The Truth About the State Pension Crisis

Separating economic myth from economic fact

Editor’s Note: Reason columnist Veronique de Rugy appears weekly on Bloomberg TV to separate economic fact from economic myth.

Myth 1: Unfunded state pensions do not represent an immediate threat and are therefore not in crisis.

Fact 1: In the best case scenario, some state pension funds will run out as soon as 2017. And the longer the states wait to fully fund their pensions, the more drastic the financial consequences will be.

The fact that state pensions only represent a small share of state budgets doesn’t mean that they aren’t in crisis. Take the case of New Jersey. According to Joshua Rauh, professor of finance at Northwestern University, under the best case scenario, New Jersey’s pension funds (there are 5 of them) are scheduled to run out as soon as 2017. Once those state pension plans run out of money, pension payments will have to come out of the state’s general fund revenues—that is, out of the pockets of state taxpayers.

Furthermore, there is reason to believe these estimates are too conservative. When private-sector accounting methods are used to show the true market value of state pension liabilities, the situation becomes even more critical than it initially appears.  

According to Andrew Biggs of the American Enterprise Institute and my Mercatus Center colleague Eileen Norcross, the state of New Jersey reports that its pension systems are underfunded by $44.7 billion. Yet when those pension plan liabilities are calculated in a manner consistent with private-sector accounting requirements—methods that economists almost universally agree to be more appropriate—New Jersey's unfunded benefit obligation rises to $173.9 billion.

In other words, New Jersey has made a $173 billion promise without any idea of how it will pay for it. I would say that’s a crisis.

Plus, this is serious money. As Biggs and Norcross note,

This amount is equivalent to 44 percent of the state's current GDP and 328 percent of its current explicit government debt. This calculation applies a discount rate of 3.5 percent (the yield on Treasury bonds with a maturity of 15 years) to reflect the nearly risk‐free nature of accrued benefits for workers. It is estimated if state pension assets average a return of 8 percent, New Jersey will run out of funds to meet its pension obligations in 2019. If asset returns are lower than 8 percent, they will run out of funds sooner.

This has real implications. State actuaries estimate that under certain assumptions, New Jersey’s pension plans will run out of enough assets to make benefit payments beginning in 2013.

The irony is that New Jersey, like other states, has put itself in a financial binder even before the pension crisis really hits. That says a lot about the state’s future ability to address the problem.

Myth 2: State debt accurately reflects state liabilities. And state default is not a concern because the federal government will bail the states out before they reach that point.

Fact 2: Many government pension liabilities are kept off the books, so most states and cities underestimate their actual debt.

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • rather||

    Veronique, I love your new polished image but straighten your posture; it will help with your breathing/pace issue.

  • Linear Actuator||

    The irony is that New Jersey, like other states, has put itself in a financial binder even before the pension crisis really hits. That says a lot about the state’s future ability to address the problem

  • Middle Class Colon||

    I can't take it anymore!

  • Jen||

    How do you write a three-page article on the state pension crisis and not mention California even once?

  • DNS||

    How do you write a three-page article on the state pension crisis and not mention California even once?

    California is already a lost cause, financially speaking.

  • Jen||

    True, but she could at least hold them up as a model of what not to do.

  • XM||

    But I live in California, though.

  • Devil Inchoate||

    They fall in the ocean next year anyway.

  • ||

    One part of me wants to fight to reform the pension system, so we don't go bankrupt. But the evil part of me wants to sit back and watch unions vanish from history in a puff of red ink.

  • ||

    *public* unions

  • Alan Vanneman||

    Refuting myths that no one believes? Proving your point by citing outliers instead of providing full documentation? Veronique, you're turning into the Marty Peretz of "Reason." That isn't your goal, is it?

  • Anal Vanneman||

    Kurt Loder stole my gig!

  • ||

    Imposter!

  • The Fringe Economist||

    This woman's graphs are so sexy!

  • Tony||

    Oh look it's the Queen of Misleading Charts again.

  • sevo||

    Tony|3.11.11 @ 1:05PM|#
    "some un-supported claim I heard"

    Thanks, Tony, you're good at that.

  • ||

    So why are they misleading?

  • ||

    my employee newsletter CLAIMS that our state pension fund is funded at 118% right now. of course, i have no idea if that's true

  • cynical||

    Since when does the government lie?

