Free Republic
Browse · Search
News/Activism
Topics · Post Article

Skip to comments.

State pensions in the red (California - $500 BILLION, the country - over $3 TRILLION)
Madera Tribune ^ | 4/06/10

Posted on 04/09/2010 7:11:59 PM PDT by Libloather

State pensions in the red
Underfunded by as much as $500 billion, study says
Tuesday, April 06, 2010
By The Associated Press

SACRAMENTO (AP) - California's public pension funds are underfunded by as much as $500 billion, according to a Stanford University study that was commissioned by Gov. Arnold Schwarzenegger and released Monday.

The shortfall could create major financial crisis for the state. And California is not alone: states around the country are facing massive shortfalls in their pension and retiree health care obligations that academics have estimated surpass $3 trillion.

The estimated California shortfall applies to the retirement systems for its state and local government workers, teachers and University of California employees. Together, they serve about 2.6 million retirees.

"This study reinforces the immediate need to address our staggering pension debt," Schwarzenegger said in a statement. "According to the study, California taxpayers are on the hook for over a half-trillion dollars. That's nearly six times the size of our entire state budget."

Analysts at those retirement funds estimated their unfunded liabilities to be much lower. CalPERS put its unfunded liabilities at $38.6 billion on July 1, 2008, and CalSTRS estimated its own rate at $16.2 billion. The Stanford researchers tallied those unfunded liability figures at $239.7 billion for CalPERS and $156.7 billion for CalSTRS.

The researchers also estimated those figures would be even higher today, because those two funds and the UC retirement fund have lost a combined $109.7 billion since then.

David Crane, an economic adviser to the governor and former CalSTRS board member, explained the difference, saying the state's pension funds have been underreporting the gap between revenue and obligations.

(Excerpt) Read more at maderatribune.com ...


TOPICS: Crime/Corruption; Extended News; Government; News/Current Events
KEYWORDS: commiecare; pensions; red; state
Big trouble is brewing.
1 posted on 04/09/2010 7:11:59 PM PDT by Libloather
[ Post Reply | Private Reply | View Replies]

To: Libloather

Ponzi schemes, all of them.


2 posted on 04/09/2010 7:14:41 PM PDT by henkster (A broken government does not merit full faith and credit.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Libloather

Turn out the lights, the party is over.


3 posted on 04/09/2010 7:17:52 PM PDT by afnamvet (Patriots Rising)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Libloather

I fail to see how the administrators can be so incompetent! This is just math right?
Investments are supposed to be relatively conservative. How do they get the income and outgo so mismatched?


4 posted on 04/09/2010 7:18:04 PM PDT by bossmechanic (If all else fails, hit it with a hammer)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Libloather
The estimated California shortfall applies to the retirement systems for its state and local government workers, teachers and University of California employees. Together, they serve about 2.6 million retirees.

Start by reducing their pensions 70 percent.

5 posted on 04/09/2010 7:19:45 PM PDT by dragnet2
[ Post Reply | Private Reply | To 1 | View Replies]

To: Libloather

I think once the death panels are up to speed the could reduce the pensioners to a manageable number post haste


6 posted on 04/09/2010 7:21:42 PM PDT by al baby (Hi Mom sarc ;))
[ Post Reply | Private Reply | To 1 | View Replies]

To: Libloather

Florida state pension is actually in the black....but the state legislature is raiding it to balance the state budget.

States need to lower pension payments....the biggest problems are not cops and low level workers....its those in the Administrative Management levels who get huge pensions with a few years of work.

You still have to fire a bunch of state employees to fix pensions....and you need to fire the highest paid first....for they are the biggest drag on pensions


7 posted on 04/09/2010 7:24:12 PM PDT by UCFRoadWarrior (Sarah Palin: "I support Amnesty...not Total Amnesty". I guess they sell "Diet Amnesty")
[ Post Reply | Private Reply | To 1 | View Replies]

To: Libloather

I’m sure the truth is somewhere in the middle. This was a study requested by the Gov. I wish the media would question these obvious bias studies. How many times have we read about a study from the Southern Poverty Law Center like it was the word of God.


