Under funded state pensions

[Spanky]

We get what we pay for..... it is what it is.

No necessary. You can pay a lot and get very little in return. If government wastes money, the tax players will not receive any valuable services in return.

 

[Texas Proud]

Someone will need to determine that.....

In a school, do we say that because its more difficult to get a physics or math teacher that that person is worth more and should get more than a kindergarten teacher? Or that because kindergarten teachers teach skills that even though they are just as hard to do for a kindergarten child and the calculus is for a high school junior, that because the skill is harder that the kindergarten teacher should get less money than the physics teacher? Do we do it by how many people in the profession would never take that job in a 100 years? How do we do it?

Surely there are easy ones. A high school physics teacher should more than a food store clerk who just pulls the food across the bar coder.

Just saying that determinations of more skill more ability are not as easy as those who are not in those professions, think it is.

Do we have a new government agency that does this? How much do we pay them?

Talk is easy; walking the talk is hard.

Z

I guess you missed what I was trying to say... I know that I have talked about having pay more in line with skill... but the quote you used was about the pension plan... I want to know the true cost of labor right now... the way the pension plan is structured, you do not know the cost until it is to late.. yes, they can estimate the cost... but that is something that can change as it is not 'fixed'.. I also think it is to high.

My proposal was to cut future costs of pensions... that would not affect anybody's current pension... as of today... you have X.. we can not take that from you.. but going forward you will earn Y.. now, you can choose to stay here and do this work or move on and find something else to do..



But to address you comments... there are BIG differences between teachers and the ability of them to teach. There are some classes you can get a highly qualified teacher at a dime a dozen... there are some you are hard pressed to find a warm body that qualifies... much less can even teach the subject... the issue is that they are paid the same... not matter what...

Using your thinking... the guy who changes your oil should be paid the same as the guy who has to rebuild your transmission... they both are important to your car... heck, the guy who changes your oil is more important since trannys don't blow up that much anymore..

Nope, the skill level is not there...

 

[ERD50]

Someone will need to determine that.....

In a school, do we say that because its more difficult to get a physics or math teacher that that person is worth more and should get more than a kindergarten teacher? Or that because kindergarten teachers teach skills that even though they are just as hard to do for a kindergarten child and the calculus is for a high school junior, that because the skill is harder that the kindergarten teacher should get less money than the physics teacher? Do we do it by how many people in the profession would never take that job in a 100 years? How do we do it?


Just saying that determinations of more skill more ability are not as easy as those who are not in those professions, think it is.

Do we have a new government agency that does this? How much do we pay them?

Talk is easy; walking the talk is hard.

Z

Z, first I have agreed with many of the things you just posted (not all), so yes we have some understanding.

But this post shows exactly where people get off on an impossible path about trying to determine what someone or something is 'worth'. That path is fraught with problems. What you are missing is, there is a very good system for this - it is called the free market. There is no "how do we do it", there is no "easy or hard" - it just does it.

In a free market, no one actually tries to determine a value for something - it just happens. All due to supply and demand. And it may have little to nothing to do with how 'hard' the job is, or how much skill it took, or anything. The 'worth' gets set by who will do the job for lowest price offered, or conversely, who can pay the lowest rate, and still hire the qualified people they need. Workers will hold out for the maximum they can get, employers (should be) holding out for the lowest they can offer. The employer has a fiscal responsibility to the shareholders, owners and somewhat to the customers, to do just that.

So no one should have the right to determine if a Kindergarten teacher should be paid more than a Calculus teacher or not. The market decides. If you can get all the qualified Calculus teachers you need for a lower offer than all the qualified Kindergarten teachers you need, then the school has a fiscal responsibility to the taxpayers to do just that.

Surely there are easy ones. A high school physics teacher should more than a food store clerk who just pulls the food across the bar coder.

Who says? If you are going to make this call, then you have to make it for every other position. No one should be doing that. If it really takes more $ to get clerks than physics teachers, then so be it. At least no one 'decided' (which would mean 'imposed') this on anyone. But of course, in a free market, the physics teacher WILL get paid more, there are fewer of them relative to the demand. It's not hard, it's simple.