  • ||

    exactly. not to mention just plain get stuff wrong. either way, i take all statistics, let alone govt. statistics with a huge grain of salt

  • Pip||

    Just in case you're the real Dunphy:

    EAT SHIT YOU LYING PIG!

  • ||

    troll-o-meter: Divide by zero error. Number is too low to compute. Danger will robinson.

  • IceTrey||

    Check your states CAFR and then you'll know.

  • sevo||

    IceTrey|3.11.11 @ 4:33PM|#
    "Check your states CAFR and then you'll know."

    What you'll know is that IceTrey is an ignoramus.
    IceTrey has the theory that governments can finance operations by selling assets; sorta like selling the desks where the clerks work.
    IceTrey justifies this in that certain wealthy widows live off the inherited wealth, so why not the governments?
    'Nuff said.

  • IceTrey||

    Hey fucktard moron the assets are liquid, as in cash sitting in various funds. If you weren't such a simpleton who obviously can't read you'd know that. Since your criticism is based solely on your stupidity I'll let your betters decide who is right.

  • ||

    my employee newsletter CLAIMS that our state pension fund is funded at 118% right now. of course, i have no idea if that's true

    Since California pension funds assume an 8% return every year for perpetuity, I would say this is absolutely not true.

  • ||

    i'm referring to WA. iirc, the 80% minimum recommendation is based on the 8% assumption. we aren't at 80%. we are at 118%.

  • ||

    Interesting.

    An 80% confidence level (I think that's what you mean by "minimum recommendation", but I could be wrong) for actuarial assumptions is generally pretty weak, BTW. Where I have seen confidence levels used (not in pensions, as we aren't involved in any), the acceptable confidence level is 90%.

    I wonder what rate of return would need to be assumed to get a 90% confidence level?

  • ||

    i;m not sure what confidence level means. the %age #'s are based on , as i understand it, the current assets in the system as compared to the projected payouts of those who will be receiving retirement pay (assuming they live the average # of years after retirement etc.).

  • IceTrey||

    Your state has 57.6 billion dollars in it's pension fund. It paid out about 2.7 billion last year.

    http://www.drs.wa.gov/administ.....ancial.pdf

  • ||

    nice. i am in the LEOFF-2 group. LEOFF-1 was INCREDIBLY overgenerous to put it mildly and the state realized they had to make a change. LEOFF-2 is a good retirement system, but clearly nowhere near as grossly ridiculous as LEOFF-2. LEOFF-1 incentivized people to game the system too, with injuries and the like. the benefits were amazing.

  • ||

    I like that Veronique is getting more TV time. The past 6-9 months instead of Gillespie and Welch being the only ones now Suderman and Veronique are as well. The movement can only stand to benefit from more exposure.

  • visitingfromtheleft||

    This and Gillespie's article has me puzzled. The consern as I see portrayed generally in the left wing press isn't whether the states are broke but with the part of the bills that break collective bargaining. What is the libertarian perspective on that aspect of the issue?

  • ||

    i'm curious about this too. isn't collective bargaining in one sense just a part of the free market? otoh, it's a form of collectivism (obviously) in the same way that monopolies would be. in the strictest sense, one could argue that monopolistic collusion is in a sense the "free market" but i would suggest that many, if not most libertarians would disagree?

    collective bargaining ime as well as such requirement as binding arbitration etc. in my field does help ensure due process as well as helping prevent capricious personal vendettas amongst the administration from negatively affecting individual officers.

    there is currently a SPD officer who has been blasted by the mayor, chief, etc. for daring to express his views about "social justice" agenda in the city. his views, as a libertarian run very contrary to the progressive seattle city council's.

    the mayor etc. have called for him to resign/be fired since his views are not consistent with seattle's social justice vision.

    it is only his union protection that protects him. also noted that he has worked a busy and ethnically diverse area for years with no record of complaints or anything like that. they aren't attacking his performance. they are attacking his viewpoints about matters of public policy

  • ||

    [i'm curious about this too. isn't collective bargaining in one sense just a part of the free market?]

    It could be. Of course government is hardly representative of anything close to a free market. Unless you have private, for profit DMV's where you live.