8 posted on 04/09/2010 7:27:02 PM PDT by willk
[ Post Reply | Private Reply | To 1 | View Replies]

To: Libloather
this is happening because people are gaming the system.

for some unknown reason you can get retirement pensions for working as little as 10-15 years as a public service employee.

So what people are doing is working the minimum ... then moving on to another government job and doing the same thing. Before long they are collecting 3 or more pensions and are only in their 50’s.

THEN on top of that, they are maximizing how much each of those pays them by working massive overtime in their final year of work before retiring, effective doubling or tripling their salaries when they were actually working.

First of all I think all pensions should be eliminated.. BUT if you just must have them, then you should only qualify for one after working someplace like 30+ years and you should only be allowed to collect ONE.

9 posted on 04/09/2010 7:27:10 PM PDT by TexasFreeper2009 (Obama = Epic Fail)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Libloather

People ain’t gonna get paid. They might as well accept it. What’s funny in this case is I understand that CA is LEGALLY obligated to fund those pensions. Sucks to be them..... ROFL

(a preview of Socialist Insecurity)


10 posted on 04/09/2010 7:27:23 PM PDT by KoRn (Department of Homeland Security, Certified - "Right Wing Extremist")
[ Post Reply | Private Reply | To 1 | View Replies]

To: bossmechanic
"Investments are supposed to be relatively conservative."

That happens when the people that work at ratings and regulatory agencies sit around surfing the internet all day, and believe whatever lies that are told to them, rather than doing their jobs....

11 posted on 04/09/2010 7:30:00 PM PDT by KoRn (Department of Homeland Security, Certified - "Right Wing Extremist")
[ Post Reply | Private Reply | To 4 | View Replies]

To: Libloather
$500 billion in unfunded liabilities for 2.6 million retirees is equivalent to almost $200 grand per retiree ($192,308).

Presumably a higher proportion of the liability is funded than is unfunded.

So what, exactly, is a retired state employee due in California? A million bucks...or so?

Who wrote this deal? California state employees?

12 posted on 04/09/2010 7:30:01 PM PDT by okie01 (THE MAINSTREAM MEDIA: Ignorance on Parade)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Libloather
Oh c’mon folks. What's wrong with funding our public sectors friends and neighbors with gold plated benefits?

Where's the love?
(the above is sarcasm, btw)

Here in Massholechusetts, a person who serves as a town or city councilor for 2 terms can get healthcare for life. Not a bad deal huh? Lifetime insurance for a less than part time job?

Any wonder why the nation is bankrupt?

The private sector cannot support the public sector anymore. Look at NJ - the teacher's unions are hoping Governor Christie dies.

Unions must be destroyed.

13 posted on 04/09/2010 7:30:01 PM PDT by GOPsterinMA (Welcome to the wonderful world of StupaKare!)
[ Post Reply | Private Reply | To 1 | View Replies]

To: bossmechanic
I fail to see how the administrators can be so incompetent! This is just math right?

It is a case of the California legislatures promising outrageous pensions to government unions (and for themselves), and receiving campaign donations for their war chests. Its been criminal. No watchdog activity. Greedy unions, and Politicians that serve their bellies and not their constituents.

Now its either declare bankruptcy and void the pension contracts (the 'right' thing to do - given the circumstances that have gotten us to this point). Or rob from the tax-payers (via the continual class warfare route -- 'the eviiil rich must pay their Fair Share!!')...
I know what pass the California Assembly Critters want to take... We'll see how it goes...

14 posted on 04/09/2010 7:31:18 PM PDT by El Cid (Believe on the Lord Jesus Christ, and thou shalt be saved, and thy house...)
[ Post Reply | Private Reply | To 4 | View Replies]

To: okie01

When corporations do this, corporate executives go to prison for misappropriation of funds. When unions do this, the government takes over the pension fund forcing taxpayers to foot the bill. And when the government does it, they raise taxes on the wealth creators.


