6 ms·

How is a governmental DB pension stealing? Or are we talking about Libertopia "taxation is theft" garbage?

HDThoreaun 3y ago
The way pensions are currently implemented in the state is "don't invest, just transfer tax revenue to pensioners" social security style. The issue is todays tax payers did not agree to those pensions. The people who voted for the pensions are mostly no longer working, they foisted all the costs onto their children and grand children.
- cool_dude85 3y ago
  No, this is not true. CalPERS is a huge investment fund. My own much smaller pension has a (nominally) large investment fund and believe me it ain't sitting in a money market fund at Wells Fargo. I don't have survey data for you but I am going to go ahead and state that the vast majority of money in pension funds is invested to hit some assumed rate of return with minimized risk / diversification targets.
  - HDThoreaun 3y ago
    Im talking specifically about Illinois pension funds, which were unfunded for decades. There's no money sitting in them at all, everything that comes in immediately goes out.
    - cool_dude85 3y ago
      Pay-as-you-go is more risky and more costly overall but it's not an unworkable system. Since you clarified that you mean one specific state has this system, then I'd say the rest of your post is bogus too. Current taxpayers didn't agree to build old bridges or whatever either. Few people living agreed to build out the state highway system. Yet taxes today pay for their maintenance and upkeep and it's not some great moral problem.
      - HDThoreaun 3y ago
        Bridges and infrastructure benefit everyone. I get no benefit from someone who's been collecting a pension since before I was born.
        cool_dude85 3y ago
        Not all infrastructure benefits everyone. No doubt some of the taxes you pay today cover the costs of maintaining boondoggle projects or wastes of money. And the pension might not directly benefit you today, but let's say those pension benefits go to a woman who used to maintain the bridge. Now today the bridge is in better shape than it otherwise would have been if they'd been done by some high-turnover, low quality employee.
        HDThoreaun 3y ago
        boondoggle projects are also theft.
        xp84 3y ago
        How do you know? Perhaps that person built or improved something very important to your life. Even if they stamped papers at the DMV for 40 years, someone needed to do that work if we're to have a functioning society. And don't wave that away saying that worker could now be replaced by a kiosk and AI, or a contractor in India. Someone needed to do that work, manually and in-person in the 80s and 90s when that wasn't an option. If you want to slim down the civil service today, that doesn't erase the work done by those workers in the past. Finally, remember that you don't personally benefit from every tax dollar, but as long as many (or sometimes even a few) do, then that dollar wasn't wasted on those grounds alone.
        HDThoreaun 3y ago
        I think these are all reasonable arguments. It’s just hard for me to take them seriously with how corrupt our government is. Yes these are all factors, but the main thing is just that politicians 60 years ago decided to give themselves bribes instead of funding the pension and now I’m paying for it.
  - lotsofpulp 3y ago
    CalPERS is only 80% funded according to their own rosy assumptions, even after a historic annual stock market increase. See top right of page 130. https://www.calpers.ca.gov/docs/forms-publications/acfr-2022.pdf https://www.calpers.ca.gov/docs/forms-publications/acfr-2022... In fact, the system is so corrupt, 80% funded (of that rosy number) is considered “fully funded” for taxpayer funded DB pensions, so kicking the can forward for the remainder 20% is just par for the course. The real situation is worse though, and clearly evident in the ever increasing proportion of the budget going to pay for deferred compensation schemes, whether it is the “normal cost” for this year’s accrued benefits or to make up for underfunding from previous years’ benefits.
