Free Republic

In a move that portends a labor firestorm, San Jose Mayor Chuck Reed and four other city leaders filed papers on Tuesday aiming to put a public pension measure on the November 2014 statewide ballot. If approved, the measure would change the California Constitution to give state and local government authority to lower current employees’ pension and retiree health benefits prospectively.

Russia’s government is temporarily seizing $7.6 billion in savings from non-state pension funds while it carries out inspections, a move critics say looks like a “confiscation” aimed at plugging a hole in next year’s state budget. Prime Minister Dmitry Medvedev told ministers Thursday that the government needs to check that the money Russians channel to private pension funds is safe. To do this, it will seize 244 billion rubles ($7.6 billion) from non-state pension funds and put them into the state pension fund. Pension funds hold more than $100 billion in assets. Nearly half of that is mandatory savings managed...

It’s no secret that most state pension plans across the country are deep in the red. However, a study by the nonpartisan group State Budget Solutions, Promises Made, Promises Broken: The Betrayal of Pensioners and Taxpayers, reveals that defined-benefit public government pension plans face a cumulative $4.1 trillion funding gap. Moreover, the study shows that combined, state pension plans are only 39 percent funded. In order for states to keep their pension promises to retirees and taxpayers, reform is crucial. State Budget Solutions uses fair market valuation to fully examine state pension unfunded liabilities. Currently, there are two main approaches...

When Vallejo entered bankruptcy, it had a golden opportunity to shed pension obligations. When the city failed to do so, I made an easy prediction: Within years, Vallejo would be back in bankruptcy court. And here we go again: Two years after bankruptcy, California city again mired in pension debt. Less than two years after exiting bankruptcy, the city of Vallejo, California, is again facing a budget crisis as soaring pension costs, which were left untouched in the bankruptcy reorganization, eat up an ever-growing share of tax revenues. Vallejo's plight, so soon after bankruptcy, is an object lesson for three...

Move over Detroit. The fiscal crisis in Chicago is far bigger. Pensions 31% fundedMoody's downgraded Chicago Debt 3 Notches (just 4 steps above junk)City debt on negative watchPension Liability is $61,000 Per Household ($23,000 Per Capita) Via email, Ted Dabrowski at the Illinois Policy Center writes ... While all eyes are focused on a solution for Illinois’ state-run pension systems, Chicago’s own debt crisis is looming. Chicago taxpayers are on the hook for more than $63 billion in pension, health insurance and other debt. That’s the total debt of the city and its sister governments, as well as Chicagoans' share...

While the world was glued to the developments in the Mediterranean in the past week, Poland took a page straight out of Rahm Emanuel's playbook and in order to not let a crisis go to waste, announced quietly that it would transfer to the state - i.e., confiscate - the bulk of assets owned by the country's private pension funds (many of them owned by such foreign firms as PIMCO parent Allianz, AXA, Generali, ING and Aviva), without offering any compensation. In effect, the state just nationalized roughly half of the private sector pension fund assets, although it had a...

In a news story that should terrify Americans, Poland reduces public debt through pension funds overhaul (reform). On Wednesday, Poland’s Prime Minister Donald Tusk said private funds within the state-guaranteed system would have their bond holdings transferred to a state pension vehicle, but keep their equity holdings. The funds would effectively be left with only the equities portions of their assets, even this would be depleted, and there will be uncertainty about the number of new savers joining. By shifting some assets from the private funds into ZUS, the government can book those assets on the state balance sheet to...

While the world was glued to the developments in the Mediterranean in the past week, Poland took a page straight out of Rahm Emanuel's playbook and in order to not let a crisis go to waste, announced quietly that it would transfer to the state - i.e., confiscate - the bulk of assets owned by the country's private pension funds (many of them owned by such foreign firms as PIMCO parent Allianz, AXA, Generali, ING and Aviva), without offering any compensation. In effect, the state just nationalized roughly half of the private sector pension fund assets, although it had a...

