Free Republic

However, new actuarial pension rules will finally force states to admit the problem. Thus, it should not be surprising that talk of "technical bankruptcy" and “service insolvency” is growing Pension plans typically assume 7.5% returns. That's not going to happen on a sustained basis with 10-year treasuries yielding close to 2%. Yet, any significant rise in bond yields will crush existing bondholders as well as wreak havoc in equities. Moody's wants states to assume 5.5% returns, but even that is far too high. The stock and bond markets are now so bloated thanks to Feb bubble-blowing policies that 0-2% returns...

The Illinois pension saga just keeps getting worse. In response to the state legislature’s failure to pass a pension reform bill before adjourning, Fitch downgraded Illinois’s bonds from A to A- earlier this week. On Thursday Moody’s joined the party, lowering the state’s rating from A2 to A3. S&P is now the only agency not to have downgraded the state, but it is issuing its own dire warnings. As Reuters notes, Illinois now has the lowest credit rating of any state in the country even without the S&P downgrade, and the worst rating in its history. The higher borrowing costs...

Things are getting rather interesting in the Netherlands as low interest rates have increased pension deficit liabilities. Unlike the US and other parts of Europe where deficits are ignored, Dutch law requires 105% funding and the plans fell from 152% funded in 2007 to 102% funded today. This has forced pension plans to cut benefits by as much as 7% for some trades. As might be expected, this has given rise to a 50 Plus Party, which won election to the Dutch parliament for the first time last year on promises to defend the interests of pensioners. Please consider Yawning...

Broke Detroit's Pension Fund "Trustees" Use Public Funds To Fund Hawaii Trip Tyler Durden 05/25/2013 12:46 -0400 "When you have city employees, police, and firefighters have taken pay cuts, it doesn't look good," is the somewhat understated response from Detroit's emergency manager to the city's latest debacle. Amid the deepening financial crisis the crumbling region faces, four trustees of its public pension funds spent $22,000 of retirement funds to attend a conference at Waikiki Beach, Honolulu. "It's one of these things we trustees must do to stay on top of the field," is how one of the trustees defended the...

The city of Detroit may be facing a deepening financial crisis but that hasn't stopped four trustees of its public pension funds from spending $22,000 of retirement system funds to attend a conference in Hawaii this week. One well-attended session covered how to avoid front-page scandals. According to presenter Lydia Lee, a pension attorney from Oklahoma, the session touched on a topic familiar back in Detroit: The indictment this spring of two former city pension officials for an alleged $200 million bribery and kickback scheme, in a case that will come to trial next March.

In a twist of irony, “Big Government” Bloomberg has admitted that NYC is at the edge of a fiscal precipice. There is no practical ways to pay our workforce given the current environment, current tax structure, current other obligations we have more than what we have been doing, with the possible exception of dramatically raising taxes”. Bloomberg points to public service unions as being among the biggest roadblocks to any meaningful fiscal health in the city. Currently in NYC, most of the unions are refusing to negotiate contracts right now. This is completely legal. If the contract is not re-negotiated,...

This week, I had a piece in the magazine arguing that retirement is trouble. That's a golden oldie for those of you who've been reading a while; my favorite evergreen topic is haranguing my readers to save 15-20% of their income, or fer goshsakes at least 10%, towards retirement. (I mean it guys. You need to save more.) But this piece had an interesting peg: Republic Services, Inc. is in the middle of an epic battle with the Teamsters International over the pension plans that cover their workers. Up until recently, Republic teamsters have been covered by the rather notorious...

Think loan sharks charge predatory rates? Compared with what it costs to get out of union pension funds, those guys are cheap. When he was forced to downsize his last, part-time unionized trucker, George Kerver said he was charged nearly half a million dollars to help bail out the Teamsters union pension fund. "We got the bill and it was for $465,774," said Kerver, president of Fastdecks Inc., a concrete forming company in Walled Lake. "We have made three payments so far. The first one was due five days after our receipt of their demand. Three sets of lawyers have...

<p>Last week, Mayor Bloomberg scolded the NYPD’s critics, from The New York Times to the Democratic mayoral candidates. The mayor said that “the attacks most often come from those who play no constructive role in keeping our city safe.”</p> <p>The mayor is right — but there’s another threat to the NYPD’s crime-fighting success, too. We now have more retired cops than active police officers, and the multibillion-dollar bill for their pension and health benefits harms our ability to hire new ones.</p>

Michigan legislators are considering a bill to rework the school pension underfunding problem but the legislation will do nothing to stop the state from continuing to improperly fund the system. Indeed, the bill represents just another pension gimmick, and a harmful one at that. Lawmakers should instead consider real pension reform. House Bill 4190 would change the way that the state apportions the costs of catching up on years of school pension system underfunding. The $22.4 billion gap between what has set aside to cover future employee retirement benefits and what the system expects to pay out in pensions must...

