Ohio public school teachers would pay a larger share of their retirement costs, work until they’re older and see pension benefits cut under changes approved Thursday that aim to keep their primary pension fund solvent by saving $10.9 billion.

The State Teachers Retirement System board approved a host of changes to the benefit program that serves the bulk of the pension fund’s 470,000 members. The changes must be approved by lawmakers and the governor.

Spokeswoman Laura Ecklar said the package marks the end of a two-year effort to find a way to keep the pension fund afloat for the long haul.

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“Industrial relations” are back at the heart of politics””not as an old-fashioned clash between capital and labour, fought out so brutally in the Thatcherite 1980s, but as one between taxpayers and what William Cobbett, one of the great British liberals, used to refer to as “tax eaters”. People in the private sector are only just beginning to understand how much of a banquet public-sector unions have been having at everybody else’s expense…. In many rich countries wages are on average higher in the state sector, pensions hugely better and jobs far more secure. Even if many individual state workers do magnificent jobs, their unions have blocked reform at every turn. In both America and Europe it is almost as hard to reward an outstanding teacher as it is to sack a useless one.

While union membership has collapsed in the private sector over the past 30 years (from 44% of the workforce to 15% in Britain and from 33% to 15% in America), it has remained buoyant in the public sector. In Britain over half the workers are unionised. In America the figure is now 36% (compared with just 11% in 1960). In much of continental Europe most civil servants belong to unions, albeit ones that straddle the private sector as well. And in public services union power is magnified not just by strikers’ ability to shut down monopolies that everyone needs without seeing their employer go bust, but also by their political clout over those employers.

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An Ohio pension fund has sued Wells Fargo & Co to recover losses suffered when a bank that it bought put the fund’s money into a risky investment vehicle that failed.

The School Employees Retirement System of Ohio, represented by state Attorney General Richard Cordray, said it lost $29.6 million because a unit of Wachovia Corp mismanaged a securities lending program marketed as a “low-risk” way to boost returns.

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A study by Northwestern University’s Kellogg School of Management calculates the combined underfunding of pensions in all municipalities at $574 billion. States have an estimated $3.3 trillion in unfunded pension liabilities.

Nunes says 10 states will exhaust their pension money by 2020, and all but eight states will by 2030.

States’ troubles are becoming bigger. Hitherto, local governments have acquired infusions of funds from federal budget earmarks, which are now forbidden. Furthermore, states are suffering “ARRA hangover” – withdrawal from the American Recovery and Reinvestment Act, aka the 2009 stimulus.

There are legal provisions for municipalities to declare bankruptcy. Some have done so. As many as 200 are expected to default on debt next year. There are, however, no bankruptcy provisions for states.

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Cities across the nation are raising property taxes, largely citing rising pension and health-care costs for their employees and retirees.

In Pennsylvania, the township of Upper Moreland is bumping up property taxes for residents by 13.6% in 2011. Next door the city of Philadelphia this year increased the tax 9.9%. In New York, Saratoga Springs will collect 4.4% more in property taxes in 2011; Troy will increase taxes by 1.9%.

Property-tax increases aren’t unusual, in part because the taxes are among the main sources of local revenue. But officials say more and larger increases are taking hold. “This year we have seen a dramatic increase in our cities and towns having to increase property taxes” for pensions and other expenses, said Jack Garner, executive director of the Pennsylvania League of Cities and Municipalities.

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…the declining, little-known city of Prichard is now attracting the attention of bankruptcy lawyers, labor leaders, municipal credit analysts and local officials from across the country. They want to see if the situation in Prichard, like the continuing bankruptcy of Vallejo, Calif., ultimately creates a legal precedent on whether distressed cities can legally cut or reduce their pensions, and if so, how.

“Prichard is the future,” said Michael Aguirre, the former San Diego city attorney, who has called for San Diego to declare bankruptcy and restructure its own outsize pension obligations. “We’re all on the same conveyor belt. Prichard is just a little further down the road.”

Many cities and states are struggling to keep their pension plans adequately funded, with varying success. New York City plans to put $8.3 billion into its pension fund next year, twice what it paid five years ago. Maryland is considering a proposal to raise the retirement age to 62 for all public workers with fewer than five years of service.

Illinois keeps borrowing money to invest in its pension funds, gambling that the funds’ investments will earn enough to pay back the debt with interest. New Jersey simply decided not to pay the $3.1 billion that was due its pension plan this year.

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Now the city faces a rare and crippling crisis. On Jan. 1 city property values will decline immediately because higher taxes will be needed to stabilize its pension fund. All of that will occur because the state, in the new year, will be able to take over the pension plan since the mayor and council are nowhere near a deal that will deliver the $200 million-plus needed to bring the plan up to 50 percent funded, from the current 29 percent.

