Saturday, April 25, 2020

FINISHING OFF MIDDLE AMERICA - THE COLLAPSE OF PENSIONS - It didn't happen by accident!


WHAT WILL FINISH OFF AMERICA’S MIDDLE-CLASS? WALL STREET AND THEIR BANKSTERS? RED CHINA? MEXICO AND THEIR LA RAZA WELFARE STATE OR THE SHITS IN CONGRESS WHO SERVICE THEM FOR BRIBES?

Neither McConnell nor the Democrats have any problem giving free money—in unlimited amounts—to Wall Street. The Senate majority leader’s statement came one day after the Senate voted by unanimous consent for a new $484 billion bill that will funnel money disproportionately to large businesses, in the guise of aiding small businesses and their employees.

 

Goldman Sachs (TRUMP’S CRONIES), JPMorgan (OBAMA-BIDEN’S CRONIES) Chase, Bank of America (WAR PROFITEER DIANNE FEINSTEIN’S PAYMASTERS) and every other major US bank have been implicated in a web of scandals, including the sale of toxic mortgage securities on false pretenses, the rigging of international interest rates and global foreign exchange markets, the laundering of Mexican drug money, accounting fraud and lying to bank regulators, illegally foreclosing on the homes of delinquent borrowers, credit card fraud, illegal debt-collection practices, rigging of energy markets, and complicity in the Bernie Madoff Ponzi scheme.

 

 

Senate Majority Leader McConnell calls for states to declare bankruptcy and gut pensions

 

