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  #361  
Old 05-27-2011, 03:21 PM
Bob Mitchell Bob Mitchell is offline
 
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News from Illinois:

STATE PENSIONS Losses in the 15 years 1996-2010
March 2011 Financial Condition of the Illinois State Retirement Systems
Commission on Government Forecasting and Accountability
Appendix M
http://www.ilga.gov/commission/cgfa2...sMarch2011.pdf


1996-2010 15 Years $ Billions %
Salary losses $.662 1%
Investment losses $11.6 20%
Employer contribution shortfall $24.7 43%
Benefit increases $5.7 10%
Change in assumptions increases $3.5 6%
Other (spike) increases $10.6 19%
Total increases $57.0 100%
2/3 of the UL in the last 15 years 67%
UNFUNDED LIABILITY $85.6
Funded Ratio=Assets/Lias 38.3% $53/138.7

Last edited by Bob Mitchell; 05-27-2011 at 07:49 PM..
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  #362  
Old 05-31-2011, 07:07 AM
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link:
http://powip.com/2011/05/three-day-h...dup-31may2011/

full post inside the spoiler:

Spoiler:
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:

[go to original post for table in pretty form -- it's just what Bob Mitchell posted above]

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 what is called the "normal costs" not being contributed. 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.
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  #363  
Old 06-03-2011, 09:57 AM
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http://www.nydailynews.com/ny_local/..._in_5_yrs.html

Quote:
Controller John Liu ticks off Bloomberg, says pension costs will drop in 5 years


Mayoral hopeful John Liu infuriated Mayor Bloomberg Thursday with an optimistic outlook on city pensions - one that appeared to question Hizzoner's need to slash teachers and fire companies.

While acknowledging pension costs would remain high in the immediate future, the city controller suggested they would start to get better by 2016, at which point Liu himself could be in power at City Hall.

"Things should improve," said Liu, whose study suggests that pension costs, which currently make up 11% of the city's budget, will drop to between 5% and 6% in five years.

While some economic analysts, including those at the Citizens Budget Commission, wondered about the accuracy of a study that looks so far into the future, the mayor's staff did not mince words.

They ripped the report as "flawed."

"The entire document is the functional equivalent of whistling a happy tune past the graveyard," said mayoral spokesman Marc LaVorgna. "We've got major problems - rosy scenarios aren't going to solve them."

Liu attributed the possible change to a new wave of pension tiers that went into effect a few years ago.
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  #364  
Old 06-03-2011, 10:51 AM
tommie frazier tommie frazier is offline
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in 5 years is now "so far into the future"? oh boy. wonder how these messes get started...
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  #365  
Old 06-03-2011, 11:22 AM
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Well, I just wonder what the assumptions are that make the costs drop that much that quickly. Just thinking of likely demographics....
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  #366  
Old 06-03-2011, 12:23 PM
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Quote:
Originally Posted by limabeanactuary View Post
Well, I just wonder what the assumptions are that make the costs drop that much that quickly. Just thinking of likely demographics....
I think you should be wondering about the definition of "cost" more than any change in demographics. The last sentence of the quote makes me think he might be referrring to some recent decreases in benefits that probably only affect future hires. But there are a lot of assumptions in that also.
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  #367  
Old 06-06-2011, 12:46 PM
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new post:

http://powip.com/2011/06/d-day-publi...ons-6june2011/

full post behind the spoiler
Spoiler:
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:



Quote:
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:

Quote:
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?


Quote:
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]



I will pull the John Liu report into a separate post here so we can discuss that.
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  #368  
Old 06-06-2011, 12:47 PM
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John Liu - Comptroller of NYC --

press release
http://comptroller.nyc.gov/press/201...11-06-051.shtm

Quote:
NEW YORK, NY – A new report from Comptroller John C. Liu’s Retirement Security NYC initiative shows that City pension costs will peak in 2016 before they begin a gradual, steady decline. From 2016 through 2040 and beyond, pension costs will grow at a slower rate than the City’s economy, using up significantly less of its budgeting resources.

The report titled, “Sustainable or Not? NYC Pension Cost Projections through 2060,” finds the long-term decline in pension costs is primarily due to the introduction of new, less expensive benefit plans that took effect between 1995 and 2009.

“Poor market performance over the past decade means we still have a few tough years ahead as those investment losses catch up to us. However, significant reforms already implemented in recent years will drive down costs for decades to come,” Comptroller Liu said.

The study, which makes use of long-term projections by independent actuaries, produced three key findings:
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.


2.Current discussions use a 30 year time period and the study shows by FY 2040, City pension costs as a percentage of the City’s budget will decline from 11.4 percent in FY 2016 to: ■5.1 percent, assuming an 8.0% rate-of-return; or
■5.5 percent, assuming a 7.5% rate-of-return; or
■6.0 percent, assuming a 7.0% rate-of-return.

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.


“While we cannot predict the precise economic cycles that will occur over the next 30 years, historical trends allow us to make reasonable assumptions about how pension obligations will affect the City’s future budgets.” Comptroller Liu said. “Retirement Security NYC will continue to bring objective research to bear on the public policy debate surrounding retirement issues that affect all New Yorkers.”

“The impact of any pension reform takes time to have an effect,” said Teresa Ghilarducci, Director of the New School’s Schwartz Center for Economic Policy Analysis, and a national expert on public pensions and retirement issues. “This study demonstrates that, over the long-term, New York City's pension funds provide a secure retirement for firefighters, police officers, teachers, and other City employees at a reasonable cost to taxpayers.”
Summary: http://comptroller.nyc.gov/press/pdf...ty_Summary.pdf

Full Report: http://comptroller.nyc.gov/rsnyc/reports.asp?f=2

Fund Projections: http://comptroller.nyc.gov/press/pdf...on_results.zip [4 spreadsheets]
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  #369  
Old 06-06-2011, 12:48 PM
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So the "projection over a long period of time" wasn't referring to the projection to 2016, but to 2060, I think.
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Old 06-06-2011, 11:32 PM
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Quote:
Originally Posted by John Liu - Comptroller of NYC View Post
"While we cannot predict the precise economic cycles that will occur over the next 30 years, historical trends allow us to make reasonable assumptions about how pension obligations will affect the City’s future budgets."
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