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Reading about municipal finance makes the freewheeling world of VC look positively conservative. E.g. there's this concept of a "13th check," at the end of the

Reading about municipal finance makes the freewheeling world of VC look positively conservative. E.g. there's this concept of a "13th check," at the end of the year in many poorly run cities. Basically, and surplus growth in the city's retirement funds were distributed to pensioners as a sort of annual bonus, rather than left in the general account to help make up for eventual shortfalls. http://www.mlive.com/news/detroit/index.ssf/2013/10/10_things_to_know_about_detroi.html http://www.mlive.com/news/detroit/index.ssf/2013/10/10_thing... There's a serious moral hazard for politicians. It's easy to give constituents services today at the expense of benefits in the future, when they'll be out of office. I wonder if a law that clawed back these government official's pensions if they were found to break from good accounting practices, would be a deterrent?

Clubber 8y ago
>I wonder if a law that clawed back these government official's pensions if they were found to break from good accounting practices, would be a deterrent? Yes, but the people who pass the laws are the people who would be affected. You'd have to find a simple majority of people moral enough to do it. I think today, that's a hard sell.
- koolba 8y ago
  The only way that'd happen would be via a direct ballot measure[1]. Even then it'd be a tough sell. More and more I'm thinking the only outcome for a lot of these States and municipalities is going to be bankruptcy. The long term austerity measures that are needed are too onerous and the entrenched powers are too corrupt to do anything about it until it's too late. [1]: https://en.wikipedia.org/wiki/Ballot_measure https://en.wikipedia.org/wiki/Ballot_measure
  - crdoconnor 8y ago
    The states could raise property/land taxes and eliminate corporate tax cuts and tax loopholes. That wouldn't be a 1% friendly solution though - too much of their wealth is tied up in land and equities. It might mean that landlords in the Bay Area couldn't collect rents of $6,000 a month for doing nothing. Most of that unearned cash would flow in to state coffers instead. It's ironic, because the Howard Jarvis Taxpayer foundation (the group behind prop 13) tried to justify prop 13 by saying that raising property taxes would hurt the elderly. Californian voters believed them. Now that their actions created a massive hole in California budgets, they advocate for stripping California pensioners of their money as the "fiscally responsible" solution. People believe them now too. Edit: For those erroneously believing propaganda that hiking taxes leads to an automatic exodus: https://www.cbpp.org/research/state-budget-and-tax/state-taxes-have-a-negligible-impact-on-americans-interstate-moves https://www.cbpp.org/research/state-budget-and-tax/state-tax...
    - jerf 8y ago
      The 1% are not equally distributed, or indeed necessarily distributed at all, in all the places with excessive pension obligations. Taxing them is not a general solution. The other problem is that we don't just need to come up with money; we need to find ways to convince/force governments to stop making these promises in the first place. A government promise about something it'll do 30 or 40 years in the future is not quite worthless, but it's just not an institution capable of reliably keeping it. (Whatever politics you think drives me to say that, I mean that and I mean lots of other things too. If nothing else, in the general case, a legislative body can not truly constrain future legislatures, who can always just vote to not keep their old promises, made by people who are mostly not here anymore, for constituencies that were growing in power 30-40 years ago but are now dying off and not very useful to the current 30-40-year-olds in the legislature. Looking to governments to keep promises so many decades in advance is far more risky that many people seem to account for on all kinds of levels. The history of the 20th century suggests that counting on your government to even exist in 40 years is, in general, not the safest bet!)
    - koolba 8y ago