While the world was glued to the developments in the Mediterranean in the past week, Poland took a page straight out of Rahm Emanuel's playbook and in order to not let a crisis go to waste, announced quietly that it would transfer to the state - i.e., confiscate - the bulk of assets owned by the country's private pension funds (many of them owned by such foreign firms as PIMCO parent Allianz, AXA, Generali, ING and Aviva), without offering any compensation. In effect, the state just nationalized roughly half of the private sector pension fund assets, although it had a...

LOS ANGELES — A federal bankruptcy court judge granted the city of San Bernardino eligibility for bankruptcy protection Wednesday, raising the possibility that the city will propose a plan to dig itself out of debt by cutting money promised to the public pension system. The ruling by Judge Meredith Jury came despite opposition from the powerful California Public Employees’ Retirement System, more commonly known as CalPERS. San Bernardino, a working-class city of 240,000 about 60 miles east of Los Angeles, declared Chapter 9 bankruptcy last summer, saying it had effectively run out of money to pay for day-to-day operations, in...

Having a pension plan has been part of the American Dream for millions of workers. Put in thirty or thirty-five years with a company, retire, and then the company will send you a check every month for the rest of your life—an attractive prospect. The amount of the check is pre-determined. It is a “defined benefit” promised to the worker. Unfortunately, this simple vision has proved difficult to implement. The basic problem has been that pensions are a promise for the future, but nobody can guarantee the future. In our dynamic economy, the Schumpeterian process of “creative destruction” relentlessly weeds...

ALBANY, N.Y. — As a lobbyist in New York’s statehouse, Stephen Acquario is doing pretty well. He pulls down $204,000 a year, more than the governor makes, gets a Ford Explorer as his company car and is afforded another special perk: Even though he’s not a government employee, he is entitled to a full state pension.

A savior or a sell-out? A compromise or compromised? -snip- “HE DOESN’T GIVE a s—- what people think,” a Republican “close” to Chris Christie told Politico after the governor denounced the Republican House and Speaker Boehner (yes, by name) for voting down a pork-laden aid bill in the wake of Hurricane Sandy. We pretty much knew Christie felt that way, though it was good to see it confirmed in writing. The bigger question, one that should concern Christie, is what people think about him. We know he’s home safe in New Jersey, cruising toward re-election this November as he enjoys...

Americans have become accustomed to hearing about unfunded liabilities generated by the various federal entitlement programs, but many state and local governments have serious public finance problems looming as well. On the state and local level, public employee pension plans are underfunded by trillions of dollars. Underfunding has real consequences: essential public service may be crowded out by legacy costs for retired employees, politicians may turn to growth-harming tax increases, and retirees stuck on fixed incomes may see the pension payments they are counting on slashed. A new American Legislative Exchange Council study titled Keeping the Promise: State Solutions for...

<p>Of course, the subjects of Detroit’s many unfunded obligations and liabilities were never going to take the bankruptcy lying down — why would they? The city’s lines of red ink are going to mean a lot of real material pain for a heck of a lot of people who built their life plans around these promises, but thwarting the city’s bankruptcy isn’t going to change the fact that decades of these extravagant and unsustainable promises (the consequences of which they’ve probably underestimated!) have left the city with few workable and zero pain-free options. Let other progressive havens take note.</p>

when it comes to public employee benefits and the damage they wreak on local governments, scoundrels have another refuge: blaming racism for concerns about lavish, unaffordable benefits and broken governments. ”Public-sector workers are disproportionately black. In 2011, about 19 percent of black workers were employed by the government, compared with 14 percent of whites and 10 percent of Hispanics. The upshot is pretty clear: Reducing the value of public pensions and other benefits wouldn’t just hurt blacks disproportionately; it would do so at a time when other economic trends have already hurt them more than most. So the question isn’t...

Moody’s has put 15 California transit agencies on credit watch for a possible downgrade because of a decision by the Department of Labor to hold up federal transportation grants. The Department of Labor, under its newly confirmed secretary, Thomas Perez, says pension reforms enacted by the state last year are in conflict with federal rules because they provide less generous pension formulas for new hires. State agencies fear that if exemptions from the reforms are carved out for transit employees, other government workers will also demand exemptions, gutting California’s efforts to contain its growing pension obligations.

