When financial markets cratered in late 2007, state pension officials assured lawmakers and the public that the damage to government retirement funds was only temporary. Pension funds are long-term investors, their story went, and pension systems would recover as soon as the market did. When lawmakers in Montana, for instance, asked the state treasurer whether they should be worried about the government’s ability to meet its retirement obligations, he confidently advised them to “go fishing” instead. They should have ignored him and taken action to bolster the state’s pension system, which has never recovered from the market crash. Montana’s retirement system has only about 75 percent of the money today that it needs to pay retirees, despite a nine-year stock-market rally.
Montana isn’t alone. A recent Wilshire Consulting report estimates that at the end of fiscal 2017, state government pensions nationwide were only 70 percent funded, down from 87 percent in 2007. Since the recovery began in 2009, $100 placed in a broad market-index fund would have yielded an investor about $365 today—an average compound annual gain of some 15 percent. No matter for pensions, though: thanks to a host of problems, most state and local government funds have spent a good part of the nine-year recovery heading in the wrong direction. Many are consequently ill-positioned to withstand the next market downturn, and without further cost-saving reforms, taxpayers in many states will face steep new assessments in coming years.
One problem is that these systems have grown so large, with so many workers earning new pension credits for their approaching retirements, that states’ obligations to these workers are growing relentlessly. Since 2007, state pension-system liabilities have increased to $4.52 trillion from $2.83 trillion, according to the systems’ own accounting. A major underlying driver of that increase is the need for defined-benefit pension systems to raise the amount of money they set aside for each worker as he gets closer to retirement. In 2017, for instance, that factor alone added $307.7 billion in new liabilities to state retirement systems studied by Wilshire.
Pension systems have also missed their projected financial targets. Back in 2007, most of the systems estimated that they’d earn an average yearly investment return of about 8 percent. Instead, according to Wilshire, they registered gains of 6.79 percent over the last decade. Many funds have now lowered their projections to more realistic targets. The average, reports Wilshire, is 7.25 percent. Lower projected market returns add to future debt, to the tune of about $90 billion in 2017 alone.
Pension plans have also miscalculated the impact that volatile swings in the market have on their ability to recover. When the market plunged throughout 2008 and into 2009, the value of government pension assets dipped from nearly $2.7 trillion to just $2.02 trillion. Pension funds then spent the next three years of robust investment returns making back the money they’d lost, even as their liabilities grew. In addition to the sharp market decline, the increasing cost of benefits drained funds. In 2017, for instance, state funds paid out $244 billion in retirement benefits. Governments have struggled to keep up with the drain. Since 2007, they’ve boosted their contributions into pension funds by 90 percent, to $140 billion annually. It’s not been nearly enough to offset the devastating effect of market declines, missed investment goals, and rising benefit payments.
The impact has been wider than many realize. Most coverage of the government pension crisis focuses on those places in the worst condition—school districts in California, Chicago’s fire and police pension funds, municipal pensions throughout Illinois, state pension systems in New Jersey and Connecticut. But the majority of funds are heading in the wrong direction. A Bloomberg report based on 2016 financial data estimated that funding levels for 43 state retirement systems declined. Among the worst was Colorado, which saw its funding ratio drop 14.4 points, to 46 percent, prompting the state to pass cost-cutting reforms.
The underlying message of these distressing numbers is that the financial structure of most state and local defined-benefit pension funds is deeply flawed. In particular, their financial models do not adequately account for the impact that sharp marketplace swings can have on their ability to keep up with the growth in the retirement benefits that workers are earning. That’s especially troubling because if funds cannot make headway reducing their debt in such a robust economy, what happens during the inevitable next bear market? If funding levels remain close to where they are now—and short of some spectacular rise in the marketplace in the next few years, that’s where they will be—then the next market downturn will widen the gap between pension funds’ assets and liabilities even more, increasing their debt. Many pension systems will see their funding slip to 60 percent or less of the money that they need to pay future retirement costs. At that point, states simply won’t have enough money invested in the market to keep up with the growth of their retirement obligations. Only massive infusions of cash from taxpayers could help then, but state and local governments—already having upped their contributions to pensions—will be in no position to bail out funds with taxpayer dollars when the next recession hits.