      > The states could raise property/land taxes ... In CA specifically, I don't see the threat of bankruptcy being enough to overcome prop 13. Plus if it was in the cards there would be a massive exodus that would further erode the tax base which would be a vicious downward spiral. > ... and eliminate corporate tax cuts and tax loopholes. Referencing "eliminating tax loopholes" is like saying "We need to do something about guns". It's meaningless without specifics. > That wouldn't be a 1% friendly solution though - too much of their wealth is tied up in land and equities. Equities aren't taxed by States or municipalities, at least not from a "wealth tax" perspective. If such a wealth tax was passed I'd immediately invest in U-Haul and other mover services. Raising income taxes enough to cover these obligations would lead to an exodus of high earners as well. That doesn't address the municipal pensions either as they don't necessarily have income taxing ability nor high earners to tax. > Now that their actions created a massive hole in California budgets, they advocate for stripping California pensioners of their money as the "fiscally responsible" solution. The fiscally responsible thing to do would have been to not make promises to pensioners to buy their votes. Sadly that continues to this day. Try running as a politician that's going to address this problem with any form of austerity measures for the people involved and see what happens.
  - maxerickson 8y ago
    Looking at Michigan, the shortfall is less than 1 year of the state budget. It's not among the worst states, but it's in the bottom half. Fixing that doesn't require long term austerity, it requires a few years of collective willingness to pay moderately higher taxes.
    - WkndTriathlete 8y ago
      Convince me, as someone that wasn't even alive when these pensions were being granted, why I should pay for gold-plated pension plans far above and beyond what I'm expecting to get in my own retirement when I'm seeing less and less value from the services those would-be pensioners provide and in general contribute significantly less "value" to society than the work I do. ... Note that I'm not as anarchist or libertarian as the above makes me sound, but it does emphasize the point I'm trying to make: I don't think you'll ever convince the current generation to pay for the previous one so I don't think there will ever be a collective willingness to pay "moderately higher" taxes. My bet is on an ugly outcome where the old and young battle it out in the courts between haircuts to pension plans and higher taxes with politicians muddling their way to an ugly middle ground that no one likes.
      - maxerickson 8y ago
        That's fine if you are angry about it, I wasn't making a moral argument about what should be done, I was making a point about the scope of the problem. An unwillingness to collectively pay taxes is also a major reason our infrastructure is falling apart. In the scheme of things it wouldn't take all that big an investment to dramatically improve things, it's just fallen out of fashion.
      - Pinckney 8y ago
        Do you own property in an affected jurisdiction? If you don't, you won't be compelled to pay. Pack up and move somewhere that's not fucked. If, OTOH, you bought property, you took on this risk in doing so. You should have priced in the pension shortfall, and the expected future tax repercussions, when you made your purchase, and the seller should have born the cost of their jurisdiction's mismanagement in the form of a reduced property value.
awinder 8y ago
I find this new wave of going after people’s pensions to be super unseemly. All of this information has been public for decades, if you view the voter as “the board”, there’s culpability in not managing politicians and allowing this situation to spiral. If we are going to be adults, these pensions are contractual and need to be paid out. It’s not a responsible behavior to use retirement plans as weapons at the 11th hour.
- sct202 8y ago
  My personal problem with the deficits is that the people who agreed to these terms are retiring and got either inflated pensions or lower taxes (as a result of under-funding the pensions). So, younger adults who are just entering the workforce are going to shoulder the burden for paying for these deficits based on decision made when they were children or not even born.
- 1123581321 8y ago
