40 percent of its current workforce eligible to retire, San Francisco needs to act now. If the city waits any longer, it, like the grasshopper, will soon starve.
40 percent?!?!

Um, are there any private sector companies with similar demographics? That's just crazy.

[and if there are, please point them to me.... ka-ching! I've been waiting for the boomers to get out of my way.]

Politics of targeting California pensions
http://legalnewsline.com/news/225451...loyee-pensions
Quote:
SACRAMENTO, Calif. (Legal Newsline)- Retroactive pension increases paid to some retired public employees in California are unconstitutional, a Republican candidate for state attorney general said Monday.

John Eastman, a conservative constitutional scholar vying to be California's next chief legal officer, said that labor contracts retroactively boosting pensions for local government workers violates a 1970 provision in the state constitution that prohibits increasing compensation for work that was previously completed.


In 2002, the state's Democratic-led Legislature authorized local government entities -- such as cities, counties and school districts -- to change their pension formula from 2 percent-at-50 to 3 percent-at-50, meaning that public employees at least 50-years-old can get retirement pay equal to 3 percent of their best year's salary for every year they worked, to a maximum of 90 percent.

Statewide, the retroactive pension increases will cost local city and county governments about $8 billion in unfunded liability, Eastman told Legal Newsline in an interview Monday.
That should be interesting to see how that plays out.

More pension politics:
http://www.bakersfield.com/news/loca...-pension-boost
Quote:
If Republican Phil Wyman is elected to the 16th Senate District seat in November, he will be able to pad a unique employment benefit enjoyed by only a handful of active legislators.

It's the same Wyman who criticized "fat pensions" for new state employees in announcing his run for office this year.

Voters ended the Legislators' Retirement System in November 1990 and Wyman said he's "fully supportive of that."

But he started his 17-year legislative career in 1979 and was grandfathered into the state pension system. He currently receives a gross monthly pension, before taxes are taken out, of $3,343.38, according to California Public Employees' Retirement System documents.

And, said CalPERS spokesman Edd Fong, Wyman would be entitled to re-activate that pension if he is re-elected to office.

Fong said Wyman would stop receiving pension checks and start paying into the system again.

But, after he left office, Wyman would be able to recalculate his entire benefit based on the final salary he earns in office and his additional years of service, Fong said.
....
PENSION DEBATE

Wyman's case illustrates the risks that discussions of public pensions pose for politicians in what is shaping up to be a raucous election year.

Local politicians have been attacking the lucrative 3-at-50 and 3-at-60 benefits awarded to state and local unions across California early in the past decade.

But some of those politicians, who are running in races this year, have come up the political ladder -- working for state and local leaders as government employees who have access to publically funded pension plans or serving in elected positions that earn them a pension.

Michael Turnipseed of the nonprofit Kern County Taxpayers' Association, has been attacking public pensions for years.

He said the pensions "are so over-inflated that they're going to cripple government's ability to provide services."

Political candidates, Turnipseed said, are going to have to explain to voters how they are going to rein in public pensions when they get one of those pensions themselves.

"Most of the people running will have a pension of some kind," he said. "If you're getting one, are you going to vote against your own personal financial interests to solve the problem?"
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Old 02-14-2010, 12:00 PM
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California stuff

While waiting for a verdict, nibbling at the edges in Contra Costa:
http://www.mercurynews.com/breaking-news/ci_14376275
Quote:
A divided Contra Costa County pension board Wednesday took a small step toward controlling runaway retirement benefits, deciding to consider changing guidelines for new employees.

The move came as the board has been considering advice from counsel Harvey Leiderman over whether its inclusion of pay received at retirement and other items in computing final salaries violates state law. The board may change the policy for new workers while it decides whether it should consider it a vested right for current employees and retirees.
The stakes are high for current employees who might lose thousands of dollars a year in benefits if trustees take the next step and apply the new rules to them.

The county has a major interest, because Administrator David Twa has told supervisors they may be on the hook for $100 million or more in extra contributions over the next six years to keep up with current benefits. The county on average covers 75 percent of the pension payments and employees 25 percent.