I'm losing track of the different threads, but I think it was youbet who mentioned that here in IL the public school cannot offer more money to one type of teacher versus the other. That is true, and it is ridiculous. They should let the free market determine the price. We could be paying the teachers in low demand less, and we could get better qualified teachers for the high demand positions. Win-Win-Win.

IF you don't believe that how hard the job is has anything to do with 'worth', learn to spin 99 plates on sticks. It is very hard, it will require years of training. Now try to get you to pay someone to do it.

-ERD50

 

[HsiaoChu]

Lotsa good points that I can't disagree with... both from ERD50 and Texas Proud

But.... if you let the free market run Fire, police, education then I suspect that only the rich will have these things. There was a reason why a free and appropriate public education was introduced in the USA. Before that, free market was the process, and only the rich got education.

However, I do have to say that there is enough research on the methods of education now to be assured that if teachers should choose to use the techniques, then a basic level of positive proficiency for everyone can be established. One of these method systems is called LEARNING FOCUS©.

And, I agree that despite being unhappy for future educators, the defined benefit pension at a high level is dead.

IN PA, I suspect we will see a small defined benefit pension at about half of the current one, with some kind of 401K type for the rest. Employees will have some involvement as to where their contributions go. I had no choice in giving about 9.5% of my take home pay into the fund for about 33 years. We will also see some kind of amortization of the current debt into a sustained and required % every year for the next 40 years by both districts and the state. As it is now, the fund is not fully funded but its not touchable by anyone in the government, and its well managed normally. While it lost a lot of money in 2008, it made 13% in 2009, when interest rates continued at abysmal levels. So given even average times, the PA fund can make decent money.

Z

 

[clifp]

But.... if you let the free market run Fire, police, education then I suspect that only the rich will have these things. There was a reason why a free and appropriate public education was introduced in the USA. Before that, free market was the process, and only the rich got education.



And, I agree that despite being unhappy for future educators, the defined benefit pension at a high level is dead.

IN PA, I suspect we will see a small defined benefit pension at about half of the current one, with some kind of 401K type for the rest. Employees will have some involvement as to where their contributions go. I had no choice in giving about 9.5% of my take home pay into the fund for about 33 years. We will also see some kind of amortization of the current debt into a sustained and required % every year for the next 40 years by both districts and the state. As it is now, the fund is not fully funded but its not touchable by anyone in the government, and its well managed normally. While it lost a lot of money in 2008, it made 13% in 2009, when interest rates continued at abysmal levels. So given even average times, the PA fund can make decent money.

Z

You make good points also. Both individual and society as whole benefits from well educated children, professional police and fire departments. This is true even one personally doesn't have kids, never has a fire, and never needs cops.

The free market doesn't do a great job at delivering these services, and they are legitimate and important function of government. Certainly in the case of police, and teachers their are private sector equivalents (security, private investigators, private schools, corporate trainers) that can be used to help establish what is the fair market value of the service. There are psychic benefits to jobs like being a teacher, cop, or firefighter that are hard for the private sector to match. Saving lives putting a high-level drug dealer in jail, and teaching a kid to read are I imagine all pretty gratifying. Public sectors jobs have higher job security also. Of course there are downsides to being a public employee also.

I think the area where there is a huge discrepancy between private and state/local government is in the pension plans. I think they are too generous in two respects first they not only allow but encourage people to retire in their mid 50s by basically capping out the maximum pension for someone working 30 years in the system.The benefit reductions for early retirement are much less than a comparable plan like social security. Second and just as importantly the benefits aren't tied to the economic situation of the community and/or the country.

You said you had no choice but to contribute 9.5% to your pension. I guess in theory I could have chosen not to max out my 401K contribution at 12.5%, and when possible max out my IRA. However, I didn't realistically have a choice not make a large 401K contribution unless I was content to live on Social Security at age 66. I know that most of the folks on the board who've retired early from the private sector did the same.

It is worth looking at the private sector expected retirement is from making this contribution. If I put 12.5% into a 401K with a 4% employer match how much will I have by early retirement or normal retirement. If we project that you get a real 2% increase in wages. The follow table shows how many times your final salary you will have accumulated with combined 16.5% contribution for various (real) interest rates and length of time.