  In many cities, they will be impossible to pay out. In the 2030s, my city will need to double its revenue to pay pensions as well as maintain services, but that won’t happen since revenue is falling. If contracts are going to be broken due to insolvency anyway, it makes sense to gently break them now to let younger employees react while taking care of the eldest who can change nothing.
- phil21 8y ago
  The issue being of course those same voters were in many cases are the recipients of said pensions. And those who were not and still voted for such things enjoyed the benefits of cheap government services without having to pay full freight. Now that they enjoyed not having to fund the pensions for 30 years, they are retiring and expecting the next generation to pay for them having their cake and eating it too. I find it very difficult to really figure out where the greater moral hazard here lies. As you state this was a problem everyone knew about when setting these public pensions up and it was easier to kick the can down the road. You will find it very difficult to convince me that the average union member in the 80's didn't know the sweet deal they were getting. It was a trope growing up in the 80's/90's to hear adults talk about "scamming" the overly generous pensions systems of the day. I think it's interesting public unions in Illinois advocated 30 years ago for enshrining pension benefits into the state constitution. That language was added specifically because the public unions knew the deals they were making with politicians were not fiscally sustainable. At this point I don't see a good way out and something major will break at a societal level before it gets fixed. There simply is no way to pay for these promised benefits and still maintain local and state government at a functional level in many states. I don't think bailing them out federally is an answer either - again for moral hazard reasons. I also don't think quadrupling taxes on the next generation is morally any better either. In many ways this discussion is moot. The math is so overwhelmingly bad in some places it's simply not fixable from the revenue side only. Everyone is going to have to share some pain here, and that includes those receiving benefits.
CyberDildonics 8y ago
> There's a serious moral hazard for politicians. It's easy to give constituents services today at the expense of benefits in the future, when they'll be out of office. Moral hazard? That's the backbone of politics
dragonwriter 8y ago
> I wonder if a law that clawed back these government official's pensions if they were found to break from good accounting practices, would be a deterrent? No, the officials making these pension decisions are politicians who mostly, while they may have government pensions, have lots of other resources, so that the pension doesn't matter much. The only thing it will deter is non-independently-wealthy people from becoming politicians, but there are barriers to that already.
- djrogers 8y ago
  > No, the officials making these pension decisions are politicians who mostly, while they may have government pensions, have lots of other resources, so that the pension doesn't matter much. That's likely true in large cities, but most cities (and thus most city governments) aren't large.
  - hackermailman 8y ago
    Even small city ex-politicians go into highly paid political consulting, where some company who wants to get into real estate development or bidding on public contracts will hire them to navigate the red tape and do introductions. They also end up as communications directors for whatever lobbyist group they did favors for, like banks and energy/utility corps making well over $300k/year. None of them need to rely on their city pensions for retirement.
  - dragonwriter 8y ago
    > That's likely true in large cities, but most cities (and thus most city governments) aren't large. Many small city elected officials are part-time, often unpaid or with a largely symbolic stipend: they don't have public pensions from those positions at all. So they are even less subject to “if you make bad pension decisions, we’ll take your personal pension away” leverage than fulltime big-city and state politicians, who are likely to have (but not depend on) public pensions.
lr4444lr 8y ago
That kind of law has so many vested disincentives to getting passed that you might as well give up on it. There are already fiduciary obligations written into the law. Those need to be enforced.

