Posted on 12/23/2010 2:45:34 AM PST by abb
PRICHARD, Ala. — This struggling small city on the outskirts of Mobile was warned for years that if it did nothing, its pension fund would run out of money by 2009. Right on schedule, its fund ran dry.
Then Prichard did something that pension experts say they have never seen before: it stopped sending monthly pension checks to its 150 retired workers, breaking a state law requiring it to pay its promised retirement benefits in full.
Since then, Nettie Banks, 68, a retired Prichard police and fire dispatcher, has filed for bankruptcy. Alfred Arnold, a 66-year-old retired fire captain, has gone back to work as a shopping mall security guard to try to keep his house. Eddie Ragland, 59, a retired police captain, accepted help from colleagues, bake sales and collection jars after he was shot by a robber, leaving him badly wounded and unable to get to his new job as a police officer at the regional airport.
Far worse was the retired fire marshal who died in June. Like many of the others, he was too young to collect Social Security. “When they found him, he had no electricity and no running water in his house,” said David Anders, 58, a retired district fire chief. “He was a proud enough man that he wouldn’t accept help.”
The situation in Prichard is extremely unusual — the city has sought bankruptcy protection twice — but it proves that the unthinkable can, in fact, sometimes happen. And it stands as a warning to cities like Philadelphia and states like Illinois, whose pension funds are under great strain: if nothing changes, the money eventually does run out, and when that happens, misery and turmoil follow.
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(Excerpt) Read more at nytimes.com ...
And Mobile is well on its way to becoming another, even bigger Prichard. That is exactly what I told a city council candidate that came around knocking on doors just before I moved away.
Confiscate the estates of all of those who served on the city council, whether they are currently dead or alive, and distribute the proceeds to the pensioners.
Ping
Always wise to check the rip cord before you bale out with the golden parachute.
What constitution?
I don’t know if Prichard is a good example of what is happening in other cities. Prichard has been broke and on the border of bankruptcy for a long time. It is probably 95% black and is and has been riddled with corruption for years. The crime rate is outrageous and it has virtually no tax base.
Maybe. But even the answer to that is in their article:
if nothing changes, the money eventually does run out, and when that happens, misery and turmoil follow
This applies even to mighty Washington, DC.
If you think not having acces to a 401K is unfair for public workers, just wait for this government to “solve the problem” by confiscating your 401k account to “redistribute” wealth. At least this was the plan under the Pelosie led House to address to soon to come tsunami of public retirement benefit defaults.
“This is ridiculous. These folks worked for forty years and now can’t get their pensions.”
They retired in their 50s, so I doubt it was 40 years.
a $150,000 per month pension bill costs each person (including children) $150 a year - assume a household of 4 people - $600 per year - for retirees.
The average wage in this town is probably pretty low.
However they got there, whatever they were promised, and however sad the stories - there is no money to pay for services and for retirees. Services to taxpaying citizens come first.
There is no money left over - no way to increase taxes.
Game over.
These same people could have put their earnings elsewhere. No one made them dependent on the govt.
They need to add one word to their standard contract wording. The word is BASE. They could give them a percentage of their base salary as the basis of their retirement - that way their overtime wouldn't matter.
I'm retired Navy, and my retirement was based upon 2.5% of my base salary per year. I should add in here that my base salary equated to about 60% of my take home pay. The rest of my take home pay was subsistance allowance, housing allowance, sea pay, submarine pay, clothing allowance, and hostile fire pay when appropriate. The US Congress set our pensions up like this to save on costs. They got away with it because we weren't unionized (and our voters were scattered throughout many districts so they could afford to "Dis" us).
I could add that they took our "Free Medical Care for Life" that we were promised upon enlisting and watered it down to the point where my "free" healthcare costs me about $8000 per year, but that would be whining!
Oh, it's so sad.
Pardon me if I have no place in my heart for these people who have been feeding at the public trough.
The best news is that so far no politician has put his hands into someone else's pocket to help these people.
ML/NJ
But that's not the case with those in government in places like Pennsylvania and the solution is to start renegotiating them in lieu of bankruptcy.
Of course, that's not likely to happen. It certainly didn't in Pa.
These employees contributed 5% and the employer paid 10% into the fund. This sounds like a company 2 for 1 401K fund match, but instead it went into a government (mis)managed ‘fund’. If it was a regular 401K with the exact same terms, these people would still have their money, if not more.
Earlier this month, the city council suspended the extra payments amid a $2 billion retirement fund shortfall (for a CITY). The two pension funds are on track to run out of money unless the cash-strapped city pumps in millions of new tax dollars, which would further erode public services.
Before the City Council said "no," three pension fund trustees representing current and retired officers and firefighters had voted to distribute $1 million from the pension fund as an "extra check" to more than 1,700 retirees and their survivors.
I took my chances in the private sector with self-directed investments and got thoroughly hosed in 2000 and again in 2008. I'm not sure we are going to recover in the next eight years. I'm just furious that every level of government is taxing us to death for these public employee pensions.
I know what is eventually going to happen, based on what happened in the Panic of 1837. The background to that disaster has some similarities to this part of our current economic trouble, at least at the State and local level.
It began with the Erie Canal. Paid for with a huge amount of State bonds, it was under construction from 1817 to 1825 and officially opened on October 26, 1825. Under time and under budget, it was a smashing success, causing a huge boom in trade. The bondholders became very wealthy. It was a brilliant idea.
The trouble began when five other States decided to repeat the success by building their own canals. But unlike the Erie canal, it used a very different theory, of connecting the Great Lakes to the Ohio River. A theory that could not work.
And here is where the parallel to our current national pension crisis begins. Because, the way the States figured on paying for their canals was to issue bonds. Vast amounts of bonds.
The way people could buy these bonds was with *State* money, or money authorized by the State, printed by private banks. Banks that only fractionally backed their paper money with specie, gold and silver.
So these States developed enormous debt, like the pension debt they have today.
Well, the light had just dawned that there was no way their canal projects could work, when right then, outgoing president Andrew Jackson issued an executive order, called the “specie circular”.
Simply put, it stated that the only money that was legal was fully backed with specie. If a bank didn’t have gold and silver to back its currency, it was instantly worthless.
Then Jackson did a double whammy, by refusing to renew the charter of the Second Bank of the United States, where the government did all its business. This meant that the government had to withdraw all its money from the bank, *in specie*.
So instantly three things happened. First, there was a artificial shortage of gold and silver. Second, hundreds of banks all went bankrupt because they could not back their accounts with gold and silver. And finally, the big one, all those State bonds suddenly had to be paid off.
And here’s the zinger, and the bottom line.
The States couldn’t pay off their bonds, so they *defaulted* on them.
See the parallel? Everyone who had their future tied to the trust that the State would pay off on its bonds, *had* to pay off on its bonds, and permanently lost their entire savings and any future income they hoped for from their investment.
And, of course, everybody else who had money in the banks lost it as well.
And this is the lesson for the pension bubble that exists today.
The States *will* default, because they have no other choice. All those pensions will instantly be worth nothing. No more checks. No more retirement.
After the Panic of 1837, the depression lasted for five years, and was the worst depression America had experienced until the Great Depression.
Some public employees (i.e. teachers) have the ability to contribute to a 403(b) instead. The rules are very similar to 401(k)'s.
You are right plus the funding election are held at such a time as to minimize large participation. School funding, bonds——Apr; Municipal bonds, funds-——Aug. All funding and bonds issues should be voted for in the general election in Nov.
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