Senate Majority Leader Mitch McConnell on Wednesday called for state governments facing mounting deficits linked to the coronavirus crisis to file for bankruptcy instead of receiving financial aid from the federal government.
Specifically targeting public sector workers’ pensions, the Kentucky Republican told right-wing radio host Hugh Hewitt: “I think this whole business of additional assistance for state and local governments needs to be thoroughly evaluated. There’s not going to be any desire on the Republican side to bail out state pensions by borrowing money from future generations.
BLOG: WHAT DOES HIS CORRUPTNESS McCONNELL THINK TRUMP IS DOING WITH HIS MASSIVE SOCIALISM FOR WALL STREET AND THE ENSUING STAGGERING DEFICITS HE IS CAUSING???
States currently have no legal right to declare bankruptcy, but McConnell suggested a law to permit it, saying, “I would certainly be in favor of allowing states to use the bankruptcy route.” He added, “We have governors regardless of party who would love to have free money.”
McConnell’s office on Wednesday released a statement titled “Stopping [Democratic-led] Blue State Bailouts.”
Declaring bankruptcy would allow state governments to override laws and even state constitutional provisions that guarantee the pension benefits of retired public workers. On Wednesday, Forbes published a commentary titled “Kiss Your State Pension Goodbye.” It noted: “This is hardly the first time letting states file for bankruptcy to escape trillions of dollars in promised retirement benefits has been proposed.”
The author cited a 2011 column by former Florida Governor Jeb Bush and former House Speaker Newt Gingrich in the Los Angeles Times calling for change in federal bankruptcy laws to allow states to “reorganize their finances.”
Neither McConnell nor the Democrats have any problem giving free money—in unlimited amounts—to Wall Street. The Senate majority leader’s statement came one day after the Senate voted by unanimous consent for a new $484 billion bill that will funnel money disproportionately to large businesses, in the guise of aiding small businesses and their employees. The bipartisan bill was approved by the House of Representatives on Thursday, with only one dissenting Democratic vote, and signed into law Friday by President Donald Trump.
The new legislation includes an additional $310 billion for the so-called “Paycheck Protection Program” (PPP) enacted last month as part of the $2.2 trillion CARES Act corporate bailout. The Democrats dropped their demands that the new legislation include money to aid state and local governments and additional funding for food stamps. They claimed that aid to the states and localities facing collapsing tax revenues would be forthcoming in a new bailout bill to be negotiated with the White House and congressional Republicans.
Trump reiterated at his Thursday White House briefing that he was open to discussing aid to the states as part of the next bailout bill, but he added that “a lot of people” were sympathetic to McConnell’s position, and he singled out for attack “blue” states, naming Illinois. The White House is seeking to use the fiscal crisis of state and local governments and the possibility of federal aid as leverage to force them to reopen their economies more rapidly.
The Democrats voted to top up the PPP, which exhausted its $349 billion funding in less than two weeks, even though multiple reports had emerged that the vast majority of family-owned businesses had been shut out of the loan program while scores of large publicly traded companies had received millions of dollars in forgivable loans, and the Wall Street banks assigned to handle the Small Business Administration financing had made $10 billion in fees.
In saying it would be preferable to allow states and cities to go bankrupt rather than provide them with a small fraction of the trillions doled out by the Treasury and the Federal Reserve to corporations and banks, McConnell was expressing the outlook of the corporate-financial oligarchy that runs America. Working through both of its political parties, it has responded to the deadly pandemic by opposing any diversion of resources from its private wealth to save lives and contain the virus, and instead orchestrated the unlimited transfer of taxpayer money to prop up the stock market and make itself even richer.
Now it is moving to use the crisis to lay waste to what remains of social services and benefits on which hundreds of millions of working class people depend. This too is, in all essentials, a bipartisan policy.
The Democratic-aligned Washington Post, owned by Amazon’s billionaire CEO Jeff Bezos, published an editorial Friday that chastised McConnell and called for aid to states and cities. At the same time, it lined up behind’s McConnell’s attack on pensions, denouncing the call by the Illinois Senate president, a Democrat, for $10 billion in federal aid to stave off the collapse of the state’s pension system. It declared that the federal government should not aid pension systems whose problems are “self-inflicted.”
The National Governors Association has requested $500 billion in federal aid, a fraction of the trillions injected into the financial markets, to avert a collapse of basic social services, from education and health care to sanitation and firefighting, and the destruction of hundreds of thousands of public-sector jobs, as well as the wages and pensions of state and municipal workers.
State and local officials of both parties fear a social explosion as the ruling class demands that workers return to work without any protection from infection, unemployment reaches Depression-era levels, millions of laid off workers are blocked from applying for benefits as a result of antiquated and overwhelmed state benefit systems, and outrage grows over the callous indifference of the political establishment to massive human suffering and death.
McConnell’s statement has intensified tensions between the states and the federal government. Trump has rejected calls by governors for federal money and coordination to ramp up coronavirus testing. Last month he suggested that New York State be quarantined, provoking Democratic Governor Andrew Cuomo to call it a “civil war measure.” Earlier this month Trump declared that he had “absolute authority” to force the states to reopen their economies on his timeline.
Democratic governors, in particular, have denounced McConnell’s proposal. On Thursday, Cuomo called the bankruptcy suggestion “one of the saddest, really dumb comments of all time.” On Friday he denounced it as “un-American.”
Some Republicans have joined in. New York Congressman Peter King called McConnell’s remarks “shameful and indefensible,” and dubbed him the “Marie Antoinette of the Senate.”
However, none of them have pointed to the contrast between the senator’s attitude to providing money to maintain social services and pensions and his avid support for bailing out Wall Street. That is because the Democratic Party, no less than the Republicans, supports the multi-trillion-dollar bailout of the oligarchy.
Even as Democratic governors and mayors criticize Trump and the Republicans for withholding federal aid, they are preparing massive budget cuts. Not one has even proposed raising taxes on corporations and the wealthy to avoid the destruction of vital services and the impoverishment of working class families.
Moody’s Analytics has warned that states may face combined deficits of $158 billion to $203 billion through the 2021 fiscal year. More than 2,100 cities across the country expect budget deficits this year.
New Jersey’s Democratic governor, Phil Murphy, has frozen more than $1 billion in spending and cut property tax rebates for homeowners. Responding to McConnell’s bankruptcy proposal, Murphy said Wednesday that without federal support his state would not go bankrupt. Instead, he declared, “We will just cut, cut, cut and cut.”
Virginia Governor Ralph Northam, a Democrat, is seeking to freeze $2.3 billion in new spending, scuttling a program for free tuition at community colleges and canceling an increase in the state minimum wage.
Washington State Governor Jay Inslee, also a Democrat, this month vetoed budget items projected to cost $445 million over three years, including a plan to hire 370 school guidance counselors.
New York’s Democratic mayor, Bill de Blasio, announced last week that he would slash over $2 billion in city services over the next year. He plans to close public pools, reduce sanitation pickups, suspend the summer youth employment program and impose a hiring freeze.
Michigan may have a deficit as high as $7 billion over the next 18 months. Detroit’s Democratic mayor, Mike Duggan, has threatened to throw the city back into bankruptcy and bring in an emergency financial manager to impose new cuts in social services, pensions and jobs.
Whatever their policy differences, the two parties are united in ruling out any challenge to the capitalist profit system and the entrenched wealth of a parasitic ruling elite. They all agree that the full burden of the pandemic crisis must be borne by working people.