San Francisco and its unfunded liabilities
http://articles.sfgate.com/2010-02-0...etirement-fund
Quote:
n Francisco city government is treating its growing unfunded pension debt like the grasshopper in Aesop's fable who tells the hardworking ant "Why worry about the winter? There's plenty of food."

Losses suffered by the city employees' pension fund have caused the city's payments into the fund to explode. Just five years ago, the city was paying $175 million in retiree pension and health care costs. Next year, as the city faces an unprecedented $522 million deficit, it must pay $525 million - an increase of 200 percent.
....
Every year, city officials have negotiated salary raises and benefits that have increased the city's pension costs. How did this happen? As former Mayor Willie Brown recently explained, "We politicians, pushed by our friends in labor, gradually expanded pay and benefits ... while keeping the job protections and layering on incredibly generous retirement packages."

However, politicians aren't the only ones to blame: Most of the benefit expansions were approved by voters.

San Francisco's pension fund is also subject to "spiking." The city's civil grand jury recently found that police and firefighters systematically promote some employees in their last year of service to increase their pensions, costing taxpayers $132 million.
....

With 40 percent of its current workforce eligible to retire, San Francisco needs to act now. If the city waits any longer, it, like the grasshopper, will soon starve.
40 percent?!?!

Um, are there any private sector companies with similar demographics? That's just crazy.

[and if there are, please point them to me.... ka-ching! I've been waiting for the boomers to get out of my way.]

Politics of targeting California pensions
http://legalnewsline.com/news/225451...loyee-pensions
Quote:
SACRAMENTO, Calif. (Legal Newsline)- Retroactive pension increases paid to some retired public employees in California are unconstitutional, a Republican candidate for state attorney general said Monday.

John Eastman, a conservative constitutional scholar vying to be California's next chief legal officer, said that labor contracts retroactively boosting pensions for local government workers violates a 1970 provision in the state constitution that prohibits increasing compensation for work that was previously completed.


In 2002, the state's Democratic-led Legislature authorized local government entities -- such as cities, counties and school districts -- to change their pension formula from 2 percent-at-50 to 3 percent-at-50, meaning that public employees at least 50-years-old can get retirement pay equal to 3 percent of their best year's salary for every year they worked, to a maximum of 90 percent.

Statewide, the retroactive pension increases will cost local city and county governments about $8 billion in unfunded liability, Eastman told Legal Newsline in an interview Monday.
That should be interesting to see how that plays out.

More pension politics:
http://www.bakersfield.com/news/loca...-pension-boost
Quote:
If Republican Phil Wyman is elected to the 16th Senate District seat in November, he will be able to pad a unique employment benefit enjoyed by only a handful of active legislators.

It's the same Wyman who criticized "fat pensions" for new state employees in announcing his run for office this year.

Voters ended the Legislators' Retirement System in November 1990 and Wyman said he's "fully supportive of that."

But he started his 17-year legislative career in 1979 and was grandfathered into the state pension system. He currently receives a gross monthly pension, before taxes are taken out, of $3,343.38, according to California Public Employees' Retirement System documents.

And, said CalPERS spokesman Edd Fong, Wyman would be entitled to re-activate that pension if he is re-elected to office.

Fong said Wyman would stop receiving pension checks and start paying into the system again.

But, after he left office, Wyman would be able to recalculate his entire benefit based on the final salary he earns in office and his additional years of service, Fong said.
....
PENSION DEBATE

Wyman's case illustrates the risks that discussions of public pensions pose for politicians in what is shaping up to be a raucous election year.

Local politicians have been attacking the lucrative 3-at-50 and 3-at-60 benefits awarded to state and local unions across California early in the past decade.

But some of those politicians, who are running in races this year, have come up the political ladder -- working for state and local leaders as government employees who have access to publically funded pension plans or serving in elected positions that earn them a pension.

