4 ms·

Nobody, it seems. They committed to lifetime payouts of 75% of the average of a worker's three highest years of salary, retiring at age 55 after 30 years of ser

by magoon 10y ago

Nobody, it seems. They committed to lifetime payouts of 75% of the average of a worker's three highest years of salary, retiring at age 55 after 30 years of service. And that's not for employees of a thriving/growing business -- but for government agencies that, over time, don't/shouldn't grow and profit. I'd like to see the original calculations they used as a basis for these decisions.

Vivtek 10y ago
The original calculations were pretty simple: "Will this get me more votes?" Puerto Rico has always assumed that the economy would soon be turning the corner and everything would work out, with a healthy helping of cargo-cult New-Jerseyism.
- galfarragem 10y ago
  This problem is widespread in all social states (democracies) all around the world. Electoral system and responsible management doesn't play very well together. Before 'shit hit the fan' is almost impossible to any government to have enough power to change anything unpopular. I wonder what the solution for this is.
  - yummyfajitas 10y ago
    Neoreactionaries promote a return to monarchy or corporate rule as a solution to this. I'm not particularly onboard with their solutions, but they are the only group of people I can see who fully recognize the problem: democracies are fundamentally short term focused and unable to do complex planning. They are certainly well worth reading (obviously skeptically).
    - tomjen3 10y ago
      There is also the libertarian solution to government pensions: don't have them (this does not mean don't have the retirement savings, it means give the money to the employee, possibly in the form of a retirement account or higher wage). It is incidentally this solution that it seems they are taking with new hires.
      - newjersey 10y ago
        As much as I hate the middle road, that's the correct approach here. No, pensioners will not get a full pension. The negotiated cut I'd propose would not promise a "life of dignity" or anything to the pension ers but rather frankly, a responsible person should not starve with this amount of payments. Congress must act to clear the roadblocks here. It is disgusting to say that the current and future generations to pay for pensions that they don't get if they were to join today. I think that's the only reasonable solution. Of course, nothing will happen because old people vote and young people don't. So much for "think of the children" and all that talk.
  - SilasX 10y ago
    Usually, for constitutional provisions requiring that every such promise be accounted as (or better, paid for with) a government debt on par with their "real" bonds. Because that's what they are: the government claiming it's putting its full faith and credit behind your pension. It's horrible that they can treat it as ultra-reliable when promising it, but can shuck it off like it's nothing. It's also why I don't understand all the whining (here and elsewhere) about requiring the Post Office to actually fund its pensions rather than just assume Uncle Sam will have infinite funds to cover it later, and we Totally Won't Renege or anything.
    - justin66 10y ago
      >It's also why I don't understand all the whining (here and elsewhere) about requiring the Post Office to actually fund its pensions rather than just assume Uncle Sam will have infinite funds to cover it later Some people believe the post office is required to pay quite a bit more into those pension funds than is necessary for their financial well being. Nobody in that discussion claimed or assumed the government has infinite funds to cover the post office's obligations. It's as if you were having a discussion with yourself that happened to occupy the same space as another, ongoing discussion on the same topic. Hence the way some tried to engage with you (unsuccessfully) and some just downvoted you.