15 posted on 04/09/2010 7:32:49 PM PDT by Hoodat (For the weapons of our warfare are mighty in God for pulling down strongholds.)
[ Post Reply | Private Reply | To 12 | View Replies]

To: Libloather

I don’t see the problem. Obviously, the taxes of the private sector slaves must be raised in order that their government masters may live out their cushy retirements in lavish comfort. That’s just the way it is.


16 posted on 04/09/2010 7:34:09 PM PDT by Lancey Howard
[ Post Reply | Private Reply | To 1 | View Replies]

To: Libloather

That’s your politicians for you. I don’t care which party they are; they are crooks. Politicians are politicians because they wouldn’t make it in the real world because they don’t know how to make an honest living.


17 posted on 04/09/2010 7:38:09 PM PDT by freekitty (Give me back my conservative vote; then find me a real conservative to vote for)
[ Post Reply | Private Reply | To 1 | View Replies]

To: El Cid

It gets even funner. Like Social Security most state and federal pensions are inflation adjusted (most private pensions are not). Think about the positive feedback loop this situation is going to set up as we print more money to pay the pensions (you can be sure than they will pass some sort of Fed bailout eventually) and this money further increases inflation.

Those folks who thought they had good private pensions are in for a world of hurt. Anyone not invested in inflation protected investments is also going to feel considerable pain.


18 posted on 04/09/2010 7:40:59 PM PDT by exhaustguy
[ Post Reply | Private Reply | To 14 | View Replies]

To: exhaustguy
Yeah - we're hosed...

Just keep your treasures in heaven, because the treasures here on earth are sure moth eaten, rusted, and robbed by thieves...

19 posted on 04/09/2010 7:43:50 PM PDT by El Cid (Believe on the Lord Jesus Christ, and thou shalt be saved, and thy house...)
[ Post Reply | Private Reply | To 18 | View Replies]

To: bossmechanic
"Investments are supposed to be relatively conservative. "

Lets see now...How can we break the bad news to you.

These investments are not really investments in the sense that you take something you have and put it to work earning a return for you. The money was never put in the pension fund to begin with. The unions ran a scam to get the employee benefits increased each year by not requiring the Citys, Countys and the State to put the money in every week. So.... having no money in the fund, it earns a net increase of Zero.

20 posted on 04/09/2010 7:49:16 PM PDT by An Old Man
[ Post Reply | Private Reply | To 4 | View Replies]

To: freekitty
"Politicians are politicians because they wouldn’t make it in the real world because they don’t know how to make an honest living."

Sure they could. There is always a need for BS artists in the law and used car sales fields.

21 posted on 04/09/2010 7:49:43 PM PDT by Earthdweller (Harvard won the election again...so what's the problem.......?)
[ Post Reply | Private Reply | To 17 | View Replies]

To: Libloather

California is almost beyond saving. The politicians keep punching holes in the hull as the ship is sinking. The only question is how long will it be until enough of the suckers(taxpayers) figure it out and do something about it.


22 posted on 04/09/2010 7:50:01 PM PDT by detective
[ Post Reply | Private Reply | To 1 | View Replies]

To: Libloather

California is almost beyond saving. The politicians keep punching holes in the hull as the ship is sinking. The only question is how long will it be until enough of the suckers(taxpayers) figure it out and do something about it.


23 posted on 04/09/2010 7:50:20 PM PDT by detective
[ Post Reply | Private Reply | To 1 | View Replies]

To: TexasFreeper2009
First of all I think all pensions should be eliminated.. BUT if you just must have them, then you should only qualify for one after working someplace like 30+ years and you should only be allowed to collect ONE.

They should also pay back social security like all us private sector commoners had to.

