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-   -   Report has public pension short fall at $4.6 trillion (http://glocktalk.com/forums/showthread.php?t=1462194)

Mr981 01-04-2013 15:50

Report has public pension short fall at $4.6 trillion
 
http://www.bloomberg.com/news/2012-0...roup-says.html

Moody's has it at about $2 trillion; the report states that the average pension is 41% funded--Yipes!

Apparently, one of the major culprits was the optimistic expected return on the pension fund investments--typically pegged at 8%. CALPERS earned just 1% in the past year indicating how far off even the major pension funds can be.

Naturally, the tax payers will have to make up the difference.

aircarver 01-04-2013 16:18

Can nobody in government do math ? .....:frown:

.

Glock20 10mm 01-04-2013 16:20

Quote:

Originally Posted by aircarver (Post 19820532)
Can nobody in government do math ? .....:frown:

.

Sure! We just don't understand the math they are doing though.:faint:

elsolo 01-04-2013 16:23

pensions are a Ponzi scheme

There are not sustainable, so the people that get in early enough get paid, everybody else is just a payer.

jpa 01-04-2013 16:40

NV PERS had a return for 2012 of 16%. Since 1984 they have a net return of 9.3%, also greater than the 8% expected. So does that mean I should get a refund of my contributions since they did better than their expected rate of return? If there was a shortfall you would expect that I would have to contribute more, right?

The problem with a lot of pension plans (CALPERS included) is that the money wasn't put into the plan to be invested as required. Instead the lawmakers wrote an IOU and spent the money elsewhere. Since that money wasn't invested, there's no way for it to achieve the rate of return required to sustain the system.

This kind of misappropriation committed by politicians across the country would land everyone involved in prison if it were done in private business. If the systems are underfunded and going broke it's because of mismanagement at the highest level, not because they're unsustainable.

certifiedfunds 01-04-2013 16:48

Quote:

Originally Posted by Mr981 (Post 19820414)
http://www.bloomberg.com/news/2012-0...roup-says.html

Moody's has it at about $2 trillion; the report states that the average pension is 41% funded--Yipes!

Apparently, one of the major culprits was the optimistic expected return on the pension fund investments--typically pegged at 8%. CALPERS earned just 1% in the past year indicating how far off even the major pension funds can be.

Naturally, the tax payers will have to make up the difference.

CALPERS? Unpossible! Where's CACop?

Here's a rough tip: If your employer is promising you a pension that is much better than the productive sector receives, or, is something the productive sector has had to abandon because it is unaffordable -- you might be in for a surprise.

certifiedfunds 01-04-2013 16:50

Quote:

Originally Posted by jpa (Post 19820620)
NV PERS had a return for 2012 of 16%. Since 1984 they have a net return of 9.3%, also greater than the 8% expected. So does that mean I should get a refund of my contributions since they did better than their expected rate of return? If there was a shortfall you would expect that I would have to contribute more, right?

The problem with a lot of pension plans (CALPERS included) is that the money wasn't put into the plan to be invested as required. Instead the lawmakers wrote an IOU and spent the money elsewhere. Since that money wasn't invested, there's no way for it to achieve the rate of return required to sustain the system.

This kind of misappropriation committed by politicians across the country would land everyone involved in prison if it were done in private business. If the systems are underfunded and going broke it's because of mismanagement at the highest level, not because they're unsustainable.

The politicians spent your contributions or the taxpayers' contributions?

If it is taxpayers contributions how is it misspent? Did they break the law?

fastbolt 01-04-2013 16:52

Kind of depends upon the retirement system.

The one I'm in only has more than 10K members.

It's funded ratio is over 70%. It's been as high as almost 80%, and as low as the middle 60's.

In 2009-10 it earned 14%.

In 2010-11 it earned 24%.

For 2011-12, when the recovery stalled, it went to essentially zero. For the first 3 months of 2012-13 fiscal year it rose to over 5%, and for the 12 months ending in Sep 2012 it had earned over 18%.

I don't believe the fund can be "borrowed from", either. ;)

Things fluctuate, but it appears that some retirement systems and funds can be managed well.

I'm just lucky that I ended up in what's seemingly a good retirement system. This wasn't known to me as a young man, nor was I really thinking about it back then when I took the job.