      - SilasX 10y ago
        I explained (with visible frustration) how it's eminently fair to expect a business to fully fund its obligations. If someone believes that the way this is calculated is unreasonable, then their primary complaint needs to be about that way, not (as every commenter does on this issue) complain about the mere requirement to fund the pension. A complete argument would look like this: "It's unfair to require the post office to fund future benefits by X standard, when common, reasonable practice is to use more lenient standard is Y." A complete but stupid argument would have X="include all obligations forever" and Y="ignore stuff after 75 years". This is because post-75 years can have non-trivial implications for its sustainability, and assuming them away does require belief in a bottomless pit. I'm interested in an exchange of ideas on this issue; I just wish people were capable of presenting a defensible argument about the Post Office pension requirement. Your own argument on the thread [1] does not meet that standard, as it was just "wow, that would be a lot of money". Well, yeah, if you've promised something with a (net discounted present) value of $75 trillion, then yeah, it's gonna be a pain to fund! Why is that an unreasonable requirement that you not just kick the can down the road? I'd like to hear an intelligent answer to that question. "They hate the Post Office and want it to fail" doesn't count as one. [1] https://news.ycombinator.com/item?id=11464618 https://news.ycombinator.com/item?id=11464618
FussyZeus 10y ago
The calculations were, I'd assume, that it made for a lot of popular politicians.
vkou 10y ago
The original calculations probably counted on a growing economy, 6% year-over-year inflation, and pension fund returns to trivialize this obligation.
api 10y ago
In every case worldwide the error was assuming continuous growth at mid 20th century rates (when many of these plans were put into place).
kspaans 10y ago
The amendment brushed off concern about future financial strain on the pensions, saying their investments were producing revenue twice what actuaries had approved, so the “measures won’t be burdensome.” I wonder if that's a lie, or just very selective quoting (I think this was for the 1973 bill though).
Spooky23 10y ago
Most of these schemes were cooked up in the late 60s/early 70s. They assumed a few key things: - Makeup of workforce. Government in 1970 was an army of clerks with higher turnover which has since shifted to professionals with automation. - historically reasonable inflation - economic growth - 7-9% annual returns Few places actually find their obligations and those who do (like New York) pay dearly when the market goes south. I've been told that in the 60s the assumption in New York was 5% inflation, population of 40M in 2010, booming industry in western and central NY, etc. Also, the change in status for women changed the dynamic -- secretaries and clerks were contributing big bucks for pensions they would never receive!
LeifCarrotson 10y ago
If you assume that the number of workers is static, and also that the average 55-year-old will live to 85, and that new workers get paid about 75% what a 27-year-veteran makes, then the calculations and solutions are simple: Require everyone in the agency to put 100% of their salary into the pension fund, or double your budget for staff salaries and direct it to pensions.
rewrew 10y ago
It gets worse the deeper you get into the article -- they're paying "Christmas Bonuses" instead of their bond payments-- they know they can't pay for any of this and they appear not to care.