LANSING -- The Michigan Court of Appeals has ruled a law requiring state employees to contribute four-percent of their pay to the pension system is unconstitutional. An Ingham County Judge said the entire law known as Public Act 264 violated the constitution, but the Appeals Court disagreed sent the issue back to the lower court. They asked the judge to define what parts of the law were valid. The Appeals Court did agree with the lower court over payment to the pension system saying the state's Civil Service Commission makes those decisions and not the legislature. The law passed in...

Much has been said about why Detroit lies in critical condition, but one serious wound has been festering for decades: the unsustainable pension and health benefits that were secured for city employees by self-serving union bosses and their political collaborators. These irresponsible promises constitute $11 billion of the once-great Motor City’s $20 billion in debt. It’s a timely lesson in government guarantees gone wrong, yet it seems that few onlookers are taking notes. States and cities across the country face similar challenges and, should they choose to do nothing, may meet a fate like Detroit’s. My home state of Pennsylvania...

We once sang about hoping to die before we got old, but quite a few of my fellow baby boomers have begun to sound like a cross between 1960s sitcom crank Granny Clampett and the 1980s SNL Church Lady when it comes to our kids' generation. I've heard some in my age group lament that the millennials refuse to grow up. I've eavesdropped few remarks like, "Back when I was my son's age, I had a decent job and a mortgage. But you can't get a mortgage on a barista's salary. Come to think of it, back when I was...

Cities: Chicago appears to be following Detroit's lead to financial disaster, perhaps the latest victim of decades of one-party rule by Democrats eager to redistribute wealth while driving real wealth creators out of cities. Moody's Investors Service downgraded the Windy City's credit rating by three notches last week, partly the result of $19 billion in unfunded pension debt, leaving Chicago's lower than 90% of Moody's public finance ratings. Among the nation's five largest cities, Chicago has put aside the smallest portion of its looming pension obligations, according to a study issued this year by the Pew Charitable Trusts. The condition...

With numerous examples around the country, it has become clear that there are poor political incentives to properly fund public pension and health care systems. Consider the case of Detroit, as well as the states of Michigan and Illinois. In each case, pension systems were supposed to be fully funded, yet large gaps remain between what employees and retirees have earned and how much money is in the systems. Detroit is spending 42.5 percent of its budget on retiree benefits. The Michigan Public School Employees Retirement System, the state's largest retirement system, is underfunded by $24.3 billion, despite some reforms...

After winning a huge legislative victory against the UNC system (see my last column), I am now preparing for another legislative battle that should prove to be an uphill climb. My next proposed bill would force socialist professors who retire from the UNC system to actually move to socialist countries after they retire - that is, if they wish to draw upon their pensions. I know it sounds radical, but I got the idea from another radical - Marxist Professor Gary Faulkner. Recently, Comrade Faulkner had this to say in the local Wilmington McTimes: "Alas, it has finally come time...

Detroit, you're not alone. Across the nation, cities and states are watching Detroit's largest-ever municipal bankruptcy filing with fear. Years of underfunded retirement promises to public sector workers, which helped lay Detroit low, could plunge them into a similar financial hole. A CNBC.com analysis of more than 120 of the nation's largest state and local pension plans finds they face a wide range of financial burdens as aging work forces near retirement. Thanks to a patchwork of accounting practices and rosy investment assumptions, it's not even clear just how big a financial hole many states and cities have dug for...

Detroit’s fiscal woes have been front and center in the news recently. Now this is a new claim that Detroit’s pension woes are not as bad as Kevyn Orr, the city’s emergency manager, estimated. Orr stated that the underfunding of the city’s two pension funds at $3.5 billion. Orr arrived at that figure in part by estimating the funds’ expected annual return on assets at 7%. The city’s actuary, meanwhile, says the size of the gap is actually $977 million, based in part on an expected annual return of 8%. So, not as bad as Orr’s calculated. But can Detroit...