That takeover will mean the city will be forced by the state to pay much higher contributions into the fund year after year. The state doesn’t care where the money comes from — even if it means sharply higher taxes — only that the city shore up its pension program.

City Council members keep saying that such a hit won’t come for years, but that lackadaisical attitude is part of the reason they and the mayor have failed to find a compromise.

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State Street Corporation (NYSE: STT), one of the world’s leading providers of financial services to institutional investors, announced today that it has been appointed by the General Synod Pension Plan of the Anglican Church of Canada to provide custody, fund accounting, securities lending and foreign exchange services for CAD $600 million in assets.

The General Synod Pension Plan of the Anglican Church of Canada is a multi-employer Pension Plan registered with the province of Ontario and has been in existence since 1946. The General Synod Pension Plan of The Anglican Church of Canada provides pension benefits to clergy and lay employees of the Anglican Church of Canada and related organizations.

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Religious denominations have long provided retired clergy and staff with secure pension payments””more secure, in some cases, than corporate retirement plans.
But some recent bumps have drawn attention to the vulnerabilities of so-called “church plans,” which are exempt from federal regulations aimed at safeguarding retirement funds for private-sector retirees.

As cash-strapped states and private companies revamp, freeze or end their pension programs altogether, participants in church plans are now realizing how church plans can be riskier than they appear, observers say.

“As a group, employees in so-called church plans are far more at risk than other private sector employees,” said Karen Ferguson, director of the Pension Rights Center, a Washington-based watchdog group.

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The trustees of the Church Pension Fund have decided not to grant a cost-of-living-related increase for retirees and surviving spouses in 2011, according to fund president Dennis T. Sullivan.

In a letter posted here on the Fund’s website, Sullivan added that the trustees will not make a “one-time special supplement” benefit payment as they did in 2010.

“I know this decision will be a disappointment to many of you,” Sullivan wrote.

This will be the second year in a row that the Fund has not made a cost-of-living-related increase.

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Five weeks after the Legislature passed a budget that promised to close a $19 billion budget shortfall, California has sunk back into yet another fiscal crisis, this time facing a $26 billion gap that is posing a major new challenge for the incoming governor, Jerry Brown, and seems almost certain to force deep cuts in a state already reeling from three years of financial turmoil.

The departing governor, Arnold Schwarzenegger, has called a special session of the Legislature for Dec. 6 to begin dealing with one part of the problem: a projected $6 billion shortfall in the $126 billion budget passed in October, a record 100 days late. Mr. Schwarzenegger’s aides said the governor, a Republican who has fought repeatedly with Democrats in pushing through deep spending cuts, will propose another round of reductions to get the state through the end of this fiscal year in June.

“There’s no more easy stuff to cut,” Susan Kennedy, Mr. Schwarzenegger’s chief of staff, said Monday. “We are cutting into bone now.”

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For the past few decades, many local and state governments evaded… [certain set] requirements, using an array of accounting gimmicks and rosy economic predictions to routinely understate pension fund liabilities and overstate assets. All the while, cozy arrangements between politicians and public employee unions fueled pension benefit increases. According to a study by the Pew Center, state and local governments today face at least $1 trillion of unfunded pension promises.

The problem is exacerbated by significant differences between the laws governing public pensions and those in the private sector.

Private sector pensions are required by federal law (Employee Retirement Income Security Act) to conform to certain minimum pension funding rules. These rules require more accurate measurement of pension liabilities and assets and prevent companies with significantly underfunded pension plans from making new promises they can’t afford to keep. State and local government plans are not subject to these federal laws, and many failed to take it upon themselves to responsibly ensure that they would be able to make good on their promises….

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The problem with the business cycle under this analysis, you’ll notice, is not the bust ”” it’s the boom. That’s when the bad investment decisions are made, largely because political influence in the markets (housing policy, tax breaks, artificially cheap money and other interest-rate subsidies, risk subsidies, etc.) distorts economic calculation.

Which brings us back to the entitlements. It’s easy to say: Well, we’ll just raise the retirement age, or cut benefits, or means-test them, or raise taxes on the wealthy who receive them (which amounts to means-testing, but Democrats like that version better). And, yes, that probably is what we will do, eventually. But that does not get us out of the economic pickle: People have been making decisions for years and years ”” decisions about saving, investing, consuming, working, and retiring ”” based at least in some part on what are almost certainly faulty assumptions about what sort of Social Security, Medicare, and other benefits they will receive when they retire. When those disappear, a lot of consumption is going to have to be forgone ”” and a lot of capital dedicated to producing those goods and services for consumption will be massively devalued. Businesses will have to retrench, probably in a way that is more disruptive and more expensive than the housing-bubble recession necessitated.