  • ||

    well yes. but if private employees collectively bargaining is "part of nature too" to paraphrase camus and love and rockets, are employees of public agencies doing the same also part of that market or not? i really don't have any strong opinions either way on this. in brief, i can see both sides. that's why i appreciate intelligent analysis to help me form an opinion

  • visitingfromtheleft||

    There is a market for employees which a government agency must engage to find employees.

    There is a market for jobs which a government employee participated in at one time and took a government job from.

    Two differences I can think of:
    1. Private employers or their investors can't write labor laws. If the public will went that way, as it seems to perhaps partly in Wisconsin, a government, whose budget funds the positions, can make a law changing the terms affecting your ability to form compacts to bargain. Private entities could try to change your contract terms perhaps, but is not that less power since the validity of the changes may be subject to a court's discretion.

    2. As has been pointed out elsewhere, public managers aren't all that incentivized to bargain hard on behalf of taxpayers. This has been offered as a reason why public unions have done better by their members than private unions (or why more of them exist?)

  • ||

    i think #2 is an especially good point. my govt. agency is so astoundingly inefficient, it hurts.

    of course there is NO incentive for us to get more inefficient. in private industry that means MORE PROFIT (underpants!)

    in govt. agencies, that means smaller budget next year.

    why would any govt. agency move towards efficient practices (Which includes hiring./retaining more efficient officers) if it means they get less money and power?

    do da math

  • visitingfromtheleft||

    There is another way of doing budgeting for government departments/universities/nonprofit foundations than this "your budget is what you needed last year" way and avoids this problem of encouraging waste. I forget the name for it. Someone on here must know.

  • sevo||

    "can make a law changing the terms affecting your ability to form compacts to bargain."

    Bullshit. Form all the compacts you please and offer to have that compact bargain for you.
    If the other party says no, well, tough stuff. You are allowed to do as you please, you're simply not allowed to force the other party to do as you please.

  • visitingfromtheleft||

    Not understanding you.

    If your employer is the government and they pass a law limiting or prescribing the way you can form into unions and bargain, what can you do about that?

  • ||

    bitch about it on the internet?

  • sevo||

    visitingfromtheleft|3.11.11 @ 5:21PM|#
    "Not understanding you.
    If your employer is the government and they pass a law limiting or prescribing the way you can form into unions and bargain, what can you do about that?"

    No such law was passed, no such limit was proscribed.
    You can associate, form into unions, and bargain as you please.
    You cannot *require* the other party to bargain with the association you choose.
    Is this hard to understand, or are you ignoring the obvious?

  • visitingfromtheleft||

    Hmmm. Think I'd better stick to the articles when visiting here. Discussion forums are pretty weak.

    1. The question is a general one. In general, if an employer is a government what powers would they have a private entity would not.

    2. In fact the Wisconsin legislature did just pass a bill that limits collective bargaining.

  • sevo||

    visitingfromtheleft|3.12.11 @ 9:32AM|#

    "1. The question is a general one. In general, if an employer is a government what powers would they have a private entity would not."

    WHAT? Are you serious?!
    The power to tax regardless of the product offered.

  • ||

    I'll do an Amazing Kreskin here & guess he meant in terms of government agencies negotiating with employees/unions on salaries/benefits.

    An elected government is constrained in what it can get away with in terms of taxation. When people are angry enough about tax rates, they tend to vote GOP. It's sad that the GOP doesn't couple revenue with spending...

  • ||

    [are employees of public agencies doing the same also part of that market or not?]

    (A) market, yes.....FREE market, no. Hardly a nuance when what the market "produces" is legally mandated, yet may be obtained from no other source.

  • visitingfromtheleft||

    This seems confused to me or at least is confusing me. For the discussion to be meaningful, surely you must distinguish between the market in employees with various skills -- what the gov. agency participates in when hiring -- from the market for the good the agency produces -- public order, education, etc. The latter seems to me to belong to a different discussion, not to this one concerning labor rights.

    Then limiting to the market for employees, we also should specify which kind of employee we mean or at least acknowledge that the matter may vary some whether you mean a police officer or teacher whose opportunity is not completely but largely defined by what jobs the government makes available vs. say a computer programmer where the government is just another employer with no special advantages (just the opposite usually) over private sector employers in competing for personel.

    But if the market is not free, if the government is the only game in town, that only shows to me why I should feel for those protesting and wish their collective bargaining rights to remain to balance out the power the goverment (and its tax payers) have in the situation.

    Is there not a libertarian argument to be made here in support of unions? Or do we so revile unions that our discomfort with them trumps our discomfort with government power?

    Of course, I would expect a clear libertarian thinker here to object that the whole difficult situation points to the problem of siting services within the government in the first place. If these services were privatized and the tax payer not involved, then the government could intervene fairly as a third party guided by principle rather than interest.

  • ||

    [But if the market is not free, if the government is the only game in town, that only shows to me why I should feel for those protesting and wish their collective bargaining rights to remain to balance out the power the goverment (and its tax payers) have in the situation.]

    Let me see. You feel it imperative to "protect" closed market workers who are workers demonstrably paid more than those in the open market, providing services that are, by law, available nowhere else, from employers who must depend upon said workers for their reelection, so they may continue to reward the worker.
    A convoluted sentence to address convoluted thinking.

  • ||

    Collective bargaining is okay unless the government only grants one party the right to do so. If an individual or other groups are excluded by law from also negotiating with a prospective or current employer, then of course this is wrong.

    If an individual or group is forced to give money to someone else or another group as a term of employment when that other group was granted monopoly privilege then it is also wrong.
    It's not the free market when competition is forcibly excluded. It also forces a kind of mediocrity into education when competition is taken away, because rather than market forces showing what a position is worth within a range, and even the possibility of someone worth more being hired you end up with positions already created that pay the same regardless of their true merit.

  • Yadda||

    Public Unions with collective bargaining are a monopoly. Even FDR was against public unions. Kennedy OK'd them in return for the public employee votes and that is how it is today: politicians OK more and more benefits for public unions (damn the taxpayer, kinda like health care consumer) and the unions keep voting their sugar daddy back in.

  • Free Market Underdog||

    Collective bargaining as we know it is not an invention of the free market. The National Labor Relations Act (aka The Wagner Act, 1935) dictated that employers have no choice but to negotiate collectively with unionized employees. This gives the upper hand to the unionized employees because they have the power of coercion on their side in that they can walk out if they don't like management's terms. Employers are more likely to give in to union demands than bear the extreme cost (i.e. business interuption) of a walkout. It is this government-invented, as opposed to natural, "right" that artificially provides unionized employees with a fabricated upper-hand in negotiations. So, no, the right to collective bargining is not a right born of the free market.

    In a free market, an employer could say to each individual employee, "these are the terms of employment here. If you don't like them, you can seek employment elsewhere".

    Matters get even worse when the employer is a governmental body. The lack of any need for a net profit makes "giving away the store" a non-issue for those in power.

  • ||

    The thing that frequently isn't mentioned, though, is that things differ considerably from state to state. Articles like this one usually overgeneralize, leaving the reader with the impression that it is exactly the same situation in all 50 states. Nothing could be further from the truth.

    Some states are indeed guilty of all the mismanagement that is discussed here. Some other states are not, though. For example, North Carolina's public pensions are almost fully funded (it is just about impossible to hit it right on the button, since it is something of a moving target), and are properly accounted for. I think the assumed portfolio yield of 7% is still too high, but that is considerably preferable to the 8% that most states are using. These are not free ride public pensions, the employees and employer have to chip in close to equal contributions.

    One would not be aware that there are any states in this good a condition just by reading articles like this.

  • ||

    yes, that was the point my employee newsletter made. they claim we are at 118% funding and acknowledge that some states are lower than 60% (that even at 8% return are still essentially bankrupting as we speak).

    just like every county is not orange county (remember that debacle), not every state is caleefohnia.

  • ||

    90% of public employment should be eliminated anyway. Arguing about the costs is like arguing about the proper way to eliminate the Jews. The state should not be engaging in this employment at all.

  • ||

    i think you have no idea of how much crime would spike if we got rid of general service police to the extent of 90%. ime, the experiment has never been tried, and if you are reflexively anti-cop you won't believe me, but if we got rid of 90% of cops, criminals would be much more prolific imo. at least prelimnary info from camden, where they laid off about 50% of the PD iirc is that crime is already skyrocketing in response.

    having interrogated scores of criminals and stuff, they admit as much. we keep them SOMEWHAT in check

    http://www.huffingtonpost.com/.....30873.html

  • ||

    You got cops/police from this? or just wanted a red herring?

    Education.

    Housing.

    Job training.

    Selling liquor.

    Transportation.

    I could keep going, but yeah 90% is probably a good estimate without actually breaking down a state's engagements.

  • ||

    oh, my bad. probably a persecution complex :)

    i would agree with you. i might not go as far as 90%, but govt is involved in scores, if not hundreds of things (especially federal govt.) it shouldn't be

  • ||

    isn't collective bargaining in one sense just a part of the free market?

    Not as practiced in the United States, and certainly not as formerly practiced in Wisconsin.

    Collective bargaining is a fine free market practice where both sides have a choice on whether to engage in it. In the US, the employer has no choice. Ergo, it is contrary to freedom of contract and freedom of association.

    In Wisconsin, which formerly had a closed shop for pubsec unions, it is even worse, because the employees were denied their freedom of association by being forced to join a union to keep their job.

  • ||

    yes, that's essentially the system in my state. any employee in my dept. is automatically entered into the union. my understanding is that there is some complex process for opting out, but even then there must be some sort of similar deduction from pay. i'm honestly not sure how it works. i've never heard of anybody who "opted out" so to speak.

    also, any system where you have to take affirmative steps to opt OUT (reminds me of some of the crap UC system pulled with the CALPIRG student crap), is hardly really "voluntary"

    don't get me wrong, i love my union, even though i disagree with some of their positions and actions

    for example, i think physical fitness standards should be mandatory. my union disagrees, as does our agency. the agency disagrees because they would have to (they believe) pay for onduty physical training (such as SWAT gets), especially for those that fail the standard. the union disagrees because they see it as an additional burdensome requirement on labor . lowest common denominator and all

    the end result is that cops can get extremely fat-assed and out of shape. statistically speaking, such cops require far more medical care, sick leave, etc. and also are far more likely to get excessive force complaints and create civil liability of all sorts.

    it's a lose/lose for the citizenry especially since a a fat-ass cop is less able to protect them

  • ||

    90% of the cops should be released from service anyway. The actual honest-to-goodness enforcement part of hte job is minimal. As far as taking notes on traffic accidents goes, a secretary can do the job, not a sworn officer.

  • ||

    enforcement is a much smaller portion than investigation. the primary type of calls are (ime) disturbance/nuisance type details that usually result in one the scene mediation and no formal action, reports of past crimes such as burglaries, auto thefts, etc. where a report is taken and investigative follow up sometimes (but usually not) results in suspect located and charges preferred, in progress stuff that may or may not be a crime but people are asking for help such as DV's, requests for assistance by business owners such as restaurants, etc in getting rid of unruly customers, traffic safety stuff such as reckless drivers, dui's, etc.

    i agree about the traffic collision stuff. we are generally so busy, most collisions are handled by an info exchange on the scene.

    where I work we have about 1/4 to 1/3 the # of officers per capita as the national average. we are WAY understaffed. Not quite at camden or oakland levels, but your statement begs the question. it assumes the primary role or even only role is "enforcement". in fact, that is a minority aspect of our job.

  • Yadda||

    Fat asses should have the insurance premiums raised to encourage better health.

  • IceTrey||

    Check the Comprehensive Annual Financial Reports (CAFR)and none of these governments are broke. It's a scam.

  • DLM||

    Check the Comprehensive Annual Financial Reports (CAFR)and none of these governments are broke.

    And of course none of them would be cooking the books a bit, right?

  • sevo||

    "And of course none of them would be cooking the books a bit, right?"

    Of course they are, but that's besides the point. Ice Trey is presuming that since the governments own assets in excess of current liabilities, they're not broke.
    In another thread, s/he mentioned that wealthy retirees can spend down their assets in place of income. As if there were any comparison to governments.
    Further most government assets are fixed; roads, bridges, buildings, land, etc.
    'So, Ms Smith, we're a bit shy of pension cash this month. How about, say, 1/10th mile of the north-bound lane of State Route 25 out side of Middleton instead?'
    His/her original post on the matter linked to a web site that's pitching the Protocols of the Elders of Zion as a blueprint of Jewish takeover plans.
    Let's just say Ice Trey and reality aren't really on talking terms.

  • IceTrey||

    Why don't you try reading for once you fucktard moron. You're idiocracy assumes I'm talking about physical assets which I'm not. If you weren't so busy sticking your head up your ass and actually look at the CAFR you wouldn't sound like such the douche that you are. You don't know what the fuck you are talking about so stfu.

  • IceTrey||

    As for the link that same article is up on 10,000 sites and I just picked one at random. If you weren't suck an imbecile and knew how to use Google you'd know that.

  • sevo||

    IceTrey|3.11.11 @ 8:26PM|#

    Why don't you try reading for once you fucktard moron. You're idiocracy assumes I'm talking about physical assets which I'm not. If you weren't so busy sticking your head up your ass and actually look at the CAFR you wouldn't sound like such the douche that you are. You don't know what the fuck you are talking about so stfu.
    reply to this
    IceTrey|3.11.11 @ 8:31PM|#

    As for the link that same article is up on 10,000 sites and I just picked one at random. If you weren't suck an imbecile and knew how to use Google you'd know that."

    Prove your claim, asshole.
    Or shut up.

  • Monty Python||

    I still have my vital organs, so that means I won't be broke regardless of how deep in debt I become! I like your thinking Ice Trey.

  • IceTrey||

    The CAFR's are "the books". It's the budgets that are being cooked.

  • sevo||

    IceTrey|3.11.11 @ 8:27PM|#
    "The CAFR's are "the books". It's the budgets that are being cooked."

    Prove your claim, asshole.
    Or shut up.

  • sevo||

    IceTrey|3.11.11 @ 4:42PM|#
    "Check the Comprehensive Annual Financial Reports (CAFR)and none of these governments are broke. It's a scam."

    You're lying.

  • IceTrey||

    And your a fucking retard.

  • sevo||

    IceTrey|3.11.11 @ 8:26PM|#
    "And your a fucking retard."

    Prove your claim asshole.

  • Devil Inchoate||

  • ||

    Not hard to do, apparently. Come up with an imaginary right, monopolized collective bargaining, and of course the fact that this occurs within an essentially monopolized industry through government force has no bearing on the argument.

    The article brings up Locke as if to validate the argument, but if anything government taking our property/wealth away and using it in the manner they do is what Locke was talking about.

  • sevo||

    Still waiting, Ice Trey. Prove your claims.

  • Gail||

    If you're looking for a fresh perspective:

    http://libertarianescapade.wordpress.com/

  • ||

    Quoting ..."Take the case of New Jersey. According to Joshua Rauh, professor of finance at Northwestern University, under the best case scenario, New Jersey’s pension funds (there are 5 of them) are scheduled to run out as soon as 2017. Once those state pension plans run out of money, pension payments will have to come out of the state’s general fund revenues—that is, out of the pockets of state taxpayers."

    Or perhaps (and more appropriately when considering how excessive such plan benefits are) we should tell the retired that their benefits (now coming out of general revenue) will be HALF what they previously were ...... because that's all a comparable private Sector worker would get from his/her employer.

  • ||

    You should know better than this. Pension contributions for Special Fund employees do not come out of the General Fund. They come out of the Special Fund the employee works for.

  • ||

    Charles, You are replying to a comment that addresses NJ, not CA. Besides the "Quote" (from the article) is saying it would come from general fund revenues. I didn't say that, although it appears to be correct for NJ.

  • ||

    Quoting ..."Would the federal government really have the ability to bail out 50 states whose individual debt often exceeds $100 billion? That would cost roughly $5 trillion. And while all of that money wouldn’t be paid out at once, it is still unrealistic for the states to count on a federal bailout."

    A Federal Bailout (of irresponsible States) would not only be unacceptable to the more responsible States, but since Taxpayers (now via increased Federal taxes) would ultimately pick up the tab, it misses the very appropriate opportunity for some of the "shared sacrifice" to directly hit Civil Servants through a reduction in promised benefits .... quite appropriate when we all know the "negotiations" which led to these excessive pensions were done with nobody at the "bargaining table" truly representing TAXPAYER interests.

  • ||

    Fascinating. Your State accounting graph vs accurate accounting assumes that you now what the actual return on investments will be over time. No one knows what the real numbers will be thirty or even ten years down the road. So the "actual" in the graph is a blatant lie.

    Your second graph forgets to mention that an "unfunded obligation" is a currently not funded obligation. The only way it makes any sense is if everyone retired tomorrow and no contributions from either the employer or the employee would ever come in and that the money would be invested in T-bills. Hardly a method of choice.

    Your next graph is the most preposterous of all. It assumes that over the next 42 years government salaries will go up by a factor of 8 and private enterprise will go up by a factor of 3.

    I can't see 42 years into the future and neither can anyone else.

    The article is not "reason", it is politics plain and simple.

  • sevo||

    Charles|3.12.11 @ 8:31PM|#
    "Fascinating. Your State accounting graph vs accurate accounting assumes that you now what the actual return on investments will be over time. No one knows what the real numbers will be thirty or even ten years down the road. So the "actual" in the graph is a blatant lie."
    Bullshit.
    They're both based on the same projections.
    -----------------------
    "Your second graph forgets to mention that an "unfunded obligation" is a currently not funded obligation. The only way it makes any sense is if everyone retired tomorrow and no contributions from either the employer or the employee would ever come in and that the money would be invested in T-bills. Hardly a method of choice."
    Bullshit.
    They're actuarial projections. The difference is that $28.2Bn missing from the fake state calcs.
    -----------------------------
    "Your next graph is the most preposterous of all. It assumes that over the next 42 years government salaries will go up by a factor of 8 and private enterprise will go up by a factor of 3."
    Not quite bullshit; poorly described.
    I see you didn't read the link. The graph is not crystal-ball prediction; it's a comparison of projected costs *if* we do nothing to change the conditions.
    -------------------------
    "The article is not "reason", it is politics plain and simple."
    Bullshit.
    The article may be flawed, but your reading of is it politics plain and simple.
    Sorry, parasite, you'll have to pay the price.

  • ||

    Flawed? It is nonsense.

  • sevo||

    Charles|3.12.11 @ 9:20PM|#
    "Flawed? It is nonsense."

    Yep, real detailed response to the points I raised.
    Hey, parasite, what's it going to feel like to earn a living?

  • ||

    I had already answered your questions before you raised them. There is no financial model where government wages could go up by a factor of 8 while private wages go up by a factor of three. Anything this out of kilter would right itself.

    Neither the state calculations or the calculations of the article are true or false. Both are based on assumptions. Neither is "fake".

    And I am not a parasite. And I certainly earned my compensation, I earned a living in a real job. Name calling doesn't improve your argument any, but it does show you are not sure of your ground. Not unusual.

  • sevo||

    Charles|3.12.11 @ 10:28PM|#
    "I had already answered your questions before you raised them."
    And they were refuted.
    -----------------------
    "There is no financial model where government wages could go up by a factor of 8 while private wages go up by a factor of three. Anything this out of kilter would right itself."
    Which, of course, is the point of the article; if they're not, we're in trouble.
    ---------------------------
    "Neither the state calculations or the calculations of the article are true or false. Both are based on assumptions. Neither is "fake".
    Wrong. They are both based on the same projections; the "state" calcs presume an impossible return; it's "fake".
    -----------------------
    "And I am not a parasite. And I certainly earned my compensation, I earned a living in a real job."
    Right. Of course you did. Could that have come from working for the government?
    ------------------
    "Name calling doesn't improve your argument any, but it does show you are not sure of your ground. Not unusual."
    Right. Brain-dead support of public unions is also not unusual from parasites.

  • ||

    Once again into the breach. I will not respond again.

    There is no way a prediction can be made regarding public vs private wages in Ohio 42 years from now.

    There is no way unfunded liabilities can be estimated accurately 30 years from now for New Jersey or Connecticut. You would have to know the exact rate of return 30 years in advance.

    I worked for my money and am not a parasite. And once again Ad Hominem attacks are the fall back position of people who don't know the facts. Or maybe just don't care.

  • sevo||

    Charles|3.13.11 @ 12:03AM|#
    "Once again into the breach. I will not respond again."
    You haven't yet, except for silly claims.
    --------------------------
    "There is no way a prediction can be made regarding public vs private wages in Ohio 42 years from now."
    Bullshit.
    *UNLESS* we do something to cut parasites' pay, we will see that disparity.
    -----------------------
    "There is no way unfunded liabilities can be estimated accurately 30 years from now for New Jersey or Connecticut. You would have to know the exact rate of return 30 years in advance."
    Bullshit. Based on stated returns, it's quite easy to predict.
    ----------------------------
    "I worked for my money and am not a parasite. And once again Ad Hominem attacks are the fall back position of people who don't know the facts. Or maybe just don't care."
    So you did slurp at the public trough? That's what I thought.

  • ||

    A true "Troll".

  • ||

    Quoting ..."A good first step would be to switch to accounting methods that show the true market value of their liabilities. Once those methods are in place, lawmakers should consider moving away from defined benefit pensions."

    That suggestion is right on the money, AS LONG AS the shift from DB to DC Plans includes FUTURE service year Pension accruals for CURRENT, not just new workers. This change is VERY important to address the ROOT CAUSE of the problem EXCESSIVE, and therefore VERY COSTLY pensions. Read on:

    So let’s cut to the chase …....

    Private sector employers typically contribute 3%-8% of an employee’s cash pay towards retirement, yet the total cost (expressed as a level annual % of cash pay throughout one’s career) of Public Sector Defined Benefit pensions (for a 30-year employee retiring at age 55) ranges from 29% to 58% depending on the richness of the benefit formula (with safety workers generally at the highest end).

    More specifically, for the noted formulas, the level annual %s of cash pay are as follows:
    2% per year of service w/o COLA – 29%
    2% per year of service with COLA – 39%
    3% per year of service w/o COLA – 44%
    3% per year of service with COLA – 58%

    Even after deducting the typical employee contribution of about 5% of pay, that still leaves the employer (meaning TAXPAYERS) contributing 24% to 53% of pay. The middle of these %s is 38.5% vs 5.5% (the middle of the range of what Private Sector employers contribute) or SEVEN (yes SEVEN) times greater.

    This is completely absurd, and the very modest “tweaking” at the edges by practically begging employees for a few more percent of pay contributions will NOT even begin solve the HUGE financial problem.

    TOTAL COMPENSATION (Cash Pay plus Pensions plus Benefits) should be comparable in the Public and Private Sectors for similar jobs, and with Cash Pay in the Public Sector now AT LEAST equal to (if not greater) than that in the Private Sector, there is ZERO justification for greater Public Sector Pensions and Benefits .

    Not for PAST service, but for FUTURE service, Public Sector pension accruals must immediately be brought FULLY down to the level of their Private Sector counterparts. Due to the huge reduction needed, the ONLY way to do this is to freeze the current defined benefit plans for CURRENT (yes CURRENT) workers, and switch everyone into a 401K-style Defined Contribution Plan with an employer contribution in the same 3%-8% range granted Private Sector workers.

    Additionally, since Private Sector retirees rarely get any retiree healthcare subsidy before eligibility for Medicare at age 65, similar restrictions should apply to Public Sector retirees.

    It’s TAXPAYERS’ money and Civil Servants are NOT more worthy of bigger pensions and better benefits.

  • Hero||

    http://www.youtube.com/watch?v=EmC26RuO26g

    All you need to know about the pension issue.

  • ||

    Obviously most states are dealing with budget crises. Pensions are a small part of the problem. The crappy economy has caused tax revenues to drop, which is the real problem.

    As usual, politicians on both sides of the aisle are looking at the short term. There needs to be pension reform. That can be done without breaking the unions. This is about cutting unions off from revenue streams that they use to support Democrat candidates. I'd be fine with that if we can also cut off funding from corporations and extremely wealthy individuals.

  • ||

    Quoting Uncle Joe ..."Pensions are a small part of the problem. The crappy economy has caused tax revenues to drop, which is the real problem."

    Real problem my AS*.. the REAL problem is now and has always been grossly excessive Public Sector Pensions & benefits.

  • sophie||

    Film is a different medium than print. Rather than characters making speeches, Rand's philosophy ought to be shown via the characters doing something interesting.

  • kelly||

    Whoa...since when did you guys start doing game commentary?

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