Detroit, you're not alone. Across the nation, cities and states are watching Detroit's largest-ever municipal bankruptcy filing with fear. Years of underfunded retirement promises to public sector workers, which helped lay Detroit low, could plunge them into a similar financial hole. A CNBC.com analysis of more than 120 of the nation's largest state and local pension plans finds they face a wide range of financial burdens as aging work forces near retirement. Thanks to a patchwork of accounting practices and rosy investment assumptions, it's not even clear just how big a financial hole many states and cities have dug for...

Detroit’s bankruptcy and the problems facing its pension funds offer two important lessons to other communities. One is that state and local governments need to do a much better job managing retirement funds. The other is that they should not pre-emptively reduce hard-earned benefits at the first sign of trouble. Several state and local pension systems around the country are under serious stress. Not surprisingly the hardest hit retirement funds are in places devastated by global economic forces like Detroit, as well as inland cities in California like Stockton, which was battered by the real estate collapse and has also...

Detroit is a classic example of failed obamunism and personal responsibility; it played out the union-controlled socialism to the bitter end and it lost the destructive game - eventually all socialists run out of other people’s money as Margaret Thatcher used to say. Detroit is now a picture of litter and filth with few suburbs left that take pride in their appearance. Pontiac and Flint are not far behind in their march towards insolvency.

Chicago — Having just been downgraded three notches by Moody’s, Chicago is suddenly hearing the uncomfortable shifting of deck chairs, as people wonder if the nation’s third-largest city is about to slam into the same debt-and-pensions iceberg that sank the SS Detroit last month. It was once inconceivable that the Motor City would become the setting for post-apocalyptic visions of burned out, abandoned neighborhoods, a corrupt and incarcerated city government, and all-but-nonexistent public services. Yet Detroit’s collapse took but a few decades. Now, the same disbelief and denial about Chicago is being heard, yet the evidence for the inescapable bill...

The MBTA’s retirement board is defying the law and keeping a lid on its secret pension records — and has gone so far as to hire a lawyer, in a move watchdogs say is a slap in the face to taxpayers who help fund the monthly checks to retired transit workers. “This isn’t stonewalling. This is breaking the law,” said Jim Stergios, executive director of the Pioneer Institute, adding that the debt-plagued T just hit up state taxpayers for $115 million to balance its books. “It is amazing to me that the T will come to the taxpayers and say...

A bill that would help local governments wind down their unsustainable “defined-benefit” pension systems is causing unions to rev up their spin machine to stop it. House Bill 4804, sponsored by Rep. Pete Lund, R-Shelby Township, would make such systems a “prohibited subject” in collective bargaining negotiations, meaning that once a city council or county board has decided to close their existing defined-benefit pension system to new employees, the decision could not be overruled by future collective bargaining agreements. The bill is pending in the House Local Government Committee. These defined-benefit pension systems were a contributor to the mountain of...

Pennsylvania legislators are gearing up to tackle one of the largest financial problems facing states today: unfunded pension liabilities. The traditional defined-benefit model for government pensions enables lawmakers to promise generous pension benefits without saving sufficient funds to pay for them. A lack of funding and the fact that benefits are guaranteed—regardless of investment performance—has led to significantly underfunded pension systems across the country. Both the House and the Senate in Pennsylvania have recently advanced legislation to reform the state’s pension system. Unfortunately, these efforts have been stalled, but Gov. Tom Corbett will likely pursue pension reform again this fall....

Union leaders are calling on Congress and President Obama to provide a federal bailout to the city of Detroit. The executive council of the AFL-CIO, the nation’s largest labor federation, called for an “immediate infusion of federal assistance for Detroit” to be matched by the State of Michigan, which they say has not done enough to keep the city from going through bankruptcy. “Bankruptcy must not be used as a tool to impoverish City of Detroit workers or retirees. City workers have already made severe concessions to keep the city afloat,” the executive council said in a statement. “They are...

Ronald Zajac, of Northville, Michigan, the general counsel of Detroit’s two pension funds, and Paul Stewart, of Detroit, Michigan, a former trustee of Detroit’s Police and Fire Retirement System, were both charged today in a superseding indictment with participating in a bribery and kickback conspiracy involving over $200 million in investments before the two city of Detroit pension funds United States Attorney Barbara L. McQuade announced today. McQuade was joined in the announcement by FBI Special Agent in Charge Robert D. Foley, III. Zajac and Stewart were added as defendants in a superseding indictment that had already charged former city...