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Earlier this year, Illinois said it had found a way to save billions of dollars. It would slash the pensions of workers it had not yet hired. The real-world savings would not materialize for decades, of course, but thanks to an actuarial trick, the state could start counting the savings this year and use it to help balance its budget.

Actuaries, including some who serve on the profession’s governing boards, got wind of what Illinois was doing and began to look more closely. Many thought Illinois was using an unorthodox maneuver to starve its pension fund of billions of dollars, while papering over a widening gap between what it owed and how much it had. Alarmed, they began looking for a way to discourage Illinois’s method before other states could adopt it.

They are too late. The maneuver, and techniques that have similar effects, are already in use in Rhode Island, Texas, Ohio, Arkansas and a number of other places, allowing those states to harvest savings today by imposing cuts on workers in the future.

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The consequences of doing nothing would be painful. But they would be far less harmful than the consequences of an unconditioned federal bailout, which would mean massive new fiscal commitments at the federal level.

Unfortunately, leaders in Illinois and elsewhere are now talking quietly about the possibility of a federal bailout. Such speculation undermines state and local efforts to reform pension systems or make other hard choices. Why agonize over unpopular budget cuts or tax increases if the feds will ride to the rescue?

Bailing out state pensions would be astronomically expensive. According to a Pew Foundation estimate this year, the total unfunded liabilities of the 50 states’ pension funds amounted to about $1 trillion in 2008. Another recent study, by Josh Rauh of Northwestern and Robert Novy-Marx of the Chicago Booth School of Business, estimated that the unfunded liability was closer to $3 trillion. Adding the liabilities of municipal pension funds makes the total even larger.

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Fidelity administers 17,000 plans, which represents 11 million participants. In the second quarter, some 62,000 workers initiated a hardship withdrawal. That’s compared with 45,000 in the same period a year ago.

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America’s baby boomers””those born between 1946 and 1964””face a problem that could weigh on the economy for years to come: The longer it takes for the economy to recover, the less money they’ll have to spend in retirement.

Policy makers have long worried that Americans aren’t saving enough for old age. And lately, current and prospective retirees have been hit on many fronts at once: They have less money, they earn less on what they have, their houses aren’t rising in value and the prospect of working longer to make up the shortfall has dimmed significantly in a lousy job market.

“We will have to learn to make do with a lot less in material things,” says Gary Snodgrass, a 63-year-old health-care consultant in Placerville, Calif. The financial crisis, he says, slashed his retirement savings 40% and the value of his house by about half.

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There’s a class war coming to the world of government pensions.

The haves are retirees who were once state or municipal workers. Their seemingly guaranteed and ever-escalating monthly pension benefits are breaking budgets nationwide.

The have-nots are taxpayers who don’t have generous pensions. Their 401(k)s or individual retirement accounts have taken a real beating in recent years and are not guaranteed. And soon, many of those people will be paying higher taxes or getting fewer state services as their states put more money aside to cover those pension checks.

At stake is at least $1 trillion. That’s trillion, with a “t,” as in titanic and terrifying.

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As the Evangelical Lutheran Church in America (ELCA) fights to stay out of a legal battle over unpaid pension benefits, all sides agree on at least one point:

More is at stake than the millions of dollars owed to some 500 pensioners of Augsburg Fortress, the ELCA’s publishing arm.

Last month, the ELCA asked a federal court to be dropped from a suit filed by stakeholders in Augsburg’s recently dissolved pension plan. The ELCA contends it bears no responsibility under the 1974 Employee Retirement Income Security Act because Augsburg Fortress’ pension program is a “church plan.” Church plans are exempted from ERISA requirements, which include sufficient funding to meet promised obligations.

Some Lutherans, however, don’t like what they’re seeing.

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Oregon government stands at the edge of a financial chasm as precarious as any in its 151-year history, hemmed in by the global recession, questionable spending decisions and a budget-draining combo of skyrocketing expenses and sluggish growth.

Consider this sobering fact: State expenses, including payroll, health and retirement benefits, and debt payments, are slated to rise by nearly $4 billion over the next two years — a 26 percent jump. During the same period, however, revenues to pay those expenses are expected to increase by a little less than $2 billion, or about 14 percent — and that assumes a return to a robust economy.

Oregon simply can’t keep up.

Lacking a substantial tax increase, which appears unlikely, the state won’t have the money to offer the same level of services, pay and benefits to the same number of people.

The state has faced tough times before, but this crisis is a game changer, economists and political leaders agree. Past budgetary tricks, such as borrowing or sweeping money from other state funds, won’t cut it.

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You may find it here.

Many states are acknowledging this year that they have promised pensions they cannot afford and are cutting once-sacrosanct benefits, to appease taxpayers and attack budget deficits.

