Very common thing, doling out pensions based on formulas figuring a rosy return on fund investments. Projecting big returns like 8 percent when reality is not even half that. By contract, the cities are on the hook to make up the shortfall. They need to change the contracts with the unions so the cities won't have to make up the difference. But they won't.
Saginaw Michigan was headed for bankruptcy but the emergency manager pulled them back from the brink. The city went from some 200 city employees to 10. Private contractors picked up most of the city employees and negotiated new union contracts with the employees.
The city isn’t out of the woods but they’re in a lot better position than they were.
Very common thing, doling out pensions based on formulas figuring a rosy return on fund investments. Projecting big returns like 8 percent when reality is not even half that. By contract, the cities are on the hook to make up the shortfall. They need to change the contracts with the unions so the cities won't have to make up the difference. But they won't.
Roadcat go here...http://www.cnbc.com/id/100963307
From the article...
"Shanks said Ford is maintaining its goal of fully funding and taking the risk out of its global funded pension plans by mid-decade. As the company takes the risk out of the pension plans, it wants to increase fixed-income asset allocations. Shanks said the goal is to have an asset mix of 80 percent fixed income and 20 percent growth. Currently, the fixed-income asset mix is 60 percent, up from 55 percent last year, Shanks said."
What they are doing is brilliant IMHO and no one noticed this methodology when it surfaced, I did. They are not assuming 8 or 10% like everyone else is and assuming the blended rate of Corporates and the 20% equity which maybe their own stock which is on a tear. So they suck it up and the front end with realistic expectations, a defined total "nut" if you will, and it seems they are not to get whipsawed in a down market later, as they move forward to eliminate the liability, period.
Unfortunately, a City like Cinnci, doesn't have a product line that is a cash generating machine to fill the gaps.