Comments on: Unfunded Public Retirement Benefits http://www.coyoteblog.com/coyote_blog/2005/12/unfunded_public.html Dispatches from a Small Business Sun, 12 Feb 2012 09:39:47 +0000 hourly 1 http://wordpress.org/?v=3.2.1 By: Dave Schuler http://www.coyoteblog.com/coyote_blog/2005/12/unfunded_public.html/comment-page-1#comment-2185 Dave Schuler Wed, 14 Dec 2005 16:32:42 +0000 http://coyote-blog.com/wordpress/2005/12/unfunded_public.html#comment-2185 <p>It's unlikely that Illinois public employees will go to a defined benefits plan. Here the inviolability of public employees pension plans has constitutional force. That makes the underfunding of public employees pension funds all the more an outrage here.</p> It’s unlikely that Illinois public employees will go to a defined benefits plan. Here the inviolability of public employees pension plans has constitutional force. That makes the underfunding of public employees pension funds all the more an outrage here.

]]> By: Todd K. Moyer http://www.coyoteblog.com/coyote_blog/2005/12/unfunded_public.html/comment-page-1#comment-2184 Todd K. Moyer Wed, 14 Dec 2005 01:48:54 +0000 http://coyote-blog.com/wordpress/2005/12/unfunded_public.html#comment-2184 <p>Interesting that this is happening nationwide. Oregon already went through this a few years ago. During the stock market bubble, public retirement packages were so fat that people were retiring with pensions greater than their salaries. Turns out they had pensions that were allowed to grow with no limit to the upside, and the downside was limited to an annual 8% rate of return on the invested funds. That is great, as long as market returns exceed 8%, if you're a retiree. But, the fund was not benefiting from the excess returns; they were delivered to retirees. That means no cushion when the market produced FAR less than a +8% return for several years. Not so great for taxpayers who have to make up the difference. It quickly balooned into a huge liability.</p> <p>Who thinks up this stuff? Who was dreaming that they could guarantee a MINIMUM 8% annual return? I'm thinking somebody who didn't figure it was coming out of his pocket...</p> Interesting that this is happening nationwide. Oregon already went through this a few years ago. During the stock market bubble, public retirement packages were so fat that people were retiring with pensions greater than their salaries. Turns out they had pensions that were allowed to grow with no limit to the upside, and the downside was limited to an annual 8% rate of return on the invested funds. That is great, as long as market returns exceed 8%, if you’re a retiree. But, the fund was not benefiting from the excess returns; they were delivered to retirees. That means no cushion when the market produced FAR less than a +8% return for several years. Not so great for taxpayers who have to make up the difference. It quickly balooned into a huge liability.

Who thinks up this stuff? Who was dreaming that they could guarantee a MINIMUM 8% annual return? I’m thinking somebody who didn’t figure it was coming out of his pocket…

]]> By: Doug Murray http://www.coyoteblog.com/coyote_blog/2005/12/unfunded_public.html/comment-page-1#comment-2183 Doug Murray Tue, 13 Dec 2005 19:42:43 +0000 http://coyote-blog.com/wordpress/2005/12/unfunded_public.html#comment-2183 <p>Would such rule changes be made to apply in Washington as well? That could change Social Security discussions significantly.</p> <p>For example, one of the favorite arguments against personal/private accounts is the cost of borrowing needed for the conversion. That borrowing is actually a timing difference that just transfers the off book obligation to the balance sheet earlier than planned. This rule would force booking the entire existing debt and reveal the true cost of conversion borrowing to be much lower than claimed.</p> Would such rule changes be made to apply in Washington as well? That could change Social Security discussions significantly.

For example, one of the favorite arguments against personal/private accounts is the cost of borrowing needed for the conversion. That borrowing is actually a timing difference that just transfers the off book obligation to the balance sheet earlier than planned. This rule would force booking the entire existing debt and reveal the true cost of conversion borrowing to be much lower than claimed.

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