Times initial salary

Years 4% 5% 6%

30 6.7 8.0 13.0

40 10.0 12.7 16.2

To put this chart in real number. If guy starts out making 50K today from college with 2% real increase he'll end up making 110K by the end of his career and if averages a 5% real return on his contribution, he will have accumulated about 1.4 million in today's dollars.

If we apply the 4% SWR rule a private sector employee would only be able to retire on 25-50% of his income depending. The person contributing for 40 years is probably fine because Social Security would supplement their income and they have shorter withdraw period.

However, I think the take away from this chart is that even very diligent savers who max out their 401Ks and work for 40 years are hard pressed to have the same financial security as public employees who work for 30 years.

 

[ziggy29]

IN PA, I suspect we will see a small defined benefit pension at about half of the current one, with some kind of 401K type for the rest.

In other words, more like the FERS model the feds have adopted, one which I have repeatedly praised as a model, sustainable retirement system that relies on all three "legs" of the retirement stool of SS, personal savings and pension.

 

[ERD50]

Lotsa good points that I can't disagree with... both from ERD50 and Texas Proud

But.... if you let the free market run Fire, police, education then I suspect that only the rich will have these things. There was a reason why a free and appropriate public education was introduced in the USA. Before that, free market was the process, and only the rich got education.

OK, but it really does not have to be an all-or-nothing thing, and I don't think it should be.

It is in the public interest to have everyone protected by the police, and by the firefighters, and to have everyone educated. So that requires some public support. I'm good with that.

But that doesn't mean we can't also use the free market principles to achieve the goals where appropriate. Let's stick with Firefighters for a minute. Once the public has funded a Fire Department, shouldn't we buy fire trucks, two-way radios, office supplies and other support equipment on the open market, and let the manufacturers compete with each other to provide the best products at the best price?

Shouldn't we hire the firefighters on the open market, and get the best qualified people at the best price we can? Wouldn't anything else be a misappropriation of the funds entrusted to the government by the taxpayers?

That is what I want from teachers also. I want the best we can get for the money. If that means we need to pay some teachers in some areas more, fine. If it means we can get qualified teachers in other fields for less, that is fine also. And it will better serve the needs of the kids, which is what we are supposed to be doing in the first place.

-ERD50

 

[Spanky]

The free market doesn't do a great job at delivering these services, and they are legitimate and important function of government. Certainly in the case of police, and teachers their are private sector equivalents (security, private investigators, private schools, corporate trainers) that can be used to help establish what is the fair market value of the service.

Teachers of private schools make in most cases much less than their public school counterparts. The academic performance of private schools in general is higher than that of public schools.

 

[HsiaoChu]

The academic performance of private schools in general is higher than that of public schools.

That's a statement that cannot be verified since in PA, private schools are not required to take the devilishly difficult state tests, and at the same time, private schools are not required to take anyone who enters. You will not have private schools who pride themselves on high scholarship taking in kids who are at the lower end of the socio-economic group, or at the below the average IQ ranges. A private school that was forced to take in the same population of children that the public school gets and must address would not be able to do any better than some public schools. However, the one elementary school where I work is a national blue ribbon school and is #13 and #20 in reading and math in the entire state of 5000 elementary schools. No private school can even hope to match that.

 

[HsiaoChu]

Part of the problem here is that people without pensions speak in generalities as if all pension systems for the public sector are the same.

They vary very widely in what they require, how they are administered, how they are managed.

In PA, there are huge issues, but they aren't anywhere like those of Illinois or California, where the system was raided by state government or where the management of it was poor. There are places where you can retire at 55 with 100%, and other places where you have to wait until you are 62 and don't get more than 40%.

In PA, the fund has more than 46 billion bucks in it, and with current teacher contributions has enough money for anyone who is within 10 years of current retirement and anyone currently retired. If it continues to gain at 8%(this past year it gained at 13%) if won't have really bad issues, no matter what.

IN PA, teachers must work 35 years to get their full pension or they have to be 60 years old. There is a 2-3% per year penalty for going earlier than that, and something like a 5% per year penalty for retiring with less than 25 years in. Most teachers who want to retire earlier than 30 or 35 years could suffer as much a 30% off their income up to 25 years. But at 24 years in they would suddenly have double that reduction.