April 20, 2020

Feasting on the taxpayer

On April 6, 2020, the Huntington Beach City Council voted to give pay raises to city employees, including police officers.  The estimated cost of these raises is $5 million over the next three years.  Huntington Beach reported general revenues of $188 million in the fiscal year ended June 2019 and also reported total revenues exceeding expenses by $25 million for that same year.  Chicken feed, right?
FYE June 30, 2019, the city collected $89.1 million in property taxes, $47.4 million in sales taxes, $18.8 million in utility taxes, and $14.0 million in transient occupancy taxes.  What will these revenues look like over the next few years?  No one voted on these raises — just one bureaucrat giving another bureaucrat a raise with other people's money entrusted to their care.
The city of Riverside is proposing floating a bond issue to cover the exorbitant costs of public servants' pensions.  Bonds are a double tax — you must pay interest on the bond and then pay the bond back.  A recent study by Stanford University found CalPERS underfunded by $1.4 trillion.
April 16, 2020, 22 million Americans filed for unemployment due to the catastrophic slowdown caused by the Wuhan virus.  This same week, California governor Gavin Newsom proposed giving all illegal aliens $500 for assistance in taking our jobs.
Two weeks ago, the government added 16,000 to the tax-funded payroll and increased the number of H-1B visas.  Just whom are our "public servants" working for?  California highway patrolmen routinely retire on $100K-plus pensions, California sheriffs and deputies retire on over $200K, firemen well over $100K.  Mark Yudoff, chancellor of the U.C. system, just retired with a tax-funded pension of $337,000 after seven grueling years.  How long do you have to work to get your $300K-plus pension?  Keep those tuition payments coming!  U.C. chancellor Janet Napolitano plans to retire this year, again after seven years (this must be the magic number for exploiting the taxpayer), and her pension should exceed $400K, as she is paid over $500K now.  In 2016, Napolitano outsourced 100 tech jobs to India and laid off 100 UCSF I.T. workers.  The president of UCSD is paid $441K plus benefits.
In 2018, Curtis Ishil, head of the California Public Employees Retirement System (CalPERS), stepped down.  Today, he draws $418,608 per year, the largest of more than 700,000 pension checks issued last year.  Some 35,598 worth $100,000 or more were issued last year according to data from TransparantCalifornia.com.
The average American makes $60,000 per year and most of the time with no benefits.  Are you getting the idea here?  Don't live in California?  Not your problem?  Think again: the State of California spent over $320 billion last year, and $106 billion of that comes from the federal government.
How did we allow our "public servants" to become so much more equal than the rest of us?  The hogs are truly in the farmhouse.  The people we hire and elect to ensure our equality and protect our rights are the same people who are depriving us of equal treatment and our rights.  They have become elitists and have placed themselves above the fluctuations of the economy we have entrusted them with.  Until they are forced to live by the same laws, rules, and regulations they impose on "we the people," we will never return to a representative form of government.
Our "public servants" have turned into greedy, self-serving tax parasites.  Are we still a constitutional republic as our Founders intended, or have we become a progressive socialist state?  Hello, Venezuela. 

THE LOOTING OF AMERICA:

BARACK OBAMA AND HIS CRONY BANKSTERS set themselves on America’s pensions next!

http://mexicanoccupation.blogspot.com/2015/04/obamanomics-assault-on-american-middle.html

The new aristocrats, like the lords of old, are not bound by the laws that apply to the lower orders. Voluminous reports have been issued by Congress and government panels documenting systematic fraud and law breaking carried out by the biggest banks both before and after the Wall Street crash of 2008.