The only sure answer is to continue reducing pension benefits that workers earn in order to slow the growth of future retirement bills before the gap between what states owe retirees and the money that pension funds have on hand grows so large that there’s no way to close it—and the whole system collapses.
Is California Governor
Jerry Brown
Mentally Ill?
Leftists are relentlessly
selling their bogus narrative that Trump is insane. Here are samples
of leftists' headlines: "Lawmakers Met With Psychiatrist About Trump's
Mental Health," "President Trump's Mental State An 'Enormous Present
Danger,'" "The Awkward Debate Around Trump's Mental Fitness,"
"The Dangerous Case of Donald Trump: 27 Psychiatrists Assess."
So what has Trump done to
convince leftists that he must be crazy? Unlike Republicans, Trump
fearlessly confronts fake news media, calling them out when they
lie. Unlike Obama's punish-evil-America-first presidency, Trump has
America's best interest at heart. Unlike leftists seeking to
dissolve our borders, Trump plans to build a wall to protect our people and our
economy. Insanely, leftists cheered when Obama allowed Ebola into America, claiming it was racist
and unfair for Americans not to be subjected to the disease. Unlike
Obama, Hillary, Democrats, and fake news media's war on Christianity (forcing a
100-year-old order of Catholic nuns to
fund contraception and forcing Christian businesses to service same-sex
ceremonies), Trump vows to defend religious liberty.
So I guess, according to
leftists' perverse way of thinking, that Trump must be crazy, along with the 63
million Americans who voted for him.
Meanwhile,
leftists are ignoring glaring reasons to question the sanity of California's
governor, Jerry Brown. The entire country is talking about the
collapse of California due to decades of insane liberal
policies. And what is Governor Brown's response? He
implemented hundreds more destructive liberal rules, regulations, and giveaways
to illegals. An article listing the top ten stupidest new California laws includes
"Single-User Restrooms," "Controlling Cow Flatulence,"
"Legalizing Child Prostitution," and "Felons Voting."
Governor Brown signed a
new law making California a sanctuary state, doubling down on his bizarre quest
to undermine American citizens. In essence, Brown gave federal law,
President Trump, and legal California residents his middle
finger. Numerous California families have suffered devastating
losses of family members killed by illegals with long felony records who have
been deported several times and welcomed back with open arms by
Brown. One mom whose son was killed by an illegal with two DUIs and
two felonies said Brown should
be arrested for treason. Isn't it reasonable to question
Brown's sanity?
Insanely, three fourths
of California's taxpayer dollars – more than $30 billion – is spent on
illegal aliens. Meanwhile, despite the highest taxes in the nation,
California is $1.3 trillion in debt – unemployment is at a staggering
11%. California's wacko giveaways to illegals include in-state
tuition, amounting to $25 million of financial aid. Nearly a million
illegals have California driver's licenses. L.A. County has 144% more registered voters than there are
residents of legal voting age. Clearly, illegals are illegally voting.
Get this, folks:
Americans are spending almost a billion dollars a year on auto insurance for
illegals. Brown is gifting illegals billions in welfare and housing
while his constituents cannot find a place to live.
Ten years ago, a buddy of
mine excitedly moved his family from Maryland to California to accept the
highest-paying job of his career. Despite his lucrative salary, he
was forced to move back east due to the outrageously high cost of
living. My buddy said if he were an illegal, practically everything
would be free. His story inspired me to write and record a Beach
Boys-style song titled "Can't
Afford the Sunshine."
Once again, I ask you,
folks: would a rational governor do what Brown is doing to his constituents? Is
Governor Jerry Brown mentally ill?
California,
the Shithole State and Getting Worse by
the Day.
By Wayne Allyn Root
Gateway Pundit,
California
is Exhibit A. It’s filled with immigrants. Ten million to be exact. Many of
them illegal. Guess which state has the highest poverty rate in the country?
Not Mississippi, New Mexico, or West Virginia, but California- where nearly one
out of five residents is poor. That’s according to the Census Bureau.
While California accounts for 12% of America’s
population, it accounts for one third of America’s welfare checks. California
leads the country in food stamp use. California has more people on welfare than
most countries around the world.
. . .
If immigration is so great for our country and
illegal aliens “contribute a net positive” to society…how do you explain what’s
happening in California?
I haven’t even gotten to the taxes. The income
taxes, business taxes, sales taxes and gas taxes are all the highest in the
nation. Why do you think that is? To pay the enormous costs of illegal
immigration. To pay for the education costs, healthcare costs, police, courts,
lawyers, prisons, and hundreds of different welfare programs for millions of
California’s illegal aliens and struggling legal immigrants too.
But you haven’t heard the worst yet. California-
the immigrant capital of America- is filthy. Perhaps the filthiest place on
earth. Filthier than the slums of Calcutta. Filthier than the poorest slums of
Brazil and Africa.
NBC journalists recently conducted a survey of
San Francisco. They found piles of smelly garbage on the streets, used needles,
gallons of urine and piles of feces- all near famous tourist attractions, fancy
hotels, government buildings and children’s playgrounds.
California Gets ‘F’ Grade from ‘Truth in Accounting’
19 Jun 2018
Newport Beach, CA18
The non-partisan “Truth in Accounting”
project, which analyzes government financial reports, has awarded California an
“F” grade for claiming surpluses instead of a $269.9 billion deficit.
The Chicago-based organization
has been providing in-depth accounting reviews of the audited financial
statements for America’s fifty states, as well as most major counties and major
cities, in the United States since 2002.
The group’s mission is to educate
and empower citizens with understandable, reliable, and transparent government
financial information.
California received the lowest score
of “F” on Truth in Accounting’s grading scale because despite Gov.
Jerry Brown touting several years of surpluses, California actually faces a
$269.9 billion shortfall in terms of its overall obligations, which equates to
$22,000 burden for each of the 12.3 million taxpayers in the state.
California’s financial burden is
primarily associated with the rapidly deteriorating condition of the state’s
current $461.3 billion in promised public employee retirement benefits –which
are $102.5 billion under-funded by the pension plan — and $107 billion for
unfunded retiree health care benefits.
The State of California faced a near
financial death experience in Great Recession, when the average taxpayer burden
jumped from $15,000 to $23,500. Newly elected Gov. Brown, facing a $25 billion
deficit in 2011, passed an array of income and sales tax hikes, including a 29
percent increase for Californians with taxable income over $1 million.
Gov. Brown has touted the
“California Comeback.” But the data demonstrate that despite the gusher of tax
revenue the flooded into Sacramento from the economic recovery and the
substantially higher tax rates Gov. Brown passed, the state’s taxpayer burden
only fell modestly to $20,900 by 2015. The taxpayer burden rose to $21,600 in
2016 and hit $22,000 in 2017, the second-highest in the history of the state.
Truth in Accounting Founder Sheila
Weinberg warns that
California is a giant “Sinkhole Sate.” Ms. Weinberg is especially critical of
Gov. Brown claiming an $8.8 billion surplus this year, while avoiding the
fact that California has only $100.1 billion in available assets to pay $369.9
billion worth of bills.
Weinberg emphasized to Breitbart
News that California’s rising “taxpayer burden” is only for net state
liabilities. Her organization intends to begin publishing consolidated reports
this summer for all the states that will also capture the liabilities of counties
and cities. Ms. Weinberg expects that the combined taxpayer burden for
California to be a much higher number.
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