Bruce M 01-04-2013 17:14

Florida's is 87% http://www.naplesnews.com/news/2012/...tions-healthy/ Or 101% in this report http://www.governing.com/topics/publ...paredness.html And has been well funded since 2000 http://www.santarosa.fl.gov/hr/docum...032309ver5.pdf

And the state has had retirement systems in place since 1945 for state and county employees and a system for state employees since 1927. Sort of a long time for a ponzi scheme to survive.



That said I think it was Illinois that was funded at ~54% which seems to me to be a potential for a problem.

janice6 01-04-2013 17:20

Hell, that's only one more tax by the feds to pay for those obligations that will be unfunded. The middle class has unlimited funds to shore up bad risks. Just ask any Congressman or Federal employee.

jpa 01-04-2013 17:27

Quote:

Originally Posted by certifiedfunds (Post 19820669)
The politicians spent your contributions or the taxpayers' contributions?

If it is taxpayers contributions how is it misspent? Did they break the law?

It's misspent because the money was budgeted to be paid into the retirement system, not to be spent on operating expenses. Just like when a company budgets to build a new factory but instead gives a raise to the ceo. It isn't illegal to spend the money in that manner, but it doesn't negate the fact that the factory still needs to be built.

dherloc 01-04-2013 17:29

Quote:

Originally Posted by Mr981 (Post 19820414)
http://www.bloomberg.com/news/2012-0...roup-says.html

Moody's has it at about $2 trillion; the report states that the average pension is 41% funded--Yipes!

Apparently, one of the major culprits was the optimistic expected return on the pension fund investments--typically pegged at 8%. CALPERS earned just 1% in the past year indicating how far off even the major pension funds can be.

Naturally, the tax payers will have to make up the difference.


1% Incredible...imagine how much the fund managers are making on that money to make that 1%. Good thing they beat the market.

certifiedfunds 01-04-2013 17:44

Quote:

Originally Posted by jpa (Post 19820806)
It's misspent because the money was budgeted to be paid into the retirement system, not to be spent on operating expenses. Just like when a company budgets to build a new factory but instead gives a raise to the ceo. It isn't illegal to spend the money in that manner, but it doesn't negate the fact that the factory still needs to be built.

But didn't the lawmakers vote to spend it on something else?

Should one group of lawmakers be bound by another group of lawmakers who are no longer in office?

What if the taxpayers want their money spent elsewhere and direct their representatives to do it? Is that not their right to have their views represented?

When a company's owners decide their money is better spent bonusing the CEO than building a new factory why are they wrong? It's their money.

NEVRL8T 01-04-2013 17:54

Quote:

Originally Posted by aircarver (Post 19820532)
Can nobody in government do math ? .....:frown:

.

Damn the torpedoes! It's that fuzzy math!

jpa 01-04-2013 18:29

Quote:

Originally Posted by certifiedfunds (Post 19820853)
But didn't the lawmakers vote to spend it on something else?

Should one group of lawmakers be bound by another group of lawmakers who are no longer in office?

What if the taxpayers want their money spent elsewhere and direct their representatives to do it? Is that not their right to have their views represented?

When a company's owners decide their money is better spent bonusing the CEO than building a new factory why are they wrong? It's their money.

It's not the owners of the company making the decision but their elected board. You have no more direct influence over what our legislators decide to do with our tax money than I do. We trust them to honor the commitments that were made when they established the pension system. If they don't want to fund it properly, they should just disband the pension, refund everyone's contributions and call it good. Then we'll see the quality of employee the government can really attract.

certifiedfunds 01-04-2013 18:40

Quote:

Originally Posted by jpa (Post 19821107)
It's not the owners of the company making the decision but their elected board.

In some cases the owners are the board. In every case, the owners appoint the board. In every case, the board has a fiduciary duty to the shareholders to make the best use of their money or they will find themselves on the losing end of litigation.

Quote:

You have no more direct influence over what our legislators decide to do with our tax money than I do.
Should the legislators be bound by the acts of a previous legislature that is no longer in office?