Goldman Sachs, JPMorgan Chase, Bank of America and every other major US bank have been implicated in a web of scandals, including the sale of toxic mortgage securities on false pretenses, the rigging of international interest rates and global foreign exchange markets, the laundering of Mexican drug money, accounting fraud and lying to bank regulators, illegally foreclosing on the homes of delinquent borrowers, credit card fraud, illegal debt-collection practices, rigging of energy markets, and complicity in the Bernie Madoff Ponzi scheme.

 

The Next Looming Economic Contagion: Pensions Collapse

As the stock market implodes in response to COVID-19, there is an underlying economic virus that will soon be evident: America's grossly underfunded pensions.  With the market down 40% in from its high point (before rebounding March 24), many corporations may default on their pension promises.  consumption and thus gross sales will decline (further dampening corporate profits), and the widespread weakness of pensions will be exposed.  This in turn will cause a vicious cycle in which retirees and those planning retirement will have fewer disposable dollars and will divert more money to retirement savings — further weakening consumption and undermining the effectiveness of interest rate adjustments by the Federal Reserve.
The problem of underfunded pensions has been loudly proclaimed for years.  It is hard to ignore article titles like "The Coming Pension Crisis Is So Big that It's a Problem for Everyone" (Forbes, 5/20/2019), "'Their house is on fire': The pension crisis sweeping the world" (Financial Times, 11/17/2019), and "Pension Plans for Millions of Americans Are on the Brink of Collapse" (NPR, 11/28/2018).
Yet these warnings have been ignored.  Now we must face the consequences.
America is on the brink of a realization of just how much corporations and legislatures have "planned for the best, in denial of the worst."  In both corporate boardrooms and legislative budget-making, employees will look back and see that what has been done is nothing short of fraud.  But it's too late now — we cannot roll back the investment clock.
John Boehner and Joe Crowley issued a bipartisan warning last summer:
Left unchecked, this crisis will decimate the retirement future of millions. Over the years, the number of retirees has grown dramatically, while the number of active participants and employers has decreased.  This imbalance, combined with the market decline from the Great Recession, has put many of these vital pension plans on an unsustainable path[.] ... To make matters worse, the Pension Benefit Guaranty Corporation (PBGC) multiemployer program, the funding backstop for plans that have run out of money, is also projected to collapse by 2025.  The dissipation of the PBGC would leave retirees with about 2% of what they had counted on for retirement[.] ... The collapse of the entire system would further compound the pension crisis at hand and have a domino effect on our economy, potentially leading to widescale business closures, layoffs and rising unemployment.
The current decline was foreseen — and the warnings ignored.  The imminent implosion will quickly exceed all municipal defaults in U.S. history combined.  Worse, state pensions are some of the greatest offenders in playing "kick the can" with beneficiaries' contributions.  Legislators everywhere have played this game of promising costly benefits to unionized state labor organizations (especially teacher unions) and then diverting required contributions to other budgetary preferences using unrealistic predictions of returns on existing investments, accounting gimmicks, and absurdly low estimates of future benefits.
There is no federal Pension Benefit Guarantee Corporation for state plans — the PBGC insulates only private-sector defined benefit plans under ERISA.  State workers may perceive that the government will always pay, but states don't print currency, and they are limited by reality:
When states and local governments reduced their employer contributions to their public pension funds during the Great Recession, they in effect borrowed from those pension funds.  If governments hope to meet their contractual obligations to their employees, they must pay these delayed pension contributions back at some point.
But most states did not pay them back.  This analysis from the Federal Reserve Bank of Cleveland addresses the legal recourse of pension beneficiaries when the state lacks the financial resources to keep its word in a time of crisis:
[O]ur legal system provides judges with the flexibility to adapt broad constitutional principles to the extreme and exigent necessities of their times.  In such times, federal courts typically defer to states' "police" (sovereign) powers, a decision which essentially allows the state, as a sovereign entity, to resolve an issue as it sees fit.  The US Supreme Court has made a similar ruling, deciding that "[t]he contract clause must be construed in harmony with the reserved power of the State to safeguard the vital interests of her people.  Reservation of such essential sovereign power is read into contracts."  In other words, when "vital interests" are at risk, defending contracts may be of secondary importance.  [A] state may have all the legal authority it needs to shed its insurmountable liabilities and force its creditors to accept any deal it offers.
What remains now is to ponder the extent of the federal bailout that will be granted to employees whose pensions are evaporating before their eyes.  When Sears sought bankruptcy protection, the PBGC undertook to step in for some 90,000 employees.  How many can it rescue now, even with a federal infusion of cash?  The present situation promises to be exponentially larger.
If President Trump is the voice seeking aid for private pensions, Nancy Pelosi and the Democrats will likely strangle a rescue plan or try to attach socialist conditions.  But how much money would be required for the federal government to also rescue underfunded state pensions? 
In June 2019, the Pew Charitable Trusts provided a 2017 snapshot of state pension shrotfalls:
[T]he pension funding gap — the difference between a retirement system's assets and its liabilities — for all 50 states remains more than $1 trillion, and the disparity between well-funded public pension systems and those that are fiscally strained has never been greater[.] ... In 2017, the state pension funds in this study cumulatively reported a $1.28 trillion funding gap[.] ... Even after nine years of economic recovery, most state pension plans are not equipped to face the next downturn.
A serious hurdle to a federal rescue is this moral hazard — states that had been most neglectful in funding their pensions would have the most to gain.
Whichever way this shrinking pie is sliced, there will be only crumbs for retirees and workers.  The coming economic whirlwind is going to pick up this Dorothy's house of pensions neglect, and no one knows where it will land.
We aren't in Kansas anymore.  Nor are we over the rainbow.

