From what I’ve read in recent years there are lots of state, union, and municipal pension funds that have been seriously under-funded over the years, because liberal bureaucrats and union hacks prefer to shovel the money into inappropriate uses. Now they will have a golden excuse to try to cover their tracks — they will try to blame all of their malfeasance over many years on the current dip in the markets.
“If you have a can that’s leaking two ounces a minute and you put an ounce a minute in it, it’s going to get empty.” He is describing his city’s coffers.
Vallejo’s unions contend that the city is solvent enough to meet its obligations. But last Friday a court disagreed, holding that the city is eligible for bankruptcy protection.
http://www.washingtonpost.com/wp-dyn/content/article/2008/09/10/AR2008091002726.html
I remember that one of the big losers on the Enron implosion was a state teachers retirement fund, in I think Florida. There fund manager was buying Enron even after everybody said it was going to tank.
You are largely mistaken. There has been mismanagement for sure but the problem is the outrageous benefit levels. Legislators and taxpayers do not understand compensation. Legislators have been duped into believing that the employer contribution is the compensation value of the pensions. The employer cost is based on unrealistic assumptions by the pension boards. In reality, the compensation value of the pensions is equivalent to a large amount of deferred compensation at retirement. In my study of Colorado pensions, the golden parachute is worth about $500,000 on average, but much more for professionals and administrators. My study was based on the world before the mortgage mess. Now the compensation value has probably doubled.
The source of the problem with most pensions is that public employees can retire at early ages with no reduction in pension benefits. Social security enacts a penalty around 8% per year for early retirement. In contrast, Colorado PERA and many similar plans allow early retirement as early as age 50 with no reduction in benefits. Many individuals in my studies retired in the low 50s with 75% of their highest average salaries (often inflated).