Something smells like 17 day old rotting Mackerel about this pension problem.
There have been public pensions for decades. This isn’t anything new. Why all of a sudden, are the pensions the reasons governments are going belly up?
Were these government entities not putting away funds to service these pensions? Were they robbing the funds to pay for liberal crap?
What gives here?
You’d think public pensions were something that just came along in the last three years or something.
I think pension obligation grew dramatically since decades ago. In recent years, many local governments dipped into risky financial instrument(derivatives) to earn enough revenue to keep the pension fund going. Now that those schemes all crashed, they created a big hole in the budget.
Several things:
1. Too many pension funds assumed a 7 to 8% return/yield as a long-term average. They didn’t expect (nor were positioned to handle) severe market downturns back-to-back such as we’ve seen in 2001-2003 and 2007 to now.
2. Yes, they were putting away funds, but not enough. The actuarial mathematics behind these pension funds has been, um, “cooked” for awhile now. The contributions have not been high enough for at least a decade.
3. Recent pay scale adjustments, coupled with increased pension benefits negotiated by unions have thrown previous expectations of pension draw-downs into the trash can. As the pension trust funds have realized this, they’ve been going through their actuarial mathematics and re-computing a lot of things with points 1, 2 and 3 now in mind... and they’re coming up with results of “Holy crap! We’re running out of money!”
There was no “robbing” per se of the pension funds. There were some grossly inept and stupid investments made by some funds (CalPERS comes to mind first and foremost), but no direct theft of which I’ve read in the last year. Just a whole lot of chickens coming home to roost all at once.