Some places have all their health care covered. PA teachers do not have any health care covered. They do have a state plan, but its usually more than the employer. My employer will keep me on, but at the rate that the employer must now pay for me to the insurance company.

You have mentioned that a person out of college starting at 50K a year..... I know of no teacher out of college starting at $50K a year, and many start at $35K or below. Sure there are some places where this happens but these are generalities designed to scare the populace. Additionally in PA, all teachers must pick up an additional 24 credits to maintain their certificate after 5 years, at often a price of $1500 a credit hour, which means that starting at their $39K they have to over five years come up with an additional $36,000 to pay for their continuing education just to keep their certificates, while they are having a full 9.5% of their take home pay channeled into the retirement fund. Some schools help with this, but few pay more than $400 per credit hour, and the teacher must come up with the money up front, while they are still paying on their college loans too.

What I am illustrating is that the issues for teachers in their system, in PA, are different than other places, and that the whole picture is rarely shared. I AM NOT SAYING THIS TO MAKE TEACHERS BETTER OR WORSE OFF OR BETTER OFF OR ANYTHING THAN OTHER WORKERS. I'm only sharing that generalities about education systems and retirement pensions and pay for work, are just that. And people who work in a business environment really don't have a clue to what the education work day is like with real children, and of course VICE VERSA.

Z

 

[Spanky]

Z,

I am aware that not all public pensions are the same. They do vary quite significantly. However, public sector pensions, in general, are much more generous than private sector pensions, most of which are either in demise or in danger of termination. Only a few mega corps are still offering a pension plan.

BTW, I have great respect for teachers.

 

[Leonidas]

The free market doesn't do a great job at delivering these services, and they are legitimate and important function of government. Certainly in the case of police, and teachers their are private sector equivalents (security, private investigators, private schools, corporate trainers) that can be used to help establish what is the fair market value of the service.

There is zero equivalency between what a police officer does and the function of a security guard. (Most) Security guards have badges, and some have guns, and after that there are no similarities. I won't be go into endless detail, but I'll give you an easy comparison by showing training required for the different occupations per Texas law:

Unarmed security guard - 8 hours
Armed security guard - 30 hours
Basic Texas Peace (Police) Officer - 688 hours.
Houston Police Department - Approximately 1900 hours (1200 hours academy training, 600-700 hours field training).
HPD Citizens' Police Academy - 33 hours (3 more than that provided to an armed security guard).

 

[clifp]

I picked the 50K salary for illustrative purpose. I believe the average starting salary for college grads is around 46K, and if you exclude the higher paying math,science and engineering, average starting paying for liberal art grads in in the neighborhood of 35-40K over course that is for 12 month jobs with 2-3 weeks annual vacation.

I've encourage people to look at the particulars of their pension plan since as you say the are very different, but overall the pension picture isn't good. I'd encourage you to do a search for Pennsylvania in the Pew study . The teachers and public employee pension appear to be about average 3 out 4 but the trend as far as funding is bad.

I then went to the PSERS website and download the presentation the euphemistically named employer Rate Spike information.

If it continues to gain at 8%(this past year it gained at 13%) if won't have really bad issues, no matter what.

Zarathu, no offense but you are badly mistaken. According to the PEW report PA only contributed 40% of the needed contribution to state/teacher pension plans, one of the lowest rates in the country. The fix the pension plan administrator is suggested is to dramatically increase the states contribution from $600 million this year to 4 billion in 2013 and 5 billion in years after that.

Now since billions are an eye glaze over number, let me help make it a little more approachable. The state of Pennsylvania has around 4.5 million households, previously they were paying around $100/year for teacher pension, now the state is going to ask each household to pay $1000-$1100 for teacher pension (and of course more for other state employees). I am guessing that if you went to 50 or so of your close neighbors explained all the great things that you done to help their children over the years you could probably get $100 out of a lot of them to pay your pension. I suspect that very few would fork $1,000 especially if you had went back year after year.

In order for your pension to be fine it needs to earn 8%/year on the existing assets AND collect $1,000/household more a year.

 

[clifp]

There is zero equivalency between what a police officer does and the function of a security guard. (Most)

I really really wasn't thinking of the mall cop security guards. More the head of corporate security of fortune 500 who are typically retired police detectives or such. The guys you were talking about who made more in the private sector.