Clubber 8y ago

>I wonder if a law that clawed back these government official's pensions if they were found to break from good accounting practices, would be a deterrent? Yes, but the people who pass the laws are the people who would be affected. You'd have to find a simple majority of people moral enough to do it. I think today, that's a hard sell.

koolba 8y ago
The only way that'd happen would be via a direct ballot measure[1]. Even then it'd be a tough sell. More and more I'm thinking the only outcome for a lot of these States and municipalities is going to be bankruptcy. The long term austerity measures that are needed are too onerous and the entrenched powers are too corrupt to do anything about it until it's too late. [1]: https://en.wikipedia.org/wiki/Ballot_measure https://en.wikipedia.org/wiki/Ballot_measure
- crdoconnor 8y ago
  The states could raise property/land taxes and eliminate corporate tax cuts and tax loopholes. That wouldn't be a 1% friendly solution though - too much of their wealth is tied up in land and equities. It might mean that landlords in the Bay Area couldn't collect rents of $6,000 a month for doing nothing. Most of that unearned cash would flow in to state coffers instead. It's ironic, because the Howard Jarvis Taxpayer foundation (the group behind prop 13) tried to justify prop 13 by saying that raising property taxes would hurt the elderly. Californian voters believed them. Now that their actions created a massive hole in California budgets, they advocate for stripping California pensioners of their money as the "fiscally responsible" solution. People believe them now too. Edit: For those erroneously believing propaganda that hiking taxes leads to an automatic exodus: https://www.cbpp.org/research/state-budget-and-tax/state-taxes-have-a-negligible-impact-on-americans-interstate-moves https://www.cbpp.org/research/state-budget-and-tax/state-tax...
  - jerf 8y ago
    The 1% are not equally distributed, or indeed necessarily distributed at all, in all the places with excessive pension obligations. Taxing them is not a general solution. The other problem is that we don't just need to come up with money; we need to find ways to convince/force governments to stop making these promises in the first place. A government promise about something it'll do 30 or 40 years in the future is not quite worthless, but it's just not an institution capable of reliably keeping it. (Whatever politics you think drives me to say that, I mean that and I mean lots of other things too. If nothing else, in the general case, a legislative body can not truly constrain future legislatures, who can always just vote to not keep their old promises, made by people who are mostly not here anymore, for constituencies that were growing in power 30-40 years ago but are now dying off and not very useful to the current 30-40-year-olds in the legislature. Looking to governments to keep promises so many decades in advance is far more risky that many people seem to account for on all kinds of levels. The history of the 20th century suggests that counting on your government to even exist in 40 years is, in general, not the safest bet!)
  - koolba 8y ago
    > The states could raise property/land taxes ... In CA specifically, I don't see the threat of bankruptcy being enough to overcome prop 13. Plus if it was in the cards there would be a massive exodus that would further erode the tax base which would be a vicious downward spiral. > ... and eliminate corporate tax cuts and tax loopholes. Referencing "eliminating tax loopholes" is like saying "We need to do something about guns". It's meaningless without specifics. > That wouldn't be a 1% friendly solution though - too much of their wealth is tied up in land and equities. Equities aren't taxed by States or municipalities, at least not from a "wealth tax" perspective. If such a wealth tax was passed I'd immediately invest in U-Haul and other mover services. Raising income taxes enough to cover these obligations would lead to an exodus of high earners as well. That doesn't address the municipal pensions either as they don't necessarily have income taxing ability nor high earners to tax. > Now that their actions created a massive hole in California budgets, they advocate for stripping California pensioners of their money as the "fiscally responsible" solution. The fiscally responsible thing to do would have been to not make promises to pensioners to buy their votes. Sadly that continues to this day. Try running as a politician that's going to address this problem with any form of austerity measures for the people involved and see what happens.
- maxerickson 8y ago
  Looking at Michigan, the shortfall is less than 1 year of the state budget. It's not among the worst states, but it's in the bottom half. Fixing that doesn't require long term austerity, it requires a few years of collective willingness to pay moderately higher taxes.
  - WkndTriathlete 8y ago
    Convince me, as someone that wasn't even alive when these pensions were being granted, why I should pay for gold-plated pension plans far above and beyond what I'm expecting to get in my own retirement when I'm seeing less and less value from the services those would-be pensioners provide and in general contribute significantly less "value" to society than the work I do. ... Note that I'm not as anarchist or libertarian as the above makes me sound, but it does emphasize the point I'm trying to make: I don't think you'll ever convince the current generation to pay for the previous one so I don't think there will ever be a collective willingness to pay "moderately higher" taxes. My bet is on an ugly outcome where the old and young battle it out in the courts between haircuts to pension plans and higher taxes with politicians muddling their way to an ugly middle ground that no one likes.
    - maxerickson 8y ago
      That's fine if you are angry about it, I wasn't making a moral argument about what should be done, I was making a point about the scope of the problem. An unwillingness to collectively pay taxes is also a major reason our infrastructure is falling apart. In the scheme of things it wouldn't take all that big an investment to dramatically improve things, it's just fallen out of fashion.
    - Pinckney 8y ago
      Do you own property in an affected jurisdiction? If you don't, you won't be compelled to pay. Pack up and move somewhere that's not fucked. If, OTOH, you bought property, you took on this risk in doing so. You should have priced in the pension shortfall, and the expected future tax repercussions, when you made your purchase, and the seller should have born the cost of their jurisdiction's mismanagement in the form of a reduced property value.

