Public pension 'best practices' omit 1 thing: How do we pay benefits?
Municipal and state pensions are at least $4 trillion in the hole as the National Conference of Public Employee Retirement Systems meets next week. Funds ended 2011 with the first year-over-year decline since 2009 after failing to make up for Great Recession losses. And three studies released last month confirm that without draconian cuts, current employees and retirees in some systems will not receive full benefits.
None of these realities are listed in the NCPERS "Best Governance Practices for Public Retirement Systems" to be presented next week at the New York Hilton.
Instead, the report offers a general guideline that "seeks to drive accountability, consistency and transparency, which enables improved performance and risk oversight for the benefit of public pension fund members, taxpayers and other stakeholders."
Taxpayers are a "stakeholder" only if you consider being impaled on the stake as holding it.
No taxpayers are among "... more than 1,000 trustees, administrators, state and local officials, investment, financial and union officers, pension staff and regulators ..." attending the annual conference.
Right now taxpayers are on that stake for more than $4 trillion we must pay on top of all other government expenses and tax increases to receive absolutely no government services of any kind.
No pension reforms to date will have any significant impact on the debt, which actually continues to grow every day.
These trillions of dollars will put no teachers in classrooms, police on streets, food in mouths of the hungry, homeless in shelters, pavement on streets, garbage in trash trucks or pay for any of the essential services provided by state and municipal workers.
This burden will repress hiring, wages, raises and benefits for public workers for 30-50 years.
For decades, politicians made guaranteed pension promises they did not fund, secretly borrowing from pensions - getting rich in the process -- and leaving future taxpayers to suffer. The future is now.
So, how do we pay? One idea on the program at 10 a.m. Wednesday is "Retirement Security for All" proposed as a way to drain private sector workers and businesses of cash now on false promise to pay later.
Why can we assume that promise is false? Just look at the record to date.
Recent studies and data compilation by the U.S. Census Bureau, Government Accountability Office, Federal Reserve Bank of Cleveland and Mossavar-Rahmani Center for Business and Government at the Harvard Kennedy School detail the continued deterioration and ultimate long-term chance of failure of public pension systems within the overall local and state government fiscal crisis:
Underfunded Public Pensions in the United States:
The Size of the Problem, the Obstacles to Reform and the Path Forward
Thomas J. Healey, Harvard Kennedy School; Carl Hess Towers Watson Investment; Kevin Nicholson, Harvard Kennedy School; M-RCBG Faculty Working Paper No. 2012-08
Mossavar-Rahmani Center for Business & Government
State and Local Governments' Fiscal Outlook
April 2012 Update
Public Finances: Shining Light on a Dark Corner
Forefront, Spring 2012
The Federal Reserve Bank of Cleveland
Public Pensions Under Stress
John B. Carlson, Vice President, Research Department
Monitoring the Risks of State and Local Finance
Jean Burson, Policy Advisor, Office of Policy Analysis
Navigating the Legal Landscape for Public Pension Reform: Travel at Your Own Risk
Moira Kearney-Marks, Research Analyst, Research Department
Quarterly Summary of the Finances of Selected State and Local Government Employee Retirement System 2011 Quarter 4:
TOTAL HOLDINGS AND INVESTMENTS OF MAJOR PUBLIC-EMPLOYEE RETIREMENT SYSTEMS HAD A YEAR-TO-YEAR DECREASE FOR THE FIRST TIME SINCE THE THIRD QUARTER OF 2009
United States Census Bureau
These studies are not on the NCPERS program. So every American must read them and weep. Then demand our governors and legislators impose real pension reforms now.
Frank, We all know that the root cause of the problem is EXCESSIVE pensions "negotiated" (with nobody at the "bargaining table" looking out for Taxpayer interests) between Public Sector Unions and politicians more than willing to accept campaign contributions and election support in return for favorable votes on pay, pensions, and benefits. Not surprisingly, VERY generous pensions are VERY hard to fund adequately.
We need to "be fair" to public servants with respect to their "total compensation" (cash pay + pensions + benefits), and "fairness" means EQUAL, but NOT better total compensation than their private sector counterparts.
While there are competing studies of Public VS Private Sector "cash pay", most conclude that cash pay in these two sectors is quite close. As such, there is ZERO justification for greater Public Sector pensions and/or benefits.
However, anyone not living under a rock knows that public sector pensions are multiples (2, 4, even 6x for sfety workers) greater than those afforded Private sector workers, and this is NOT offset by the workers contributions ... those contributions (WITH investment earnings) RARELY accumulating to an amount at retirement sufficient to buy more than 10-20% of their pension.
Clearly, the FAIR answer is to renege on that portion of promised pensions that results in Public Sector "total compensation" greater than Private sector total compensation. Without doubt, that excess is the result of the collusion between the Public Sector Unions and our self-interested, vote-selling, contribution-soliciting elected representatives. It would not be difficult to demonstrate that 50+% of promised pensions should NOT be paid for by taxpayers.
Accrued pensions, as well as those granted for future service, need to be reduced by at least 50%. And retirees should not be completely excused from sharing in this burden.
posted by : Tough Love
Monday, May 7, 2012 at 11:51 AM | Permalink
posted by : Skipping
Monday, May 7, 2012 at 12:54 AM | Permalink
Let me answer for you ... nothing, nada, zipo.
The category of pension excesses that should be at the TOP of the list to renege upon should be these outrageous retroactive increases.
posted by : Tough Love
Monday, May 7, 2012 at 01:16 PM | Permalink
posted by : shirley
Monday, May 7, 2012 at 09:19 PM | Permalink
posted by : Robert
Tuesday, May 8, 2012 at 08:20 PM | Permalink
posted by : copiun
Monday, May 28, 2012 at 07:27 AM | Permalink