Illinois raised its retirement age to 67, the highest of any state, and capped public pensions at $106,800 a year. Arizona, New York, Missouri and Mississippi will make people work more years to earn pensions. Virginia is requiring employees to pay into the state pension fund for the first time. New Jersey will not give anyone pension credit unless they work at least 32 hours a week.

“We can’t afford to deny reality or delay action any longer,” said Gov. Pat Quinn of Illinois, adding that his state’s pension cuts, enacted in March, will save some $300 million in the first year alone.

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According to the Pew Center on the States, state pensions and other retiree benefit programs are underfunded by $1 trillion. And that estimate was made before the stock market swoon of 2008.

That number is an aggregate of all states, some of which are in relatively decent shape, and some of which are courting disaster. Too many states and localities created pension plans that are way too generous, allowing some workers, particularly those in law enforcement and other emergency response areas, to retire as early as their 40s, to “double dip” by collecting a salary and pension at the same time, or to manipulate pay in a way that inflates their pensions. In New Jersey, for example, a local lawyer and Democratic Party official cobbled together some part-time work for local government to claim a pension of more than $100,000.

The shortfall is made worse when cash-strapped governments make unrealistic projections about investment returns or underfund their plans by failing to make adequate annual contributions.

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Public school teacher pensions are a ticking time bomb. They’re short by $933 billion in assets needed to cover promises to retirees, or more than $18,600 per public school pupil.

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The Internal Revenue Service is drafting guidance that could require employers with religious affiliations to warn workers when their pensions have lost their federal safety net.

Over the past decade, more than 100 employers, including hospitals, schools, nursing homes, charities and other nonprofits, have converted their pension plans to “church plans,” a largely unregulated category of pensions that generally cover clergy and lay employees of churches and synagogues.

Church plans are exempt from federal pension rules, including those that require employers to fund the plans and insure them with the Pension Benefit Guaranty Corp., or PBGC, a federal agency that pays the benefits if a pension plan runs out of money.

“They said: ‘Hallelujah, I’m a church plan,’ and no longer have to meet funding requirements, or pay premiums, said Andrew Zuckerman, the IRS’s acting director of employee plans, at a meeting for pension groups this year.

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Yesterday was my 58th birthday. If I were a Greek worker I could retire. Although pension payments in Greece normally start around 61, special provisions allow anyone to retire at 58 if they have been in employment for 35 years. That, as it happens, is how long I have been at work. My index-linked pensions from the Greek Government would be worth 75 to 90 per cent of the average salary in the country, guaranteed for the rest of my life by the State.

If you want to know why Greece is going bankrupt and why the euro seems to be on the verge of disintegration, look no farther. The best argument I have ever heard for a break-up of the euro was this observation in a German newspaper: “The Greeks go on to the streets to protest against an increase of the pension age from 61 to 63. Does this mean that Germans should extend the working age from 67 to 69, so Greeks can enjoy their retirement?”

This, however, is not another article about self-indulgent Greeks and self-righteous Germans. The battle over bailouts in Europe is only a sideshow compared with the great social conflict that lies ahead all over the world in the next 20 years. This will not be a struggle between nations or social classes, but between generations ”” and it is a conflict that, in Britain, begins in earnest this year. The end of the Second World War in May 1945 marked the start of the baby boom, which lasted until the mid-1960s. Now, 65 years later, the corresponding retirement revolution is about to shake up our society, economy and political institutions.

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The state of California’s real unfunded pension debt clocks in at more than $500 billion, nearly eight times greater than officially reported.

That’s the finding from a study released Monday by Stanford University’s public policy program, confirming a recent report with similar, stunning findings from Northwestern University and the University of Chicago.

To put that number in perspective, it’s almost seven times greater than all the outstanding voter-approved state general obligation bonds in California.

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But the comfortable retirement promised to retired firefighters and police officers is taking its toll on the city where DeGenova still lives. Today, Cranston is staggering under a huge underfunded pension liability equal to more than twice its annual budget, and paying the pensions of retired police officers and firefighters now absorbs some 20 percent of the city’s budget.

“Right now the unfunded liability is well over $240 million,” says Mayor Allan Fung. “And so it’s a big obligation and is basically a ticking time bomb for the city of Cranston that we are trying to get a handle on.”

How this happened is a monument to political shortsightedness. For years, Cranston operated a separate pension fund for more than 500 police and firefighters who regularly contributed money from their paychecks to the fund. (Other municipal employees were part of the state pension system.) Instead of setting the money aside and investing it, the city used the funds to pay operating expenses ”” everything from shoveling snow to paying employee salaries, says former Mayor Stephen Laffey.

“It was like taking your 401(k) plan and saying, ‘I have to buy a lot of bubble gum with it.’ That’s what they did, and they really did it with a straight face,” Laffey says.

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