  - tick_tock_tick 3y ago
    > CalPERS CalPERS the fund that famously didn't put a dime in for basically a decade? The one everyone was sure was going to bankrupt California until they lucked out and the stock market saved them?
    - lotsofpulp 3y ago
      CalPERS was prudent in planning that the federal government would, as usual, backstop asset price growth even if it meant near 0% interest rates reducing purchasing power of the USD. Aka, taxing future generations to pay for the underfunding. And even after all that currency devaluation, CalPERS is still only 80% funded, by their own calculations. At least previous California legislators were generous enough to not bake cost of living increases for DB pensions into their state constitution like Illinois.
lotsofpulp 3y ago
The simplest explanation is politicians excluded taxpayer funded defined benefit pensions from any regulations ensuring their solvency, such as ERISA 1974 and PPA 2006. Why? Because future taxpayers can always make up for underfunding. Voters today want lower taxes today. Politicians today want votes today. Government employee union members want maximum compensation, and union leadership is composed of older employees who will collect benefits in the short term. So, how do you deliver both lower taxes (than a competing politician) and market pay? By using benefits where you can fudge the numbers with plausible deniability. For example, the federal government requires non taxpayer funded pension plans to calculate the present value of the benefit using corporate bond yield curves, which were ~4% and below for the last 10+ years. https://www.irs.gov/retirement-plans/pension-plan-funding-segment-rates https://www.irs.gov/retirement-plans/pension-plan-funding-se... In the meantime, most taxpayer funded pensions were using 7%+, some even 8.5% return on investment assumptions to calculate present value of the benefit. The higher the discount rate (or ROI) assumption, the cheaper the benefit is today (since you are expecting the investment to pay the benefit to grow quicker). And as a rough estimate, the sensitivity of the discount rate is 15%, meaning a 1% difference in the discount rate assumption will change the present value (or liability) by 15%. Which means when a government uses a discount rate 2% and 3% above what non governments have to use, that means your government is understating liabilities by 30%+, which means either they have to make up for it by investing in riskier investments, and most likely hosing down future taxpayers to make up for the underfunding. These reports show a ranking of the levels of deferred compensation funding throughout the US. Note the relatively bad position of Chicago and Illinois, hence why this thread exists. https://www.truthinaccounting.org/resources/page/state-reports https://www.truthinaccounting.org/resources/page/state-repor... https://www.truthinaccounting.org/resources/page/city-reports https://www.truthinaccounting.org/resources/page/city-report...
- ghaff 3y ago
  Aside from the challenges of switching over deeply-ingrained systems, it's really hard for me to make the case for DB pensions today, especially with them largely gone from the private sector. Yes, a lot of people don't voluntarily save for retirement as much as they should to supplement social security and other benefit programs. But my response to that is something the lines of "OK. Let's stipulate that's an issue. Why are we only solving it for public sector employees?" I suspect the answer is at least partly because voters won't give us enough money to pay today's salaries so we need to obfuscate our costs and kick the can down the road. But that's not a very satisfactory answer.

