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Except for when the pension and budget planners plan around 10% returns that don't happen, or the planners make really bad bets for a whole lot of people that w

Except for when the pension and budget planners plan around 10% returns that don't happen, or the planners make really bad bets for a whole lot of people that will never meet expectations but the money is owed and has to come from somewhere (ultimately the taxpayers)

azernik 8y ago
"It's just a matter of relying on a conservative rate of return with a proven track record."
- Spooky23 8y ago
  Responsible states have managed to figure out this problem.
  - jeffbax 8y ago
    I think you are over-estimating how many responsible states there are: https://www.pewtrusts.org/en/research-and-analysis/issue-briefs/2018/04/the-state-pension-funding-gap-2016 https://www.pewtrusts.org/en/research-and-analysis/issue-bri... > The funding gap for the state pension plans studied reached $1.4 trillion in 2016—an increase of $295 billion from 2015. State contribution policies proved insufficient to deal with the unfunded liabilities already on the books. Even if all assumptions had been met, the funding gap would have grown by $13 billion. Instead, investments fell short of assumptions for the second year in a row, leaving state pension debt at historic highs. > Other measures of fiscal vulnerability also show cause for concern. The gap between returns on safe investments and state pension plan investment assumptions was the highest in decades. Independent analyses suggest that states can assume returns of about 6.5 percent a year for at least the next 10 years; 5 percent or lower returns are a real possibility over the next 20 years.7 While strong investment performance in 2017 would lower reported unfunded liabilities in the short term, measures of plan cash flow show that state pension plans increasingly depend on investment performance to keep assets from declining. All of these measures show that plans are more vulnerable to volatility than in the recent past, which could have an adverse impact on funds in the future. Meanwhile in California, and probably all the other underwater states soon enough: https://reason.com/blog/2017/10/05/pension-costs-are-forcing-cities-to-cut https://reason.com/blog/2017/10/05/pension-costs-are-forcing... > California public pension plans are funded on the basis of policies and assumptions that can delay recognition of their true cost. Even with this delay, local and state governments are facing increasingly higher pension costs—costs that are certain to continue their rise over the next one to two decades, even under assumptions that critics regard as optimistic. As budgets are squeezed, what are state and local governments cutting? Core services, including higher education, social services, public assistance, welfare, recreation and libraries, health, public works, and in some cases, public safety. There's a deep irony in re-electing Jerry Brown to fix the problem he made in the 70s with his giveaways to the public sector, which will be paid for by the private sector who generally is compensated much much less.
    - Spooky23 8y ago
      You're over-estimating the liability outside of truly screwed places like Illinois. Many states can and will screw over the employees. California needs a constitutional change, as pensions is just one of a bunch of issues that will kill the golden goose. Unions are getting killed right now -- the real boogeyman is the braindead propositions that tie the hands of the government. The Reason article to linked to is a great example of overplaying it: "Using data from Merritt Research Services, Governing Magazine determined that American cities with a population of more than 500,000 spend, on average, about a quarter of their budgets on debt service—including payments to pension system and other so-called "legacy costs" like retired public workers' health care costs." It's kind of disingenuous to portray debt service budgeting as pension costs and neglect to mention things like... bond payments. The far bigger problem is health costs, which need to be addressed at the national level. Much of the actual cost growth is in increasing health costs, especially for police/fire people who tend to retire young and may be receiving benefits for a decade or more before Medicare kicks in.

azernik 8y ago

"It's just a matter of relying on a conservative rate of return with a proven track record."

Spooky23 8y ago
Responsible states have managed to figure out this problem.
- jeffbax 8y ago
  I think you are over-estimating how many responsible states there are: https://www.pewtrusts.org/en/research-and-analysis/issue-briefs/2018/04/the-state-pension-funding-gap-2016 https://www.pewtrusts.org/en/research-and-analysis/issue-bri... > The funding gap for the state pension plans studied reached $1.4 trillion in 2016—an increase of $295 billion from 2015. State contribution policies proved insufficient to deal with the unfunded liabilities already on the books. Even if all assumptions had been met, the funding gap would have grown by $13 billion. Instead, investments fell short of assumptions for the second year in a row, leaving state pension debt at historic highs. > Other measures of fiscal vulnerability also show cause for concern. The gap between returns on safe investments and state pension plan investment assumptions was the highest in decades. Independent analyses suggest that states can assume returns of about 6.5 percent a year for at least the next 10 years; 5 percent or lower returns are a real possibility over the next 20 years.7 While strong investment performance in 2017 would lower reported unfunded liabilities in the short term, measures of plan cash flow show that state pension plans increasingly depend on investment performance to keep assets from declining. All of these measures show that plans are more vulnerable to volatility than in the recent past, which could have an adverse impact on funds in the future. Meanwhile in California, and probably all the other underwater states soon enough: https://reason.com/blog/2017/10/05/pension-costs-are-forcing-cities-to-cut https://reason.com/blog/2017/10/05/pension-costs-are-forcing... > California public pension plans are funded on the basis of policies and assumptions that can delay recognition of their true cost. Even with this delay, local and state governments are facing increasingly higher pension costs—costs that are certain to continue their rise over the next one to two decades, even under assumptions that critics regard as optimistic. As budgets are squeezed, what are state and local governments cutting? Core services, including higher education, social services, public assistance, welfare, recreation and libraries, health, public works, and in some cases, public safety. There's a deep irony in re-electing Jerry Brown to fix the problem he made in the 70s with his giveaways to the public sector, which will be paid for by the private sector who generally is compensated much much less.
  - Spooky23 8y ago
    You're over-estimating the liability outside of truly screwed places like Illinois. Many states can and will screw over the employees. California needs a constitutional change, as pensions is just one of a bunch of issues that will kill the golden goose. Unions are getting killed right now -- the real boogeyman is the braindead propositions that tie the hands of the government. The Reason article to linked to is a great example of overplaying it: "Using data from Merritt Research Services, Governing Magazine determined that American cities with a population of more than 500,000 spend, on average, about a quarter of their budgets on debt service—including payments to pension system and other so-called "legacy costs" like retired public workers' health care costs." It's kind of disingenuous to portray debt service budgeting as pension costs and neglect to mention things like... bond payments. The far bigger problem is health costs, which need to be addressed at the national level. Much of the actual cost growth is in increasing health costs, especially for police/fire people who tend to retire young and may be receiving benefits for a decade or more before Medicare kicks in.