24 posted on 04/09/2010 7:53:14 PM PDT by LoneRangerMassachusetts
[ Post Reply | Private Reply | To 9 | View Replies]

To: bossmechanic

15 years ago Pension funds were taking back commercial real estate at the courthouse at huge losses. At the time I was wondering “how can they absorb these kind losses”. Seems it is finally catching up with them.


25 posted on 04/09/2010 8:10:47 PM PDT by Orange1998
[ Post Reply | Private Reply | To 4 | View Replies]

To: All

So sad, too bad!

Guess those state pensioners will just need to bugger off.

Looks like that teat dried up...


26 posted on 04/09/2010 8:22:03 PM PDT by Irenic
[ Post Reply | Private Reply | To 25 | View Replies]

To: Libloather

http://www.nctpp.net/

Sacramento Tea Party

California is in the toilet because of the morons in the CA Assembly; RAT corrupt Morons.


27 posted on 04/09/2010 8:54:01 PM PDT by ExTexasRedhead (Clean the RAT/RINO Sewer in 2010 and 2012)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Libloather

I have read that the unions eventual solution to their pension problems is to raid private 401K plans.
If they try to do this, I predict revolution.


28 posted on 04/09/2010 9:13:51 PM PDT by kaila
[ Post Reply | Private Reply | To 1 | View Replies]

To: bossmechanic

The problem is that many times the Administrators and people who are supposed to be in charge of these funds are recipients of the funds themselves, and have no motivation to protect the taxpayers, since most of them are the taxpayers.

In the State of Oregon, the biggest voting bloc in the State is present and former state employee union members. Figure the odds that any of them will ever agree to any meaningful reforms to their own pensions...


29 posted on 04/09/2010 9:40:06 PM PDT by Bean Counter (I keeps mah feathers numbered, for just such an emergency...)
[ Post Reply | Private Reply | To 4 | View Replies]

To: Earthdweller

LOL I wouldn’t say there was a real need for them.


30 posted on 04/09/2010 11:42:36 PM PDT by freekitty (Give me back my conservative vote; then find me a real conservative to vote for)
[ Post Reply | Private Reply | To 21 | View Replies]

To: Libloather

this should end the ride


31 posted on 04/10/2010 5:21:31 AM PDT by Flavius
[ Post Reply | Private Reply | To 1 | View Replies]

To: exhaustguy

Since the government is in charge of the inflation statistics used by most of the public pensions, they can just change the methodology of CPI so that we never have any inflation ever again. Huzzah!


32 posted on 04/10/2010 8:39:38 AM PDT by boomstick (I really underestimated the creepiness.)
[ Post Reply | Private Reply | To 18 | View Replies]

To: Libloather

I took a look at the report — their methodology does overstate the gap a bit, but doesn’t change the verdict.

The crux of the issue is figuring out the difference between the value of the assets with the value of the liabilities. For the most part, the former is easy: just add up the stock and bond prices and voila. Private equity, hedge fund, and real estate investments are a bit harder to value, but are still relatively straightforward.

The present value of the liabilities is tougher. If the pension has to pay out a dollar in fifteen years, how much value should we assign to that obligation today? In other words, what annual rate of return should be assumed? The higher the assumed discount rate, the lower the present value of the obligation.

The authors used the yield of the 10y Treasury bond (4.4%), while the state uses their expected average annual return (7.5-8%). In my opinion, they should use the yield of their own state-issued general obligation bonds — that’s what the market is saying is the value of the state’s future obligation to pay. For California, that’s around 5.1% for a bond due in ~15 years. So rather than the $425bn shortfall, maybe it’s more like 375bn.

Note that this is relative to asset values as of July ‘08. The three pensions in question are down about 50bn since then, so the “headline” number should be roughly 425 bn rather than 500 bn.


33 posted on 04/10/2010 8:53:30 AM PDT by boomstick (I really underestimated the creepiness.)
[ Post Reply | Private Reply | To 1 | View Replies]

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
News/Activism
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson