Public Pensions in Crisis

by albertacowpoke | October 11, 2009 at 05:28 am

187 views | 40 Recommendations | 15 comments

Consultants and Government officials in the United States have come to the conclusion that the current money crisis and markets, pension funds have incurred losses that are insurmountable.

The funds affected are those that pay public pensions to teachers, police forces , fire departments and other public employees.

Pricewaterhouse Coopers predicts that within 15 years public systems will have less than half of the money needed to meet their pension obligations. Some analysts predict that funds will hit that low within a decade.

Markets have lost close to a Trillion dollars. This has left fund managers for this pensions with an unenviable choice to either go with high risk investments or slash pension benefits.

During the so-called boom times of the market, pensions were invested in hedgefunds or other high risk investments. The inevitable result has now come home to roost, unfortunately on the back of those that were planning their retirement with these pensions.

Welcome to the new reality.

The upheaval on Wall Street has deluged public pension systems with losses that government officials and consultants increasingly say are insurmountable unless pension managers fundamentally rethink how they pay out benefits or make money or both.

Within 15 years, public systems on average will have less half the money they need to pay pension benefits, according to an analysis by Pricewaterhouse Coopers. Other analysts say funding levels could hit that low within a decade.

After losing about $1 trillion in the markets, state and local governments are facing a devil's choice: Either slash retirement benefits or pursue high-return investments that come with high risk.

2 See all footage | View Slideshow

Share: email story | add to any | | facebook | stumbleupon

recommend Add a comment

marianmo

at 06:05 on October 11th, 2009

how sad

nanute

at 07:15 on October 11th, 2009

It seems like the whole "enchilada" is unraveling. Good story ACP.

albertacowpoke

at 07:28 on October 11th, 2009

Thank you nanute and marianmo

Roy C

at 07:35 on October 11th, 2009

Vallejo, Ca., as a city, municipality, is already bankrupt.

I will toot my own horn here. I thought that these pensions were too generous many times. Stuff you could never get out of a corporation. I wondered how long this could last.

Now that gravy train has ended.

Next it will be MediCare, MedicAid, and Social Security.

The bad part, other than the negative part that hits the employees directly, is that the pension funds were the democratization of Wall Street. Teacher's pension fund managers called the shots on boards of directors and who got hired as CEO.

Now, that is over or cut back as well.

albertacowpoke

at 07:48 on October 11th, 2009

I'm afraid you're right Roy.

a211423

at 10:28 on October 11th, 2009

Roy,

City employees in Vallejo belong to PERS retirement system that is state operated, not city. The only problem I have heard about--i have family member who works there--when people are retiring they are getting IOUs for their accued sick leave and vacation, instead of getting paid for it. And the general feeling is they will never get that money.

The PERS system is solvent so far. I paid into PERS for over twenty years, and recieve retirement.

Roy C

at 12:53 on October 11th, 2009

Vallejo's insolvency then is based on what?

a211423

at 13:07 on October 11th, 2009

It's a very long history in Vallejo of high wages and strong unions. When I worked for the county, City of Vallejo jobs were coveted by just about everyone because of their high wages and that was for all jobs, not just police and fire who had some of the highest paying jobs in the bay area. Eventually this caught up with the city and when the economy started the decline with property devaluation resulting in less property tax and basically less income all around, they couldn't pay their bills, contracts or city employees. The employees have already taken an 8 or 10% cut in pay. And some union contracts are still being negotiated--I think this is the third year!

http://calpensions.com/2009/03/24/vallejo-bankruptcy-judge-wants-a-settlement/

Barry Artiste

at 08:47 on October 11th, 2009

But then Taxpayers are the biggest hedge fund against inflation and the pensions will go on.

Iffy (not verified)

at 09:52 on October 11th, 2009

Don't worry: they have already decided to hyperinflate their way out of the mess and use illegal migrants and the youth to work like devils to come up with the cash to pay for pension funds.

158

at 09:53 on October 11th, 2009

This is not good news.

Pensions need more safeguards.

The_Cynic

at 12:44 on October 11th, 2009

That free-market and deregulation is the best thing since sliced bread, init!? /sarc

albertacowpoke

at 12:49 on October 11th, 2009

I still like sliced bread, not sure about the market lol.

Barbara McPherson

at 14:01 on October 11th, 2009

The continuation of pensions is a big problem in Canada too. With the demise of defined benefit plans a retiree can't count on that money or benefits any more. Could be all us old geezers end up as greeters at Walmarts.