 

[Leonidas]

I really really wasn't thinking of the mall cop security guards. More the head of corporate security of fortune 500 who are typically retired police detectives or such. The guys you were talking about who made more in the private sector.

Okay, you might be able to make some comparisons there, but you would have to do a lot of extrapolation. You're right that most of the people filling those positions are retired police or federal law enforcement, but I know what they make and I don't know a one that is making less than $110-120K a year. You could find some correlation with mid-management in a police agency, but working your way down to front line supervision and police officers would get pretty complicated once you factor in physical danger, shift work, occupational stress that is unique to police work, and increased mortality rate/reduced lifespan.

 

[clifp]

I need to get life because I know normal people should be watching the Oscar winning Precious on netflix, rather than reading pension plans for states I've never lived but the Pennsylvania Public School Employees Retirement System (PSERS) really deserves special mention, cause of it remarkable creative accounting. PSERS won an award for best financial reporting and its all there except for a common sense explanation of what is going on.

PSERS report claims that it is 86% funded, which is better than average for public pension in the country. How it arrived at the figure is the rest of the story. The average teacher in PA contributes about 7.5% of their salary they can retire at 62 or after 35 year at any age with a pension equal to years of service * 2-2.5%.

Since as I showed earlier even a 16% contribution is NOT enough for 70-80% salary after 35 years, the state is suppose to make up the difference. Historically the state was lousy about contributing to the pension, so PA has passed various laws requiring the state to contribute a minimum amount. Right now by statue the state has to contribute 4% of all teacher salaries to the pension. However, 4% isn't nearly enough to fund the pension so the state is suppose put in more. Of course the state doesn't actually do this contributing between 29-46% of what they needed to the last 5 years. Last year the state put in $503 million of the 1.76 billion required, by 2014 that number is will be 5 billion.

Now imagine every year your wealthy brother hires you for $10K to manage his extensive rental properties during his summer vacation, but every year he only pays you $3,000 instead of $10K. He does other good stuff like pay for mom's nursing bill so you don't want to be an *******. You are saving for retirement so every year you do a balance sheet to measure your progress. After 5 years of this how do you treat the $35,000 of unpaid income? Most people would write it off and even assume that next year that you'd only get $3,000 in income from your brother.

Not those smart folks managing the PA pension system, they not only treated the $35,000 as an asset, but AFAIK they tacked on a 8.25% interest charge to the unpaid state balance and included this in the fund's assets! This and few other legitimate things is how they managed to improved the funded status of the fund from 85% to 86% last year. This astounding bit of financial wizardry occurred despite suffering a 27% investment loss, cause the brilliant guys had 20% of the teachers pensions in alternative investment (i.e. hedge funds). BTW, Zarthus PSERS did worse than all of its own benchmarks.

There are some other astounding assumptions. In 2009 the system had 14,693 people retire and 4,471 die or a ratio of more than 3:1. Now with an increase lifespan one would assume that this ratio would increase. Not the PSERS by 2018 they project 11,370 retire and 6,199 a ratio of under 2:1. I guess there is a clause that teacher over 85 are turned into Soylent Green.

Clever tricks like this is why my simple system is in many ways better than fancy actuarial trick to determine an answer to the question
"is my pension sound."

PSERS
Assets 46 Billion
Active members 273K
Inactive but vested member 100K
Retirees 174K

Ratios
Active Members/Inactive 1:1
$/Member 84K
$/Retiree $264K

Average pension $22,748

Annuity value of $264,000 (50% survivor benefit NO COLA) $20,200

So right now the system is in ok shape. The problem is the system will soon be seeing a huge increase in the average pension payments as higher paid teachers retire in the next 5 to 10 years, and without the state massively increasing their payments the system is in trouble.

 

[HsiaoChu]

So right now the PENNSYLVANIA system is in OK shape. The problem is the system will soon be seeing a huge increase in the average pension payments as higher paid teachers retire in the next 5 to 10 years, and without the state massively increasing their payments the system is in trouble.

Bottom line in from above quote above.