Quote:

We trust them to honor the commitments that were made when they established the pension system.
You trust the government?:upeyes:

What about the taxpayers that may not want their money going into a pension fund that was created decades ago by their parents? Who should they trust?

Quote:

If they don't want to fund it properly, they should just disband the pension, refund everyone's contributions and call it good. Then we'll see the quality of employee the government can really attract.
So most government employees are in it for the pension gravy?

Generally speaking, the government doesn't attract the best and brightest (to say the least). I guess what you're saying is that if you can't dangle a lucrative pension in front of them, it'll get worse?

jpa 01-04-2013 19:31

Quote:

Originally Posted by certifiedfunds (Post 19821150)
In some cases the owners are the board. In every case, the owners appoint the board. In every case, the board has a fiduciary duty to the shareholders to make the best use of their money or they will find themselves on the losing end of litigation.



Should the legislators be bound by the acts of a previous legislature that is no longer in office?



You trust the government?:upeyes:

What about the taxpayers that may not want their money going into a pension fund that was created decades ago by their parents? Who should they trust?



So most government employees are in it for the pension gravy?

Generally speaking, the government doesn't attract the best and brightest (to say the least). I guess what you're saying is that if you can't dangle a lucrative pension in front of them, it'll get worse?

Yes, I understand in many cases the board is the owners of the business who have a direct stake in the success of the company but at the least are appointed by the ownership. In cases where they are not the owners, they have a fiduciary duty to the owners as you stated. However, they have no stake in the operation of the company and could do what they wanted as long as they were acting "in the best interests" of the company.

I know you're intentionally being dense on this parallel I'm drawing because you refuse to admit that it's the same thing. Lawmakers have a fiduciary duty to be fiscally responsible when handling the taxpayers' money, wouldn't you agree? How is it fiscally responsible to knowingly incur debt and spend the money that was budgeted to pay that debt anyway? Just because they say "oh well, we spent your pension money" doesn't mean that the gov isn't still obligated to pay that pension. There have been court cases regarding that very issue. This is why changes to the pension system only apply to new members going forward, not to those already in the system. Because they would find themselves on the losing end of litigation.

I trust the government as long as its' employees fear going to jail or its elected officials fear losing election. I believe the current legislators should honor the commitments made by prior legislators, otherwise disband the entire system and refund my contributions (and those of everyone else).

2bgop 01-04-2013 20:17

Quote:

Originally Posted by certifiedfunds (Post 19820853)
But didn't the lawmakers vote to spend it on something else?

Should one group of lawmakers be bound by another group of lawmakers who are no longer in office?

What if the taxpayers want their money spent elsewhere and direct their representatives to do it? Is that not their right to have their views represented?

When a company's owners decide their money is better spent bonusing the CEO than building a new factory why are they wrong? It's their money.

By their very definition they can not be, plus almost every state constitution clearly states this.

CAcop 01-04-2013 20:38

Quote:

Originally Posted by jpa (Post 19820620)
NV PERS had a return for 2012 of 16%. Since 1984 they have a net return of 9.3%, also greater than the 8% expected. So does that mean I should get a refund of my contributions since they did better than their expected rate of return? If there was a shortfall you would expect that I would have to contribute more, right?

The problem with a lot of pension plans (CALPERS included) is that the money wasn't put into the plan to be invested as required. Instead the lawmakers wrote an IOU and spent the money elsewhere. Since that money wasn't invested, there's no way for it to achieve the rate of return required to sustain the system.

This kind of misappropriation committed by politicians across the country would land everyone involved in prison if it were done in private business. If the systems are underfunded and going broke it's because of mismanagement at the highest level, not because they're unsustainable.

In other words see Stockton for what not to do with a city. They built stadiums and convention centers when nobody wants to go there. Trust me, I grew up there, if you find yourself on I-5 or 99 driving through Stockton, don't bother getting off the freeway unles you need gas or food. And if you get off dont get off any exit other than Ben Holt or Hammer.

It's getting so bad in Stockton they are loosing so many officers they will have to pay the Feds back money they took for funding officer positions. The only people who apply can't meet the minimum standards.

engineer151515 01-04-2013 20:45

Quote:

Originally Posted by jpa (Post 19821390)
..........
Lawmakers have a fiduciary duty to be fiscally responsible when handling the taxpayers' money, wouldn't you agree? ....

