As of June 30, Kentucky’s largest fund for state workers held about 52 percent of the assets needed to pay current and future benefits to its 117,000 members.
As of June 30, Kentucky’s largest fund for state workers held about 52 percent of the assets needed to pay current and future benefits to its 117,000 members.
Government employee pensions are the next torpedo to hit us below the waterline. Like mortgages, they’ve been politicized with [url=http://reason.com/news/show/130843.html]predictable results[/url].
Glenn Reynolds has been all over this issue in recent months:
http://pajamasmedia.com/instapundit/?s=pension
The short of it: rather bleak.:(
Imagine if we had privatized everything…. All gone to people like Maddow.
The best thing would be
Guaranteed Retirement Accounts.
http://www.sharedprosperity.org/bp204.html
I’d prefer something solid than an IRA, given the last few months.
Villages, towns, cities, states… there’s a looming crisis in government obligations to retirees. We’ve been asleep at the wheel.
As a KY state government employee, I’m acutely aware of the situation facing our retirement system. Every year, the director of the retirement system raises a red flag to the governor and legislature, and every year, they kick the can on down the road. Very bleak prospect. For those of us still working, our raise this year was 1%, so with the huge cost of living increase during 2008, we really lost ground. Still, in the current economy, I’m just thankful I have a job.
John,
Social Security and Medicare are guaranteed: the government guarantees that it will print all the money needed to cover its on-paper obligations. This money-printing thing is great. So far as I know, the government of Zimbabwe has not bounced a single check.
With sound money and no income tax, people could truly “save for a rainy day,” rather than watch grinding inflation eat away at their purchasing power so they have to give it to people like Maddow and hope and pray for returns that will beat the Fed/Treasury’s printing press.
Byzantine, yes, if people were rational you’d be right. I wish human beings were as perfect as you think they are.
Social Security and Medicare are meant to work like insurance. They are collective pools of money to ensure some degree of stability in the public order, because the alternatives (because most people are pretty irrational and dependent upon each other) are worse.
I think most of Maddow’s clients would prefer the returns of the treasury than what they got.
[blockquote]The best thing would be
Guaranteed Retirement Accounts. [/blockquote]
If you are talking about retirement accounts that provide a specific monthly payment, that’s exactly what these government pension plans are, John, and exactly why they are teetering on insolvency.
If you are talking about government backing up private pension plans with a similar promise of a defined monthly benefit, that is little more than a green light for pension managers to engage in even riskier behaviors than they do now.
Ultimately, Bernie Madoff only does what the Social Security Administration has been doing for 70+ years now: He took money from new suckers to pay old suckers. There is no “pool of money,” no SS Trust Fund. It’s a Ponzi scheme, and its trajectory over the years has proceeded precisely along those lines, with near-insolvency temporarily deferred by ever-higher taxes. Ultimately, in another decade or so, it will implode just like every other Ponzi scheme has before it. You can congratulate yourself on your compassion for that long.
This is a common and growing problem that has been around for many years. In the past few years it has been masked by the substantial returns being achieved in the stock market, but that has pretty much all evaporated now and many plans are back where they were.
Another related problem. In our State in the last economic downturn the health of the plan was further harmed by the Legislature both beginning to divert required contributions to other things (such as funding union demanded wage increases), and taking away returns in excess of an arbitrary limit declared by the Legislature (skimming). My firm sued the State for breach of fiduciary duty and State constitutional requirements about funding of the pension plan. After several years of litigation and appeal, the State Supreme Court agreed that it was illegal and a violation of the State Constitution, but couldn’t do anything but warn the State not to do it again (because of legislative immunity/separation of powers).
I suspect we’ll start seeing that again with the present bad economic times.
Any State, however, that has not moved from a defined benefit plan to a 401K type model for new employees is a fool, however. There’s no way you can guarantee a payout, and many of the plans have become Ponzi schemes as a result.