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 know Purple Heart 0-6s with 4 combat tours who don't have a pension as high as that bus driver.
The Democrats do not give a damn about Constitutions, State or Federal. They do as they damn well please when in power.All they care about is power and control along with murdering unborn and partially born babies.When in power they loot and steal and enact laws to give them more control of the sheep.
Setting aside Kentucky and the other worst of the worst States, there is a huge issue for local governments. Note that I live in New York and I can only speak for the local government issues in New York.
New York has a “State & Local System” whereby local governments pay into the State system to provide a pension for local government employees.
When we use a phrase like “underfunded public pensions” realize there is some type underlying actuarial calculation.
This is crazy, but in New York they allow local government to fund pensions to an actuarial calculation. What does that mean? In a given year if the local government only has to fund the pension for their members to some actuarial standard.
So, as a representation of the market, if the S&P 500 goes up 11% in a given year, the local government doesn’t have to contribute as much.
Likewise, if the S&P 500 goes down 15% the local government has to then contribute MUCH more to the system.
The State Comptroller’s Office allows this insanity of funding pensions less when times are good and demanding much more pension funding when times are bad.
All the while the, whether you agree with pensions or not, the employees (future pensioners) are paying a level contribution rate. The local government is contributing “...when need be” -basically.
All this epic malfeasance is culminating RIGHT NOW!
During a financial crisis local governments will now have to make double digit pension contributions...12-15 maybe 20 percent on salaries across the board.
The net effect, without giving anyone a raise, local government payroll costs will increase double digit percentages.
Exactly. I believe it is the same with many other states.
“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.)”
It wouldn’t bind the future anything. They would get a fully funded match of say 2 1/2% of earnings into their 401-K and that would be their sum total of their retirement savings.
Take it with you when you leave. It would go into the stock market just like everyone else’s.
add to that, Illinois does not tax retirement income.
“The COVID-19 Economic Collapse Is Absolutely Wrecking State Pension Systems...”
Utter crap! The associated state government wrecked it long ago by allowing it in the first place. Government employee unions should be OUTLAWED!! And certainly not bailed out, despite it affecting potentially many Freepers here. Outlaw the public unions today, current pensioners are allowed to continue to receive pensions but at a lower amount, and all new govey employees from this day forward are treated as private business employees for all purposes.
Pay social security?
But has anyone heard of Illinois Governor Pritzker reducing the number of its current state workers? Of course not. If gubmint workers sometimes-corrupt loyalties can’t be counted on, the idea of delivering an election as desired goes *poof*.
The Constitution of Illinois specifically guarantees state pensions. To “fix” the state’s pension problems requires a state constitutional amendment. I don’t know if Illinois law allows citizen initiatives to amend its constitution—that varies by state. Certainly the state constitution can be amended by the legislature, but whether or not they have the political will to buck state unions to fix the mess is questionable.
“but whether or not they have the political will to buck state unions to fix the mess is questionable.”
They don’t and they never will.
L
Exactly. If mine collapses (Los Angeles Unified School District) I'll settle for just getting back the money I paid in. But if I don't... wow. Then I'd really feel sick.
This talks about the cost to local economies of states declaring bankruptcy and getting out of the lavish and unsustainable pension promises they made to public sector workers. What about the cost of actually paying those pensions? I don’t get any benefit from the politicians’ promises to teachers unions and the like. All I get is cost and taxes. Less money out of my pocket means more money in the local economy because I’ll have more to spend more.
What we’re really talking about here as with all public benefits schemes is taking money from Peter to pay Paul. Most of us are Peter in this scenario - just regular ole taxpayers. In any event, states are sovereign and are responsible for their debts. There must be absolutely no federal bailouts of insolvent states. Demanding taxpayers in Wyoming and Arizona pay for the lavish pension and healthcare benefits of public sector retirees in California is totally unreasonable. They never had the chance to vote for or against the politicians who made those promises.
Its long past time for public sector workers’ benefit schemes to take a severe haircut so as to be more in line with private sector retirement plans.
In 1999 California Governor Gray Davis signed into law the largest pension increase in state history, allowing retirements to those as young as 50 at 90% of their final year salaries, for the rest of their lives. He relied on ‘economists’ who predicted an absurd increase in the Dow Jones index to 28,000,000 by the year 2099. The pension fund would be swimming in so much money that the actual pensions would cost California peanuts.
Of course we all know this was a fantasy. A destructive fantasy.
http://pensionpulse.blogspot.com/2010/05/calpers-dreaming-of-dow-28000000.html
The State has changed things for the future however. About 10 years ago changes were made to the State's five retirement systems involving how they are funded, when an employee can retire, limits on how much can be received by a retiree and a few more significant items.
The problem has been that the State would have had to rewrite parts of the constitution to change the current system.
The changes that have been made are significant and when they are fully in play the States financial situation is going to be much improved.
That's still probably 15 years out, but 10 years ago it was 25 years out.
To fully understand "The Illinois Way", you have to understand how demunists look at and regard money/debt and that is way too far out to attempt to deal with here.
”I’ll settle for just getting back the money I paid in.”
That money is long gone.
The CalSTRS rep assured me that our pension was guaranteed no matter what till like... 2035? Of course, that was this January. And yet, the Dow is still higher than it ever was under Obama. I can’t help but hope that President Trump can bring it around again in time for November.
I agree, but that is what some states are demanding. Illinois wants $41 Billion and $10 Billion of that for pensions.
New Jersey wants Billions more, as does New York.
Talk about "Taxation Without Representation" if citizens in Iowa have to pay for the pensions in Illinois via a "bailout."
The pensions in many cases are fraudulent to start. Cops earning 60,000/yr then work massive overtime in their last 3 years to earn 100,000 per year then retire at 70,000 per year instead of 40,000.
Solution, either investigate these abuses or cut everyone’s pension by 25%.
if they can get some givebacks along with changing new retirement savings to 401K's only, with the state contributing as well as the worker, it would help...
also, state pensions in states that have income tax must not be tax free, starting now...
and if you move out of your home state, you need to payback a portion of our pension in state income....
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