I haven't seen the US Senate pass a budget in 3 going on 4 years. And they are Constitutionally required to do so.

So, no. There is no evidence that fiscal responsibility in handling the taxpayers' money is a requirement.

CAcop 01-04-2013 20:46

http://www.ai-cio.com/channel/ASSET_...rd_Assets.html

Sounds like they are changing stratagies.

The $251.5 billion California Public Employees’ Retirement System (CalPERS) gained 9.3% on its real asset portfolio, and plans to invest more next year, according its annual report for the 2011-2012 fiscal year. As of June 30, the fund’s real asset portfolio totaled $4.69 billion.

Sounds like that porfolio did better than the commodities.

http://www.bloomberg.com/news/2013-0...4-billion.html

Maybe they shouldn't have listened to some on GT about buying gold.

certifiedfunds 01-04-2013 21:52

Quote:

Originally Posted by jpa (Post 19821390)
Yes, I understand in many cases the board is the owners of the business who have a direct stake in the success of the company but at the least are appointed by the ownership. In cases where they are not the owners, they have a fiduciary duty to the owners as you stated. However, they have no stake in the operation of the company and could do what they wanted as long as they were acting "in the best interests" of the company.

I know you're intentionally being dense on this parallel I'm drawing because you refuse to admit that it's the same thing.

I'm intentionally being dense on this because it wasn't a valid analogy and I was using "density":supergrin: to illustrate that. Instead of picking the above excerpt apart, lets just let it go and address the meat of the issue:

Quote:

Lawmakers have a fiduciary duty to be fiscally responsible when handling the taxpayers' money, wouldn't you agree?
No. They don't. I wish they did but they don't. If they did have such a duty they most certainly would have been jailed for creating most of these public pensions in the first place because by creating them they would have been in violation of it.

Furthermore, if they had a fiduciary duty at the present they would likely be in violation of it for allowing the pension funds to continue, and for most public employee union contracts.

A fiduciary duty is a legal obligation:

Quote:

A legal obligation of one party to act in the best interest of another. The obligated party is typically a fiduciary, that is, someone entrusted with the care of money or property. Also called fiduciary obligation.

Read more: http://www.businessdictionary.com/de...#ixzz2H4VRycGI
The people who manage the funds within the pension plans DO have a fiduciary duty.

Quote:

How is it fiscally responsible to knowingly incur debt and spend the money that was budgeted to pay that debt anyway?
Well, it isn't. I agree. However, your point is based on a fallacy. There is no debt if the legislators legislate it away.

In other words, taxpayer funds in public pensions are only guaranteed so far as the last law written to protect them. It is taxpayer money. The lawmakers can simply pass a law and re-allocate it. The taxpayers have a right to have their interests represented. If they, via their legislators, decide to remove taxpayer money, stop depositing taxpayer money or dissolve the pension (assuming not contractually bound), they have a right to do that and can do it.

I'm not passing judgement on it one way or another. I'm just saying they can.

However, current taxpayers/current legislatures cannot be bound by previous legistures. In other words, just because some legislature 30 years ago promised you a pension package, the current legislature can change that obligation and they should be able to. The current taxpayers were not represented by the previous legislature.

Truth be told, this is generally the biggest problem with public union contracts and public pension systems. Some politician years ago made an agreement to spend some other person's money in the future for their own political benefit today.

Quote:

Just because they say "oh well, we spent your pension money" doesn't mean that the gov isn't still obligated to pay that pension. There have been court cases regarding that very issue. This is why changes to the pension system only apply to new members going forward, not to those already in the system. Because they would find themselves on the losing end of litigation.

Sure they can walk away from it. Courts may or may not rule against them. If they so choose, they can amend their respective constitution. Nothing with the government is iron-clad, and it shouldn't be. That's my basic point.

Remember that though we put judges in black robes and call them "your honor", they're still just lawyers and most of them are political hacks or politicians themselves. It is what it is.