awinder 8y ago

I find this new wave of going after people’s pensions to be super unseemly. All of this information has been public for decades, if you view the voter as “the board”, there’s culpability in not managing politicians and allowing this situation to spiral. If we are going to be adults, these pensions are contractual and need to be paid out. It’s not a responsible behavior to use retirement plans as weapons at the 11th hour.

sct202 8y ago
My personal problem with the deficits is that the people who agreed to these terms are retiring and got either inflated pensions or lower taxes (as a result of under-funding the pensions). So, younger adults who are just entering the workforce are going to shoulder the burden for paying for these deficits based on decision made when they were children or not even born.
1123581321 8y ago
In many cities, they will be impossible to pay out. In the 2030s, my city will need to double its revenue to pay pensions as well as maintain services, but that won’t happen since revenue is falling. If contracts are going to be broken due to insolvency anyway, it makes sense to gently break them now to let younger employees react while taking care of the eldest who can change nothing.
phil21 8y ago
The issue being of course those same voters were in many cases are the recipients of said pensions. And those who were not and still voted for such things enjoyed the benefits of cheap government services without having to pay full freight. Now that they enjoyed not having to fund the pensions for 30 years, they are retiring and expecting the next generation to pay for them having their cake and eating it too. I find it very difficult to really figure out where the greater moral hazard here lies. As you state this was a problem everyone knew about when setting these public pensions up and it was easier to kick the can down the road. You will find it very difficult to convince me that the average union member in the 80's didn't know the sweet deal they were getting. It was a trope growing up in the 80's/90's to hear adults talk about "scamming" the overly generous pensions systems of the day. I think it's interesting public unions in Illinois advocated 30 years ago for enshrining pension benefits into the state constitution. That language was added specifically because the public unions knew the deals they were making with politicians were not fiscally sustainable. At this point I don't see a good way out and something major will break at a societal level before it gets fixed. There simply is no way to pay for these promised benefits and still maintain local and state government at a functional level in many states. I don't think bailing them out federally is an answer either - again for moral hazard reasons. I also don't think quadrupling taxes on the next generation is morally any better either. In many ways this discussion is moot. The math is so overwhelmingly bad in some places it's simply not fixable from the revenue side only. Everyone is going to have to share some pain here, and that includes those receiving benefits.

CyberDildonics 8y ago

> There's a serious moral hazard for politicians. It's easy to give constituents services today at the expense of benefits in the future, when they'll be out of office. Moral hazard? That's the backbone of politics

dragonwriter 8y ago

> I wonder if a law that clawed back these government official's pensions if they were found to break from good accounting practices, would be a deterrent? No, the officials making these pension decisions are politicians who mostly, while they may have government pensions, have lots of other resources, so that the pension doesn't matter much. The only thing it will deter is non-independently-wealthy people from becoming politicians, but there are barriers to that already.

djrogers 8y ago
> No, the officials making these pension decisions are politicians who mostly, while they may have government pensions, have lots of other resources, so that the pension doesn't matter much. That's likely true in large cities, but most cities (and thus most city governments) aren't large.
- hackermailman 8y ago
  Even small city ex-politicians go into highly paid political consulting, where some company who wants to get into real estate development or bidding on public contracts will hire them to navigate the red tape and do introductions. They also end up as communications directors for whatever lobbyist group they did favors for, like banks and energy/utility corps making well over $300k/year. None of them need to rely on their city pensions for retirement.
- dragonwriter 8y ago
  > That's likely true in large cities, but most cities (and thus most city governments) aren't large. Many small city elected officials are part-time, often unpaid or with a largely symbolic stipend: they don't have public pensions from those positions at all. So they are even less subject to “if you make bad pension decisions, we’ll take your personal pension away” leverage than fulltime big-city and state politicians, who are likely to have (but not depend on) public pensions.

lr4444lr 8y ago

That kind of law has so many vested disincentives to getting passed that you might as well give up on it. There are already fiduciary obligations written into the law. Those need to be enforced.