The way pensions are currently implemented in the state is "don't invest, just transfer tax revenue to pensioners" social security style. The issue is todays tax payers did not agree to those pensions. The people who voted for the pensions are mostly no longer working, they foisted all the costs onto their children and grand children.

cool_dude85 3y ago
No, this is not true. CalPERS is a huge investment fund. My own much smaller pension has a (nominally) large investment fund and believe me it ain't sitting in a money market fund at Wells Fargo. I don't have survey data for you but I am going to go ahead and state that the vast majority of money in pension funds is invested to hit some assumed rate of return with minimized risk / diversification targets.
- HDThoreaun 3y ago
  Im talking specifically about Illinois pension funds, which were unfunded for decades. There's no money sitting in them at all, everything that comes in immediately goes out.
  - cool_dude85 3y ago
    Pay-as-you-go is more risky and more costly overall but it's not an unworkable system. Since you clarified that you mean one specific state has this system, then I'd say the rest of your post is bogus too. Current taxpayers didn't agree to build old bridges or whatever either. Few people living agreed to build out the state highway system. Yet taxes today pay for their maintenance and upkeep and it's not some great moral problem.
    - HDThoreaun 3y ago
      Bridges and infrastructure benefit everyone. I get no benefit from someone who's been collecting a pension since before I was born.
      - cool_dude85 3y ago
        Not all infrastructure benefits everyone. No doubt some of the taxes you pay today cover the costs of maintaining boondoggle projects or wastes of money. And the pension might not directly benefit you today, but let's say those pension benefits go to a woman who used to maintain the bridge. Now today the bridge is in better shape than it otherwise would have been if they'd been done by some high-turnover, low quality employee.
        HDThoreaun 3y ago
        boondoggle projects are also theft.
      - xp84 3y ago
        How do you know? Perhaps that person built or improved something very important to your life. Even if they stamped papers at the DMV for 40 years, someone needed to do that work if we're to have a functioning society. And don't wave that away saying that worker could now be replaced by a kiosk and AI, or a contractor in India. Someone needed to do that work, manually and in-person in the 80s and 90s when that wasn't an option. If you want to slim down the civil service today, that doesn't erase the work done by those workers in the past. Finally, remember that you don't personally benefit from every tax dollar, but as long as many (or sometimes even a few) do, then that dollar wasn't wasted on those grounds alone.
        HDThoreaun 3y ago
        I think these are all reasonable arguments. It’s just hard for me to take them seriously with how corrupt our government is. Yes these are all factors, but the main thing is just that politicians 60 years ago decided to give themselves bribes instead of funding the pension and now I’m paying for it.
- lotsofpulp 3y ago
  CalPERS is only 80% funded according to their own rosy assumptions, even after a historic annual stock market increase. See top right of page 130. https://www.calpers.ca.gov/docs/forms-publications/acfr-2022.pdf https://www.calpers.ca.gov/docs/forms-publications/acfr-2022... In fact, the system is so corrupt, 80% funded (of that rosy number) is considered “fully funded” for taxpayer funded DB pensions, so kicking the can forward for the remainder 20% is just par for the course. The real situation is worse though, and clearly evident in the ever increasing proportion of the budget going to pay for deferred compensation schemes, whether it is the “normal cost” for this year’s accrued benefits or to make up for underfunding from previous years’ benefits.
- tick_tock_tick 3y ago
  > CalPERS CalPERS the fund that famously didn't put a dime in for basically a decade? The one everyone was sure was going to bankrupt California until they lucked out and the stock market saved them?
  - lotsofpulp 3y ago
    CalPERS was prudent in planning that the federal government would, as usual, backstop asset price growth even if it meant near 0% interest rates reducing purchasing power of the USD. Aka, taxing future generations to pay for the underfunding. And even after all that currency devaluation, CalPERS is still only 80% funded, by their own calculations. At least previous California legislators were generous enough to not bake cost of living increases for DB pensions into their state constitution like Illinois.

lotsofpulp 3y ago

The simplest explanation is politicians excluded taxpayer funded defined benefit pensions from any regulations ensuring their solvency, such as ERISA 1974 and PPA 2006. Why? Because future taxpayers can always make up for underfunding. Voters today want lower taxes today. Politicians today want votes today. Government employee union members want maximum compensation, and union leadership is composed of older employees who will collect benefits in the short term. So, how do you deliver both lower taxes (than a competing politician) and market pay? By using benefits where you can fudge the numbers with plausible deniability. For example, the federal government requires non taxpayer funded pension plans to calculate the present value of the benefit using corporate bond yield curves, which were ~4% and below for the last 10+ years. https://www.irs.gov/retirement-plans/pension-plan-funding-segment-rates https://www.irs.gov/retirement-plans/pension-plan-funding-se... In the meantime, most taxpayer funded pensions were using 7%+, some even 8.5% return on investment assumptions to calculate present value of the benefit. The higher the discount rate (or ROI) assumption, the cheaper the benefit is today (since you are expecting the investment to pay the benefit to grow quicker). And as a rough estimate, the sensitivity of the discount rate is 15%, meaning a 1% difference in the discount rate assumption will change the present value (or liability) by 15%. Which means when a government uses a discount rate 2% and 3% above what non governments have to use, that means your government is understating liabilities by 30%+, which means either they have to make up for it by investing in riskier investments, and most likely hosing down future taxpayers to make up for the underfunding. These reports show a ranking of the levels of deferred compensation funding throughout the US. Note the relatively bad position of Chicago and Illinois, hence why this thread exists. https://www.truthinaccounting.org/resources/page/state-reports https://www.truthinaccounting.org/resources/page/state-repor... https://www.truthinaccounting.org/resources/page/city-reports https://www.truthinaccounting.org/resources/page/city-report...

ghaff 3y ago
Aside from the challenges of switching over deeply-ingrained systems, it's really hard for me to make the case for DB pensions today, especially with them largely gone from the private sector. Yes, a lot of people don't voluntarily save for retirement as much as they should to supplement social security and other benefit programs. But my response to that is something the lines of "OK. Let's stipulate that's an issue. Why are we only solving it for public sector employees?" I suspect the answer is at least partly because voters won't give us enough money to pay today's salaries so we need to obfuscate our costs and kick the can down the road. But that's not a very satisfactory answer.