by magoon 10y ago

Vivtek 10y ago

The original calculations were pretty simple: "Will this get me more votes?" Puerto Rico has always assumed that the economy would soon be turning the corner and everything would work out, with a healthy helping of cargo-cult New-Jerseyism.

galfarragem 10y ago
This problem is widespread in all social states (democracies) all around the world. Electoral system and responsible management doesn't play very well together. Before 'shit hit the fan' is almost impossible to any government to have enough power to change anything unpopular. I wonder what the solution for this is.
- yummyfajitas 10y ago
  Neoreactionaries promote a return to monarchy or corporate rule as a solution to this. I'm not particularly onboard with their solutions, but they are the only group of people I can see who fully recognize the problem: democracies are fundamentally short term focused and unable to do complex planning. They are certainly well worth reading (obviously skeptically).
  - tomjen3 10y ago
    There is also the libertarian solution to government pensions: don't have them (this does not mean don't have the retirement savings, it means give the money to the employee, possibly in the form of a retirement account or higher wage). It is incidentally this solution that it seems they are taking with new hires.
    - newjersey 10y ago
      As much as I hate the middle road, that's the correct approach here. No, pensioners will not get a full pension. The negotiated cut I'd propose would not promise a "life of dignity" or anything to the pension ers but rather frankly, a responsible person should not starve with this amount of payments. Congress must act to clear the roadblocks here. It is disgusting to say that the current and future generations to pay for pensions that they don't get if they were to join today. I think that's the only reasonable solution. Of course, nothing will happen because old people vote and young people don't. So much for "think of the children" and all that talk.
- SilasX 10y ago
  Usually, for constitutional provisions requiring that every such promise be accounted as (or better, paid for with) a government debt on par with their "real" bonds. Because that's what they are: the government claiming it's putting its full faith and credit behind your pension. It's horrible that they can treat it as ultra-reliable when promising it, but can shuck it off like it's nothing. It's also why I don't understand all the whining (here and elsewhere) about requiring the Post Office to actually fund its pensions rather than just assume Uncle Sam will have infinite funds to cover it later, and we Totally Won't Renege or anything.
  - justin66 10y ago
    >It's also why I don't understand all the whining (here and elsewhere) about requiring the Post Office to actually fund its pensions rather than just assume Uncle Sam will have infinite funds to cover it later Some people believe the post office is required to pay quite a bit more into those pension funds than is necessary for their financial well being. Nobody in that discussion claimed or assumed the government has infinite funds to cover the post office's obligations. It's as if you were having a discussion with yourself that happened to occupy the same space as another, ongoing discussion on the same topic. Hence the way some tried to engage with you (unsuccessfully) and some just downvoted you.
    - SilasX 10y ago
      I explained (with visible frustration) how it's eminently fair to expect a business to fully fund its obligations. If someone believes that the way this is calculated is unreasonable, then their primary complaint needs to be about that way, not (as every commenter does on this issue) complain about the mere requirement to fund the pension. A complete argument would look like this: "It's unfair to require the post office to fund future benefits by X standard, when common, reasonable practice is to use more lenient standard is Y." A complete but stupid argument would have X="include all obligations forever" and Y="ignore stuff after 75 years". This is because post-75 years can have non-trivial implications for its sustainability, and assuming them away does require belief in a bottomless pit. I'm interested in an exchange of ideas on this issue; I just wish people were capable of presenting a defensible argument about the Post Office pension requirement. Your own argument on the thread [1] does not meet that standard, as it was just "wow, that would be a lot of money". Well, yeah, if you've promised something with a (net discounted present) value of $75 trillion, then yeah, it's gonna be a pain to fund! Why is that an unreasonable requirement that you not just kick the can down the road? I'd like to hear an intelligent answer to that question. "They hate the Post Office and want it to fail" doesn't count as one. [1] https://news.ycombinator.com/item?id=11464618 https://news.ycombinator.com/item?id=11464618

FussyZeus 10y ago

The calculations were, I'd assume, that it made for a lot of popular politicians.

vkou 10y ago

The original calculations probably counted on a growing economy, 6% year-over-year inflation, and pension fund returns to trivialize this obligation.

api 10y ago

In every case worldwide the error was assuming continuous growth at mid 20th century rates (when many of these plans were put into place).

kspaans 10y ago

The amendment brushed off concern about future financial strain on the pensions, saying their investments were producing revenue twice what actuaries had approved, so the “measures won’t be burdensome.” I wonder if that's a lie, or just very selective quoting (I think this was for the 1973 bill though).

Spooky23 10y ago

Most of these schemes were cooked up in the late 60s/early 70s. They assumed a few key things: - Makeup of workforce. Government in 1970 was an army of clerks with higher turnover which has since shifted to professionals with automation. - historically reasonable inflation - economic growth - 7-9% annual returns Few places actually find their obligations and those who do (like New York) pay dearly when the market goes south. I've been told that in the 60s the assumption in New York was 5% inflation, population of 40M in 2010, booming industry in western and central NY, etc. Also, the change in status for women changed the dynamic -- secretaries and clerks were contributing big bucks for pensions they would never receive!

LeifCarrotson 10y ago

If you assume that the number of workers is static, and also that the average 55-year-old will live to 85, and that new workers get paid about 75% what a 27-year-veteran makes, then the calculations and solutions are simple: Require everyone in the agency to put 100% of their salary into the pension fund, or double your budget for staff salaries and direct it to pensions.

rewrew 10y ago

It gets worse the deeper you get into the article -- they're paying "Christmas Bonuses" instead of their bond payments-- they know they can't pay for any of this and they appear not to care.