1. The single most depressing thing to watch is the 36 hour news cycle of the populus. I can't understand it. I can't understand how it is that you people just collectively let massive, massive crimes go as soon as the media spoon-feeds you the next "big story". This has to be a function of the diabolical coupled with God withdrawing His grace. Memory is a gift from God. To choose to not use it, to choose to suppress it is a sin. 2. Um, yeah, it was reported about 48 hours ago (now outside the window, apparently) that the...

Citing a $1 billion budget deficit, Chicago Public Schools will lay off more than 2,000 employees, more than a 1,000 of them teachers, the district said Thursday night. About half of the 1,036 teachers being let go are tenured. The latest layoffs, which also include 1,077 school staff, are in addition to 855 employees—420 of them teachers--who were laid off last month as a result of the district’s decision to close 49 elementary schools and a high school program. CPS spokeswoman Becky Carroll said the district was “scraping the bottom” of reserves to provide financial relief and had made cuts...

This past Friday's jobs report showed continued strength in jobs numbers for state and local governments, led by the latter. This year, local governments have added 45,000 jobs, which may not sound like much, but municipalities had lost jobs in nearly every preceding month going back to the summer of 2008. (Total US nonfarm employment, by contrast, has been growing since February 2010).   But just as stability has returned to the state and local employment picture, borrowing costs have started to climb.  Ben Bernanke's June speech that the Fed is considering taking its thumb off the scales of...

Accelerating an increasingly bitter feud with the General Assembly, Gov. Pat Quinn suspended the pay of state lawmakers Wednesday, saying he believed the best way for legislators to reach a long-sought fix to Illinois' massive public worker pension debt was to "hit them in the wallet." Quinn used his veto powers to zero-out the $13.8 million budget for legislative salaries and leadership stipends, effectively eliminating the state's ability to send lawmakers their Aug. 1 paychecks. The governor said that until now taxpayers — not lawmakers — have had to pay for the legislature's failure to resolve an unfunded pension liability...

MADISON – While labor unions grouse about public sector pay, a state government job is a good gig if you can get it, according to the latest income data from the U.S. Bureau of Labor Statistics. In Wisconsin, state employees earned on average $53,552 in 2012, nearly $12,000 more than their fellow workers in the private sector, based on BLS data tracked by Stateline, the news service of The Pew Charitable Trusts. The salary data was drawn from BLS’ Quarterly Census of Employment & Wages, through the fourth quarter of 2012. While Wisconsin state employees are coming off a two-year...

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/b763a6f8-de91-11e2-b990-00144feab7de.html#ixzz2XhyE9i1y US states would need to raise $980bn to cover the aggregate shortfalls in their retirement schemes for public sector workers, according to an analysis of state obligations. Moody’s Investors Service, which provides credit ratings for states and municipalities, looked at the detailed financial accounts for each state and its schemes in the most recent financial year available. If all 50 states...

Detroit About To Blow Up The World?Karl DenningerThe Market TickerJune 20,2013 "Detroit Emergency Manager Kevyn Orr ordered an investigation into employee benefit programs, including the insurance and pension systems. Orr told the city’s inspector and auditor general, agencies that both have subpoena power, to report within 60 days in an order dated today. The document should cover “next steps, and any corrective, prospective, legal, additional investigatory or other action designed to address any waste, abuse, fraud or corruption uncovered,” according to Orr’s order. Everyone raise their hand if they think this is just about people scamming "disability" and other pension-related...

Texas Republican John Cornyn supplemented his Senate salary with a trio of public pensions last year from his days as a Texas judge and elected official—a practice some fiscal watchdog groups have attacked as “double dipping.” Cornyn, who is the minority whip and the No. 2 ranking Republican in the Senate, reported collecting $65,383 in public retirement benefits in 2012 in addition to his $174,000 salary as a U.S. senator. Cornyn’s office did not respond to requests for comment. Elected to the Senate in 2002, Cornyn is a former district judge, Texas Supreme Court justice, and state attorney general. In...