Michael Turnipseed of the nonprofit Kern County Taxpayers' Association, has been attacking public pensions for years.

He said the pensions "are so over-inflated that they're going to cripple government's ability to provide services."

Political candidates, Turnipseed said, are going to have to explain to voters how they are going to rein in public pensions when they get one of those pensions themselves.

"Most of the people running will have a pension of some kind," he said. "If you're getting one, are you going to vote against your own personal financial interests to solve the problem?"
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Old 02-15-2010, 07:59 AM
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Terry Savage on Illinois POBs:
http://www.suntimes.com/business/sav....savagearticle

Quote:
Illinois politicians are at it again. They're borrowing from the future to make state pension contributions today. Illinois has one of the most underfunded public pension plans in the nation.
....
In early January, while everyone was busy watching the nasty campaign commercials, the State of Illinois pulled an end-run on the budget process. On Jan. 7 the state sold $3.5 billion of "pension obligation notes." In simple English, the state borrowed money to finance the state's contribution to its five retirement systems.

These five-year debt securities carry an interest rate of 3.84 percent, tax free to bondholders. It's a much higher yield than you could get in the bank because of the risk involved. Moody's and Standard and Poors rated them at least 6 notches below the top AAA rating. In fact, all the rating agencies characterized the outlook for Illinois finances as "negative."
....
But what happens in five years when those bonds must be repaid? Where will the state find $3.4 billion -- plus the interest that must be paid along the way? Will investors be willing to lend to them at any yield? Will the next governor return to Blagojevich's plan to lease out the state lottery and sell the toll roads? Or will this "Ponzi scheme" finally be exposed?
More at link.

So which state will not be able to roll over pension-related debt first.... NJ or IL? The race is on!


Pennsylvania
http://www.philly.com/inquirer/busin...sion_gaps.html
Quote:
mong Gov. Rendell's legacies when he leaves Harrisburg next year will be a gap, now estimated by the state at $20 billion, between what Pennsylvania has promised to pay future state and school retirees and what the state has set aside to pay them. Even if investment values keep rising.

Unless it pays more or spends less, Pennsylvania's pension funds will run out of money. The state will have to fund pensions directly from the state budget, at a cost many times next year's budgeted $1.3 billion pension subsidy. Or it will default.

....
McCord used to be one of those managers. Now he's frustrated by the pension system's reduced circumstances because he says he sees a lot of bargains the beaten-down systems cannot afford to buy.

He dreams of a federal pension rescue. Maybe the government will let banks lend pension plans money, cheap, for low-risk investments.

Compromise?

Or maybe cuts are inevitable, after all. "There are some pretty reasonable conversations going on now that weren't reasonable a year ago," McCord said.

Does that mean tightening eligibility or cutting benefits? "Nothing with existing employees. But they're talking about future employees."
Atlanta
http://www.ajc.com/news/atlanta/reed...ns-305364.html
Quote:
Her successor, Kasim Reed, may wind up being known as its "pension mayor."

Reed has crisscrossed the city in campaign-like form in recent weeks, warning civic leaders that pension reform is a critical challenge. In one speech, Reed likened the problem to Franklin's effort to fix the sewers, a $4 billion project that is still going.

Without sweeping changes, Reed said the city will be able to do little aside from policing, fighting fires and picking up trash. It also has hurt the city's bond rating, which could force Atlanta to pay higher interest rates to borrow money to fund various projects.

"[Pensions are] putting the long-term health of our city in jeopardy," the mayor said in a recent speech to the Buckhead Coalition.
New Jersey
http://www.nj.com/news/index.ssf/201...ie_target.html
Quote:
In firehouses and police stations, union halls and county offices, workers eligible to retire are asking each other the same question: Are you putting in your papers?

With Gov. Chris Christie targeting public-worker benefits in fiery speeches, they’re wondering if it’s time to get out, before legislators remake the pension system.
....
"You’re going to see a mass exodus," said Anthony Wieners, president of the New Jersey State Policemen’s Benevolent Association, which represents 33,000 officers. "They’re moving forward on this too quickly. They’re not thinking it out properly."

Although the proposed pension changes would largely affect future workers, they also would require all public employees — rather than just state workers — to contribute at least 1.5 percent of their salary toward health benefits now and when they retire.

The reform proposal also includes banning future part-timers from the pension system, and it would readjust the number of years used to calculate benefits, resulting in smaller checks. And payouts for unused sick leave — which can run into six figures for some public employees — would be capped at $15,000.
....
Mayors say the proposed pension changes are not enough to prompt a mass exit. "There’s nobody that’s going to run out the door for 1.5 percent of their pension," said Elizabeth Mayor J. Christian Bollwage, a Democrat. "It’s smoke and mirrors. It does absolutely nothing."

Irvington Mayor Wayne Smith said the struggling economy will ensure people don’t leave the public sector. "In a tight economic climate, people aren’t looking to leave jobs," he said. "
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Old 02-15-2010, 10:35 AM
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New Jersey
http://www.nj.com/news/index.ssf/201...ie_target.html

Quote:
Originally Posted by Article
"You’re going to see a mass exodus," said Anthony Wieners, president of the New Jersey State Policemen’s Benevolent Association, which represents 33,000 officers. "They’re moving forward on this too quickly. They’re not thinking it out properly."
Speaking of exoduses:

http://online.wsj.com/article/SB1000...236600444.html

Quote:
Originally Posted by Article
Not a day too soon, judging from the striking data that a just-released study reveals about the number of residents of the Garden State fleeing to greener pastures.


The study by Boston College's Center on Wealth and Philanthropy—"Migration of Wealth in New Jersey and the Impact on Wealth and Philanthropy"—looked at 1999 to 2008. It found that in the decade's first half New Jersey experienced a "substantial increase in both household wealth and charitable capacity," otherwise known as "expected giving." During those five years the Garden State had a $98 billion net influx of capital due to wealthy households moving into the state, and it enjoyed a corresponding $881 million increase in "charitable capacity."

The Garden State was blooming. Then the trend reversed. From 2004-2008, author John Havens found "a large decline in the number of wealthy households entering New Jersey" as well as "a moderate increase in the outflow of wealthy households leaving." The result: a net decline of $70 billion in household wealth while the "expected giving" became a net outflow of $1.132 billion.

So what happened in 2004? The study doesn't purport to explain what caused the wealth movements. But the state's most notable economic policy event that year was an increase in its top income tax rate to 8.97% from 6.37%, on incomes starting at $500,000. That's a 40% increase.
I am going to enjoy seeing government employee vs. taxpayer play out, and if the Feds get involved.

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Old 02-16-2010, 06:14 AM
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Today's theme is low-hanging fruit:


DROP benefits in Cincy [ugh, who came up with this craptastic idea?]
http://www.dispatch.com/live/content...2.html?sid=101
Quote:
Having risen through the ranks, Cincinnati Police Chief Thomas Streicher Jr. and Fire Chief Robert Wright will scale one final impressive height when, thanks to a very generous pension plan, each wraps up his career with a $1 million retirement and benefits package.

Streicher and Wright are expected to walk away with about $929,000 and $905,000, respectively, when they step down, probably in 2011, under a program that allows Ohio police officers and firefighters to simultaneously draw a paycheck and bank a deferred pension for as many as eight years.
....
The large payments in Streicher's and Wright's future stem from Ohio's Deferred Retirement Option Plan, which permits public-safety officers to build sizable nest eggs in exchange for reduced lifetime pensions.

To be eligible for DROP, individuals must be at least 48 with 25 years of service as a police officer or firefighter. When an officer joins DROP, he or she officially "retires" for pension purposes but retains the same job.

While that caps their future pension, as long as they remain in DROP -- for at least three years and up to eight -- the monthly pension they otherwise would draw accumulates in an account, along with interest and a portion of their 10 percent of salary contributions.

