We are a commune of inquiring, skeptical, politically centrist, capitalist, anglophile, traditionalist New England Yankee humans, humanoids, and animals with many interests beyond and above politics. Each of us has had a high-school education (or GED), but all had ADD so didn't pay attention very well, especially the dogs. Each one of us does "try my best to be just like I am," and none of us enjoys working for others, including for Maggie, from whom we receive neither a nickel nor a dime. Freedom from nags, cranks, government, do-gooders, control-freaks and idiots is all that we ask for.
$3-trillion of actual public pension liabilities on top of $trillions of actual ObamaCare costs and $trillions of ObamaCare taxes.
All private and public pension funds took a shellacking over the past few years.Tougher accounting rules are leading private pension funds to decrease risk, and thus the required contributions, by reducing their percentage of funds in stocks.Public pension funds, by contrast, are increasing the risks they are taking, to reduce voting taxpayers’ sticker shock at the unsustainable promises made to government employees.
Greenwich Associates, one of the top investment research firms, calls it a “swing-for-the-fences” attempt to avoid fiscal realities.
Public funds appear to be banking on the fact that the investment strategies they are implementing will help shore up solvency ratios by generating returns that far outpace the market. Municipal pension funds last year said they expect their investment portfolios to beat relevant benchmarks by 160 basis points — up from a 132 bps expectation in 2008. Public funds with assets of $500 million or less increased their stated expected outperformance to a staggering 180 basis points in 2009 from an already aggressive 135 bps in 2008. "These are very aggressive expectations," says Greenwich Associates consultant Chris McNickle. "Most investment managers struggle to generate the levels of outperformance expected by institutional investors; it would be rarer still for an entire portfolio to achieve that level of outperformance for any number of years." [Note: bps = 1/100th of 1%, so 180bps = 1.8%]
The American Enterprise Institute’s study says that, contrary to public pension funds’ official accounting that they are about $½-trillion in actuarial deficit, their actual deficit is closer to $3 trillion.
The problem is fundamental: According to accounting rules adopted by the states, a public sector pension plan may call itself "fully funded" even if there is a better-than-even chance it will be unable to meet its obligations….
Public pension plans are hiding behind unrealistically low deficit figures. This allows policy makers to dodge difficult choices today at the cost of a much heavier burden on taxpayers in the future.
Today’s California Field Pollcooperates in the sham. In the face of a projected $20-billion shortfall, expected to continue in future years, Californians are more likely to support budget cuts than two-years ago, but still only two areas gain even marginal majority support for cuts, prisons and parks. Notably lacking from the poll questions of areas to cut is public employee pensions.
Some states and localities are trying to make adjustments to future pension liabilities to their employees, but the adjustments are relatively minor in comparison to the burden on and cuts to other government services.
Top that off with the new huge budget burdens upon the states mandated by ObamaCare’s expansion of Medicaid eligibility. Fourteen states are already suing to block ObamaCare’s effects on the states. For example, the Christian Science Monitorreports:
The suit says that, under the new law, Medicaid rolls in Florida are expected to increase dramatically. The corresponding soaring costs [already 26 percent of Florida’s annual budget] will fall increasingly on the Florida treasury, but state officials will have less authority to set priorities….
The lawsuit says this amounts to an unconstitutional exercise of federal power that violates principles of federalism protected in the 10th Amendment. It says the healthcare reform bill commandeers the states and their employees as agents of the federal government’s regulatory scheme, and that it does so at the state’s own cost.
Actually, at the cost of schools, roads, policing, and other high-priority government services.The number of government employees, however, keeps increasing while the number of taxpaying workers decreases and their taxes increase.
As a guy who lost my Defined Benefit retirement to a bankruptcy, let me add this point....
Private Defined Benefit pensions are insured against failure with policies at the Pension Benefit Guarantee Corporation. Like the FDIC, the PBGC is itself going broke, but that is not the worry here.
Unlike the insurance that the Private-Sector pension plans were required to keep, Public DB pensions have no insurance backstop at all. There is no agency on the hook for any part of that $3 trillion deficit. There are only two ways out of this hole: a) Raise taxes to support these pensions or b) Start reneging on these pension promises.