The 7.5% that teachers pay into the fund is 7.5% of their gross IRS income, which actually amounts to about 9.5% of actual take home after other taxes. If they didn't take it out of my paycheck, then that would be the amount of what I have left over after taxes that I would have to put into a 401K or whatever.

Everybody knows what the state will do, when it eventually gets off their duffs and does something:

1. First of all they will have to intervene: By law and its a law that has been run through the courts numerous times, as well as it being in the state constitution that these committments to pensions MUST be paid, all current vested members benefits are obligations that must be paid. People can complain all they want, but its a waste of their energy which they could put into something more useful. Its like complaining that you have send in your taxes on April 15, or that its going to rain.

2. The state will pass a new law that states that both the state itself and the districts will amortorize the current debt to the system over a period of 30 to 40 years of same amount payments into the system every year that cannot be changed. With a change in the total system, and some steady payments into the current system and the hoped for early death of all retired teachers, this will ease the crises.(yeah.... when I called them to ask about my own retirement, they admitted that statistically only, they wished my mother at age 88, a retired teacher, would die soon.)

3. The state will probably raise the teacher portion of the payment into the system to 12% of gross pay.

4. For new hires, the state will partially eliminate the defined benefit program from what amounts to about 75% of previous three highest years to something like 35-40% of three highest years of income, and force the educators into some kind of 401K that either they administer or the state administers for the remainder of the amount. I doubt that this will affect teacher performance at all, or hiring. Teachers don't generally go through all the training processes that they have to do and then change at the end because there is not a good retirement system. No teacher who is 22 years old EVER thinks of retirement 40 years later.

5. The state will develop some kind of across the board health care system for every teacher and retired teacher and every other public employee, that will reduce the costs to the districts for the individual health care of each employee, thus freeing up money for spending on pension obligations.

6. I believe that they will change the time when teachers can retire of 35 years at any age or 30 years at age 60, to 30 years at age 62 at the earliest. I don't believe any teacher will be allowed to retire at age 58, and the earliest you could retire with a full pension would be 62. They might even bump it to 64 or 65.
------------------

Part of the issues for districts involve a whole series of basically unfunded mandates from the Feds for No Child Left Behind and Special Education that over the years have siphoned massive amounts of money from districts that in the past were used for their pension obligations. Over the past 9 years of not paying into the pension funds, my district's class size at elementary has dropped from about 30 to 18 per class. Class size will have to go back up, and all the other frills that we didn't have before when districts were required to pay into the pension fund(like from 1978 to 1997 nearly everyone of my budget requests was always cut), will go away. I should say They will not have since I will be retiring after 40 years. No real early retirement for me.

It will work itself out. It always does somehow.

Z

 

[HsiaoChu]

People can complain all they want. They can ask their neighbors if they want to pay this bill all they want. They can do what they want.

They can also complain about the weather and the april 15 tax deadline.

IN PA THE law is very clear, its been tested through the courts, and its in the state constitution. The current pension obligations have to be paid. You can change the future obligations, you can change the time the teachers can get the obligations, you can increase their payment into the fund, but you cannot change the benefits which were defined by law.

So rather than complaining about it, we all need to move on, and work on doing something about it. Besides, I will have to pay for this increase along with everyone else, and on my retirement salary too.

I'm interested in solutions, not constant complaining about why it happened. That makes no difference now. it is what it is.

 

[ERD50]

bold mine:

A private school that was forced to take in the same population of children that the public school gets and must address would not be able to do any better than some public schools.

However, the one elementary school where I work is a national blue ribbon school and is #13 and #20 in reading and math in the entire state of 5000 elementary schools.

No private school can even hope to match that.

You say that like it is a fact. How can you know this, since some of it seems hypothetical at this point (I don't think any private schools are forced to take the same cross-section)? Is it even true?

-ERD50

 

[HsiaoChu]

bold mine:
You say that like it is a fact. How can you know this, since some of it seems hypothetical at this point (I don't think any private schools are forced to take the same cross-section)? Is it even true?

-ERD50

I know it because my wife works for and started her own private Quaker Elementary School. I know it because I have close contact with many of the other private Quaker Schools in the east coast, including the very famous West Town School, and the Sidwell Quaker School that the President of the United States sends his kids to. These are schools which only take the cream of the crop from public schools.