That formula, critics argue, is simply a creative form of double-dipping -- drawing a pension from one public job while earning a salary from the same or a similar post.
Guaranteed interest, of course.

So. DROPs. Are these valued in a way similar to fixed deferred annuities? Any pension actuaries want to throw in here? [my assumption is that they're not, and that they're valued well under what a similar fixed DA would be, but I don't know this for a fact.]

In any case, all Ohio employees eligible for DROPs had better take them before they're taken away. I highly doubt that benefit is long for the world.

Easy political move in Idaho - nix on pension increase
http://www.kivitv.com/Global/story.asp?S=11987754
Quote:
An Idaho lawmaker says the state shouldn't give its retired workers a cost of living increase while furloughing current employees.

Retired state employees have received more money in pension payouts every year since at least 1970 to keep up with inflation. But several state agencies that fund those checks will continue to furlough employees this year.

Rep. Dennis Lake, a Republican from Blackfoot, told the House State Affairs Committee Monday that nixing a pension increase due to be paid to retirees starting in March could save the fund $50 million. He says dropping the increase for retirees is only fair to current workers.
Easy political move in NM: anti-double-dipping
http://www.santafenewmexican.com/Loc...who-double-dip
Quote:
Public employees could no longer double dip by returning to work in government jobs with a salary and their pension under legislation approved by the Senate on Monday.

The proposed restrictions target state and local government employees retiring after July 1.

The legislation will not stop about 1,500 state and municipal workers who already receive a salary and their pension. However, they will be forced to resume making payroll contributions into the public employee pension fund.

Under a 2003 law, government workers can retire, wait 90 days and return to work for the state, city or county while receiving their pensions.

Critics say the practice has encouraged experienced workers to retire early, which has strained the public pension fund by forcing it to pay out benefits over a longer time. There's also been a public outcry over some double-dipping government workers earning combined retirement and salary of more than $150,000.

"When we did this double dipping we kind of took the genie and let it out of the bottle, and the genie has gotten real big over the years," said Sen. Clint Harden, R-Clovis. "But what we're doing is putting that genie back in the bottle."

The legislation (SB 207) requires a retiree in the Public Employee Retirement Association pension program to wait a year before returning to a governmental job, and their pension will be suspended until they leave the job.


Easy political move in MD: targeting legislators' pensions [here's a thought - get rid of legislators' pensions]
http://weblogs.baltimoresun.com/news...on_reform.html
Quote:
State Senator Andy Harris (R-Baltimore County), is busy this afternoon drafting a pair of amendments that make changes to lawmaker pension plans. He plans to offer them tonight if they are ready.

**UPDATE** Harris said Monday night the amendments will be ready Wednesday.

The first would create a so-called “bad boy clause" in the lawmakers' pension eligibility code. This means state lawmakers would not get pensions payouts if convicted of crimes related. Harris said he drafted the bill in part because of voter outrage after former Baltimore Mayor Sheila Dixon kept her $83,000-a-year city pension despite a jury conviction on a theft charge.
....
Harris also wants to move all lawmakers into a defined contribution (401K-type) pension plan. Currently retired lawmakers receive a defined benefit, meaning they can count on a set amount each month. Harris believes the change will save taxpayers $750,000 a year. Del. William J. Frank (R-Baltimore County) tried and failed to offer a similar amendment in the House last week.
A fun comment at the link.
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Old 02-16-2010, 10:31 AM
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Guaranteed interest, of course.

So. DROPs. Are these valued in a way similar to fixed deferred annuities? Any pension actuaries want to throw in here? [my assumption is that they're not, and that they're valued well under what a similar fixed DA would be, but I don't know this for a fact.]
Say you have a DROP that pays out the accumulated balance at termination of employment, and the balance accumulates at a guaranteed, fixed rate of interest. Typically, the actuary would treat the DROP entry as the decrement, and the associated benefits would be a deferred lump sum and a deferred annuity, both payable at an assumed duration after DROP entry. The discount rate used would be the same as the discount rate used for all other plan liabilities - typically, the expected return on plan assets.
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