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Posted on 03/04/2012 1:37:34 PM PST by SmithL
Recent San Jose actuarial reports show $3.5 billion of city debt for underfunded pension and retiree health benefits -- a shortfall that works out to about $11,000 for every household in the city.
Yet, as Mayor Chuck Reed proposes substantive pension reform, workers and a local television reporter are hyperventilating about irrelevant numbers that distract from the ballooning problem.
If not for major layoffs and salary cuts last year, the shortfall would be much worse. It would also be much larger if the city used more realistic investment earnings assumptions rather than relying on overly optimistic forecasts.
Nevertheless, the calculations show the city's retirement programs combined have only 56 percent of the funds they should. Put another way, the unfunded liability equals about eight years of city payroll.
To understand what's going on here, keep in mind that employees earn additional future retirement benefits for each year that they work along with their salaries. So the city and its workers should invest enough money annually to cover the future costs of those newly earned benefits.
The city has three problems: First, the amount that should be set aside for those newly earned benefits has increased.
Second, even that greater amount isn't enough because the payment calculation relies on those optimistic investment assumptions.
Third, past reliance on unrealistic assumptions, retroactive benefit increases and actuarial changes have caught up with the city, leaving it with huge unfunded liabilities for pensions. As for retiree health benefits, only small amounts have been set aside for future benefits.
The resulting debts are treated like mortgages, with annual payments spread over as much as 30 years, thereby passing costs to the next generation.
The city must pay off the entire pension shortfall; workers have no obligation. For retiree health, workers make a small contribution...
(Excerpt) Read more at contracostatimes.com ...
Can’t they just raise taxes and promise higher wages to counter them?
And for them, that's just "city". Those residents still have state and federal to worry about.
As for retiree health benefits, only small amounts have been set aside for future benefits.
It was plundered.
Harry Dent, in his recent book, “The Great Crash Ahead” speaks about this issue and it’s happening in cities, and states, all over the country. And it’s much worse than they’re letting out. The public employee pension issue is a huge time-bomb waiting to go off.
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The courts have upheld the employees right to the pension as promised and we will be forced to pay much higher taxes so a few can have their retirement.
This one more item that will cause "life as we know it" to unravel.
Oh well! Stupid People will be left to pick up the thievery.
Somehow, when push comes to shove, I feel us people here in Missouri, will be paying for the decades-long, fiscal insanity of Commiefornia.
On the way back to the elevators I chatted with two of Mayor Reed's aides. He'd mentioned to me that as bad as they might think they have it in San Jose, a lot of other American cities have it worse. "I count my blessings when I talk to the mayors of other cities," he'd said.
"Which city do you pity the most?" I asked, just before the elevator doors closed.
The aides laughed and in unison said, "Vallejo!"
W00T!
Here’s how they want it to work:
Public employees, teachers, union goons get to retire in their late 50’s - with full benefits. The rest of - who by law must pay for their ‘retirement perks - get to work until we die.
The courts ruled the cities have to pay them. Does the court say where the cities can go to get the money?
If not, I’m sure it won’t be long before congress will be borrowing more money to bail out the cities “Because the courts told us to”. And they’ll just prolong it a little while.
We’re sliding down a slippery slope. And obama is pooring water on it making it more slippery which means we’ll get to the bottom faster. If a republican gets in all he’ll be able to do is borrow some dirt from China to throw on it hoping it will create some friction and slow it down. But we’ll still get to the bottom. I don’t see how we can climb out of this.
“Do you know how to pay in San Jose?”
Great song.
This has been talked about for years in CA. I read 4 or 5 years ago that in future years the state of CA wouldn’t be able to bring in enough $$$ to pay JUST retirement benefits...amounting to billions annually.
No question, but since California is much further down the curve, they would get the Federal bailout FIRST.
We Californians salute and thank you Missourians.
Signed,
Ex-Missourian (Mizzou ‘73)
If Baraq wins another term, I can definitely see federally guaranteed state bonds for the BIG 3 - Cal, Ill, and NY.
The joke is that by sometime in that next term, the US credit rating will be so degraded it won't make much difference.
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