And yes, it is true that these private schools do not have to take anyone they don't want to take. They are just like places like MIT or Harvard, or like specialized grad programs like the nuclear physics one my son got into at Notre Dame. The have entrance requirements.

But I have a feeling I answered a question that isn't what you were actually asking.

Z

 

[clifp]

Bottom line in from above quote above.

The 7.5% that teachers pay into the fund is 7.5% of their gross IRS income, which actually amounts to about 9.5% of actual take home after other taxes. If they didn't take it out of my paycheck, then that would be the amount of what I have left over after taxes that I would have to put into a 401K or whatever.

Everybody knows what the state will do, when it eventually gets off their duffs and does something:

1. First of all they will have to intervene: By law and its a law that has been run through the courts numerous times, as well as it being in the state constitution that these committments to pensions MUST be paid, all current vested members benefits are obligations that must be paid. People can complain all they want, but its a waste of their energy which they could put into something more useful. Its like complaining that you have send in your taxes on April 15, or that its going to rain.


It will work itself out. It always does somehow.

Z

Z I hope for your sake you are right, and you are correct these things do generally work out. Still the problem is the $5 billion the state needs is massive PA's budget is only 30 billion, so 1/6 of the budget will be needed to pay for teacher pensions in a few years add in pension for the rest of the worker you have huge chunk of the budget devoted to pension payments. I for one wouldn't depend on voters to accept this meekly.

Laws even constitutions can be changed (they amended the constitution 1/2 dozen times a year in California.). The economy has caused governments to renege on promises, California has done a couple of things (I'm not aware of the details) but I can tell you what has happened here in Hawaii.

In 2001, Hawaii passed a law giving generous tax credits to individuals who invest in local technology or TV/movie businesses. Over the years they have gradually reduced the attractiveness. In the last few years Nords, and I have invested in a few technology companies partly motivated by the tax credits. Last year they reduced the benefits for investment in the last two years of the act 2009/2010. Last week they pass a law that retroactively prevented us from claiming any credits we earned until 2013. In affect massively raising taxes on us for 2010,2011,2012. We will sue claiming that the state seized our property (tax credits) retroactively which is unconstitutional. I suspect that state will win using as precedent the California actions, and in effect claiming that is "technically bankrupt", since its promises exceed its ability to pay.

The are actual bankruptcy lawyers on the forum, but the one thing I do know is that in bankruptcy contract get broken.

 

[HsiaoChu]

Laws even constitutions can be changed (they amended the constitution 1/2 dozen times a year in California.). The economy has caused governments to renege on promises, California has done a couple of things (I'm not aware of the details) but I can tell you what has happened here in Hawaii.

.

Not in PA. Nothing changes in PA. Heck our legislators can't even agree to have a budget on time(they were almost 6 months late last year).

What do I think will really happen? I think that the reality is that the state will fail to pay the pensions of anyone who is more than 15 years from retirement. This means that anyone who is younger than 45 years old has little chance of getting a pension. And I think the feds will cap SS at about $25K per year no matter who you are. They will enter some gradually reducing defined benefit plan starting at 60% and over time dropping it to maybe 25%. And a good percentage of my group will be dead in 15 years.

So It will work for me, but not for many more people.

Z

 

[ERD50]

But I have a feeling I answered a question that isn't what you were actually asking.

Z

Correct!

-ERD50

 

[MichaelB]

As you also opted to make your comment public; as if it were not a well-intentioned suggestion for improvement, but, rather, as if it was intended to be a public kick in the shin.

There have been some lengthy posts by others here that I have chosen to not read for the same reason, and yet, I've never succumbed to any desire to publicly point out how they failed to communicate their message to me. Perhaps, in addition to being loquacious, one of my other failings is an over-developed sense of courtesy when it's really not necessary to be rude.

I hope my reply was brief enough. But please, don't waste any further time on correcting me if I was again imprecise in my words. I feel that if I am to improve the brevity of my writing I will have to devote some time to the effort, so I'm going to have to add to my "ignore poster" list so I'm not distracted. Unfortunately, you didn't make the cut.

Leonidas, your response showed more restraint than the comment that originated it. Better manners too. cheers...