President Barack Obama’s 2014 budget puts a $3 million cap on tax-advantaged retirement accounts to crack down on “wealthy individuals” using these investment vehicles to earn “substantially more than is needed to fund reasonable levels of retirement savings.” But an analysis by Forbes finds that a 20-year old saving for retirement would need to amass a $9.97 million portfolio to fund just a $60,000 lifestyle by age 65. What’s more, writes David John Marotta of Forbes, $3 million today represents just $500,000 in 1970s dollars. Kathleen Pender of the San Francisco Chronicle also notes that Obama’s plan would not apply...

It has been said that an actuary is someone who really wanted to be an accountant but didn't have the personality for it. See who's laughing now. Things are starting to get very interesting, actuarially-speaking. Federal bankruptcy judge Christopher Klein ruled on April 1 that Stockton, Calif., can file for bankruptcy via Chapter 9 (Chapter 11's ugly cousin). The ruling may start the actuarial dominoes falling across the country, because Stockton's predicament stems from financial assumptions that are hardly restricted to one improvident California municipality. Stockton may expose the little-known but biggest lie in global finance: pension funds' expected rate...

Were California's state government a business, it would be a candidate for insolvency with a negative net worth of $127.2 billion, according to an annual financial report issued by State Auditor Elaine Howle and the Bureau of State Audits. The report, which covers the fiscal year ending June 30, 2012, says that the state's negative status -- all of its assets minus all of its liabilities -- increased that year, largely because it spent more than it received in revenue. During the 2011-12 fiscal year, the state's general fund spent $1.7 billion more than it received in revenues and wound...

<p>A few years ago, it was fashionable to compare California, Illinois, or whatever U.S. state was struggling financially to the troubled island nation of Greece. Now, with Stockton, California the largest U.S. municipality to enter bankruptcy, it may be tempting to make another Mediterranean comparison - this time to the troubled island nation of Cyprus.</p>

It is not surprising that they quickly found the source of their pain, the bond holders; those money loving, rich old white guys who know nothing but greed. It is their fault that huge lifelong pensions and free healthcare for life, regardless of how long you worked for the city has not turned Stockton into the utopia it should have been. It is amazing how greedy some people are, they simply don’t care about their fellow man. In a case that will most likely go to the US Supreme Court, the municipal bondholders will be pitted against the California Public...

SACRAMENTO, Calif. (AP) — On its first official day in bankruptcy, the city of Stockton now must grapple with the hard part of reorganizing its financial affairs — how to share the financial burden equitably among creditors while meeting its massive state pension obligations. At the conclusion of a three-day trial, a judge on Monday formally granted the city Chapter 9 protection, over the objections of creditors who questioned whether it was fair for the city to fully meet its obligations to the state pension system while other debt holders go partly paid. The issue — whether federal bankruptcy law...

Alameda County supervisors have really taken to heart the adage that government should run like a business — rewarding County Administrator Susan Muranishi with the Wall Street-like wage of $423,664 a year. For the rest of her life.

Working for the public good has also worked well for one California county administrator’s bank account. According to reports by several newspapers, Alameda County, in the San Francisco Bay Area, is paying its County Administrator Susan Muranishi, north of $400,000—for life. This includes a generous base salary of $301,000, plus taxpayer-funded deferred pension plans paid for by the county. The pension accounts are set by a formula that multiplies years of service by 2 to 3 percent of the top salary to calculate the benefit, the San Jose Mercury News reports. With 38 years of service under her belt, the...

U.S. Still Making Payments to Relatives of Civil War Vets The U.S. government spends over $40 billion a year to compensate veterans and their family members for service in conflicts as far back as the Civil War. According to an analysis conducted by the Associated Press, the costs of veteran compensation for previous wars are as follows: • $12 billion a year for the wars in Iraq, Afghanistan, and the first Persian Gulf War • $22 billion a year for Vietnam • $5 billion a year for World War II • $2.8 billion for the Korean War • $20 million...

For the eighth time in the past 10 years, the state of Michigan has failed to meet the "annual required contribution" level estimated to catch up on unfunded school employee pension promises. Due to years of failing to fully pay this contribution, the Michigan Public School Employees' Retirement System (MPSERS) now is underfunded by $22.4 billion. The contribution for 2012 should have been $1.74 billion. However, the state invested $1.45 billion, resulting in a $290 million shortfall. Last year, the Legislature and Gov. Rick Snyder had an opportunity to switch new education employees over to a defined contribution, 401(k)-style system....