There's dumb and then there's really dumb. The executive of Sacramento County in California recently attributed the increase in his county’s pension costs to “investment losses during the recession.” The official, Brad Hudson, is right that public pension costs are growing, but not that investment losses are to blame. To the contrary, these expenses are rising despite gains in pension-fund investments. Oh really? The article goes on to say that the Dow is up 15% from December 31st 2007 to June 3rd of this year. True. But annualized this is less than a 3% rate of return, while the pension...

Many states, especially California and Illinois, have had severe pension underfunding problems for many years. However, new actuarial pension rules will finally force states to admit the problem. Thus, it should not be surprising that talk of "technical bankruptcy" and “service insolvency” is growing. Here are some pertinent ideas from California on the Brink: Pension Crisis About to Get Worse   Moody’s new credit standards for public pensions would nearly double the unfunded liabilities for state and local pension plans in California to $328.6 billion from $128.3 billion. California has the second lowest credit rating at Standard & Poor’s of all 50 states;...

Mayor Rahm Emanuel on Wednesday sought to lay the blame for upcoming Chicago Public Schools budget cuts on state lawmakers' failure to extend pension relief, saying the loss in Springfield is now "on the doorstep of every school and every classroom in the city of Chicago." The mayor refused to rule out teacher layoffs or a property tax increase as pension payments are expected to balloon from $196 million this year to $612 million in the next budget year, which begins July 1. "Chicago Public Schools is working through the issues," Emanuel said in his first news conference since last...

More Minnesota public employees are staying on the job longer -- a result of the struggling economy and a change in the rules for public workers who have long enjoyed incentives to leave the workforce in their late 50s. Last year, about 60 percent of new retirees from Minnesota's public workforce -- not including public safety workers -- waited until they were 62 or older to retire. Just seven years ago, that figure was 40 percent, according to data from Minnesota's three statewide public pension plans. This trend is expected to accelerate sharply. Within the next decade, there won't be...

The Illinois pension saga just keeps getting worse. In response to the state legislature’s failure to pass a pension reform bill before adjourning, Fitch downgraded Illinois’s bonds from A to A- earlier this week. On Thursday Moody’s joined the party, lowering the state’s rating from A2 to A3. S&P is now the only agency not to have downgraded the state, but it is issuing its own dire warnings. As Reuters notes, Illinois now has the lowest credit rating of any state in the country even without the S&P downgrade, and the worst rating in its history. The higher borrowing costs...

According to the latest official projections, in the current fiscal year Michigan’s state government will collect $483 million more from taxes and fees than previously expected, and $219 million more next fiscal year. Not surprisingly this has the usual spending interests lobbying intensely to get more for themselves. Yet despite today’s budgetary fair weather, storm clouds still darken Michigan’s fiscal horizon. In particular, huge unfunded liabilities in the school pension system. The temporary revenue windfall is an opportunity to ease this burden. There is a $22.4 billion gap between the school pension system’s future commitments to retirees and the amount...

A resolution calling for the boycott of Israeli firms will not be put to a vote at TIAA-CREF’s upcoming shareholders meeting. The move comes after the pension fund giant received approval from the Securities and Exchange Commission (SEC) to “take no action” on a submission by pro-Palestinian activists. This followed the company’s warning by an Israeli civil rights group that passage of the resolution would violate NY and Federal law. Nitsana Darshan-Leitner, director of Shurat HaDin – Israel Law Center, stressed that the development was “a major defeat for the extremist Boycott, Divestment and Sanctions movement taking aim at Israel.”...

A recent Reuters’ article pointed out that four trustees of the Detroit pension fund spent $22,000 attending a pension fund conference in Hawaii (Hilton Hawaiian Village Waikiki Beach Resort). That is a whopping $5,500 per Detroit trustee. Of course, they could have held the conference in Dallas, Phoenix, Atlanta or Cleveland and saved on airfares and hotel costs. Or even at Detroit’s Convention Center? But I suspect lounging in the Hilton pool is more pleasurable than swimming in the Detroit River. Now, hundreds of pension fund representatives attended the conference and not every attendee dipped into their pension fund to...