Quote:

I trust the government as long as its' employees fear going to jail or its elected officials fear losing election.
I don't. Government has proven it is untrustworthy. It has proven it does not have a fiduciary duty or even a "fiduciary mindset". I truly feel sorry for honest hardworking NECESSARY government employees who are put in this compromising postion. The good news for you folks is that in reality, not paying you would be political suicide in MOST cases. However, as the fiscal crises grow public opinion seems to be changing a bit as well and should the taxpayers send politicians to the state house with a mandate to relieve them of pension obligations, rest assured it will happen. I think it is highly unlikely though because the government pretty much has a monopoly on force and will bring as much pressure to bear on the taxpayers to force them to pay in order to protect their political status.

Quote:

I believe the current legislators should honor the commitments made by prior legislators,
I do too, if possible. But I don't believe I should have to bail it out at any cost, as a taxpayer. You have to be conscious of the possibility that it may not be feasible at some point. No matter the reason or the malfeasance involved, there is a limit, unless the federal government starts bailing them out with printed money. Even still, there is a limit, you just might realize that limit slowly.

Quote:

otherwise disband the entire system and refund my contributions (and those of everyone else).
I would vote for that in a heartbeat and put public employees on a 401k type plan with very conservative taxpayer contributions/matches, like the productive sector has.

I suspect that can't happen because it is mathematically impossible and would trigger collapse in any number of areas. So to that extent, we're all in it together.

SunsetMan 01-04-2013 22:15

Quote:

Originally Posted by jpa (Post 19820620)
NV PERS had a return for 2012 of 16%. Since 1984 they have a net return of 9.3%, also greater than the 8% expected. So does that mean I should get a refund of my contributions since they did better than their expected rate of return? If there was a shortfall you would expect that I would have to contribute more, right?

The problem with a lot of pension plans (CALPERS included) is that the money wasn't put into the plan to be invested as required. Instead the lawmakers wrote an IOU and spent the money elsewhere. Since that money wasn't invested, there's no way for it to achieve the rate of return required to sustain the system.

This kind of misappropriation committed by politicians across the country would land everyone involved in prison if it were done in private business. If the systems are underfunded and going broke it's because of mismanagement at the highest level, not because they're unsustainable.

Do you have proof the CALPERS money was not put into the plan? My roommate says all the money was only used for CALPERS.

I had a discussion with him that his pension could become insolvent if California became bankrupt, that promises were made that CA maybe could not keep. He was fairly convinced that was impossible.

CAcop 01-04-2013 23:18

Quote:

Originally Posted by SunsetMan (Post 19822031)
Do you have proof the CALPERS money was not put into the plan? My roommate says all the money was only used for CALPERS.

I had a discussion with him that his pension could become insolvent if California became bankrupt, that promises were made that CA maybe could not keep. He was fairly convinced that was impossible.

To understand CalPERS you have to understand how they pay out. There are three streams.

1. Intrest off their holdings. This runs 70-90% depending on the economy. I haven't checked the current rate in awhile but it is out there if you want to find it.

2. Employee contributions. For public safety it is default 9% of each working employee's pay. Non public safety is 7%.

3. Employer contributions. This varies. During much of the 90s and 2000s most cities paid 0-5% assuming they did not pay their employees' share. I looked up my city and they got 2% back one quarter. Also factored into this is disability retirements CalPERS has to pay for people vs. the city paying for it. I won't even go there because I could write 10 pages on that alone.

Essentially for CalPERS to go bankrupt cities would have to stop paying into it yet demand their retirees get paid by CalPERS. Not going to happen. CalPERS would tell them to pay them or they are on their own.

CalPERS is essentially like the Mob. Once you are in there is only one way out, meanwhile you pay the vig.

Also CalPERS is a public/private organization. Somewhat similar to BART.

SunsetMan 01-05-2013 00:35

Quote:

Originally Posted by CAcop (Post 19822186)
1. Intrest off their holdings. This runs 70-90% depending on the economy. I haven't checked the current rate in awhile but it is out there if you want to find it.

This is where I see the big problem if say a 7% rate of return is what was planned for. I don't think my roomy expects the tax payers to make up any difference in rate of return, but I'm assuming CalPERS has been supplemented out of the general fund. I have nothing to back that up though. Research on that has turned up nothing.

I think government pensions should operate like private 401k's where you get back what you have put in plus actual interest on holdings.


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