Posted on 04/30/2020 3:31:23 AM PDT by SkyPilot
When Kentucky senior Senator and Majority Leader Mitch McConnell said this week that he would be in favor of allowing states to use the bankruptcy route to deal with their underfunded public pensions amid the pandemic emergency, state workers and retirees—already struggling with the economic and health crisis—were rightfully alarmed. “Using the bankruptcy route” is code for slashing pension benefits promised to state workers. Under current law, only cities and other local governments can file for bankruptcy and only with permission of the state.
McConnell supposedly represents Kentuckians and Kentucky already had the worst-funded state pension system in the nation—only 16% funded—before the COVID-19 market meltdown. Chris Tobe, a former trustee of the Kentucky pension and SEC whistleblower, suspects when the pension reports fiscal-year-end performance July 1st, its funding level may fall into single-digits. (Full disclosure: I served as Independent Counsel to Mr. Tobe in connection with his SEC whistleblower complaint.)
Presumably Kentucky would be the first state to use McConnell’s bankruptcy plan to eliminate state worker retirement security. Kentucky has over half a million (514,000) current and future pensioners who are unlikely to support his reelection. A staggering percentage (94%) of the state’s 114,000 retirees still reside in Kentucky and pump over $1.9 billion a year into all 120 counties. Cutting pension benefits will undoubtedly depress the local economy.
To be clear, McConnell is not opposed to all federal bailouts of pensions. A few months ago, he joined a bipartisan group of senators in introducing a bill to secure the pensions for nearly 90,000 retired coal miners as a recent wave of coal company bankruptcies threatened the solvency of the federal pension fund.
(Excerpt) Read more at forbes.com ...
I would love for Trump to say “Any state which wants a bailout must FIRST submit to an audit, using forensic accountants of MY choosing, to get to the bottom of why they are in such bad shape”.
The states in actual rather than actual jeprody should reduce cash payouts by 50% with a voucher for the balance. The voucher would amount to a 15 or 20 year bond that can be sold to a bank.
“In Illinois, a judge simply ruled that the state had to not only pay every penny of pensions earned by retirees, but it also had to pay every future pension of workers.”
And that judge was correct legally speaking. Pensions may not be “diminished or impaired” per the Illinois Constitution. It’s beyond stupid but it’s true.
L
This is the drawback. The tsunami is coming.
“UNLESS the same State Constitution had already been amended to forbid the Legislature from acting to impair contracts arrived at in the past...”
Precisely the situation in Illinois. Section 23 I believe.
L
How about replaced with nothing?
It used to be a principle of American government that one legislature could not bind a future legislature. (I.e. no payments could be promised beyond the end of the life of that legislature.)
Corporations are free to do what they want, but governments are not. Government payments should only be for current account goods and services, as it used to be.
ML/NJ
GDP down -4.8% and the Dow closes +532???
What a joke of economic indicators.
Yes, it’s cost me dearly for not being in, but still, though it has always been a form of gambling, it became “pure gambling” to me actually before the dot com bust.
GDP = present or near past. Where we are now.
Stock Market = investments looking forward. Where investors think we’re going, where they’re putting their money.
To give just one example...a few years ago it was revealed that a bus driver for the MBTA (Greater Boston's public transit system) retired...in his 50s...with a pension of $97,000 a year.
A BUS DRIVER!
I worked in academic medicine for decades and I know physicians and surgeons who don't have a pension that big!
Y’all know how the federal government requires private enterprises to have fully or near-fully funded pension systems if they have pensions at all? Well, those requirements do not extent to governments, up to and including federal entities.
So, states are free to make all the pension promises they want. Can’t squeeze blood out of a bankrupt turnip.
As long as states have defined benefit plans for their public sector, they will always run the risk of going broke. The solution is to bite the bullet and go to defined contribution plans and let the public sector workers carry the risk of the stock market gyrations, not the taxpayers, just as private sector workers do.
I saw some Rep Congressman on TV saying in his hometown, where average home prices are about 75K, the Supt of Education got 400K and 300K a year in pension.
He wasn’t exaggerating either.
Take just Illinois for example.
Why Illinois Is In Trouble – 109,881 Public Employees With $100,000+ Paychecks Cost Taxpayers $14B
Many on this site bitch to high heaven about teachers and their pensions. It’s BS like these 300K pensions that destroy the reality. I’ve been paying 10% of my salary for 30 years. My pension after this year will be 40K. I’m excited, I’ve earned it, this is the reality. It’s a good pension, but you have to put in 30 years, it’s not transferable, leave the profession and you are disqualified. It doesn’t roll into a 401K. How many people out there can put up with babysitting tomorrow’s “leaders” for 30 years.
State and federal pensions are a travesty. Work for 20-25 years, retire in your forties at full or nearly full pay, then move out of the state and pay no money in taxes back for your largess, leaving the tax burden of paying for it on the backs of those left behind.
North Carolina is a haven for these idiots, as are other states.
I would say you've earned that.
My brother retired last year (captain), he is 50. He makes 9k a month after paying taxes and healthcare. How is that sustainable? He retired from Las Vegas Metro, they are going to be in a world of hurt.
Man, is it ever. Kentucky and Florida also.
Vegas could take years to recover, if ever fully.
Very good and frightening analogy.
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