Democrats to seek aid for troubled union pensions in next relief package

 | April 01, 2020 12:01 AM
House Democrats planning a new and sweeping economic relief package to respond to the coronavirus say they’ll include federal aid for troubled union pensions.
Democrats have just begun drafting the relief bill, which they said would include enhanced family paid leave, more money for food stamps, and new worker safety requirements.
The pension bailout, if included in the measure, could cost tens of billions of dollars if it matches a pension relief package the House passed last year.
Speaker Nancy Pelosi, a California Democrat, told reporters she believes President Trump has signaled interest in aiding troubled pension programs but that it was excluded from the $2.2 trillion package signed into law last week because Senate Republicans, led by Majority Leader Mitch McConnell, did not want it in the bill.
“President Trump was actually supportive, but Mitch McConnell was not,” Pelosi told reporters. “And so, he said we'll save it for the next bill. Well, here's the next bill.”
House Democrats earlier this month introduced an economic relief package, but it was rejected by Senate lawmakers, who negotiated the $2.2 trillion bipartisan deal with the Trump administration.
The sidelined House proposal included the language in the House-passed Butch Lewis Act, a multiemployer pension bailout measure with a nearly $100 billion price tag. It would provide low-interest loans to the nation’s most underfunded union pension plans to help them stave off looming insolvency, and it would provide an additional $71 billion in direct cash assistance to those struggling pension plans. The measure would help ensure pension benefits for 1.3 million workers.
Pelosi did not indicate this week whether the draft of the new economic relief bill will include the Butch Lewis Act, but a Democratic aide confirmed it, acknowledging the plan would have to be bipartisan.
“Our proposal is the Butch Lewis Act, but, more importantly, we need and want multiemployer pension reform that works,” a senior Democratic aide told the Washington Examiner. “We are not so committed to an approach that we can’t negotiate a solution.”
The House-passed bill won support from dozens of House Republicans, but it never received consideration in the Senate.
The plan has generated opposition from some economists who argue it does nothing to address the underlying flaws in the pension programs that now threaten their solvency.
About 125 multiemployer pension plans will become insolvent in the next two decades, and some will go broke in the next few years, the Congressional Budget Office said.
“It’s a way to kick the can down the road, and you are using a lot of taxpayer money,” Rachel Greszler, a research fellow in economics, budget, and entitlements at the Heritage Foundation, told the Washington Examiner.
Greszler pointed to a Sept. 6 letter from the CBO that warned of the looming collapse of many union pension plans, even if Congress passes a pension bailout.
“About one-quarter of the affected pension plans would become insolvent in the 30-year loan period and would not fully repay their loans,” the CBO wrote. “Most of the other plans would become insolvent in the decade following their repayment of their loans.”
Greszler said it would make more sense for the federal government to shore up the Pension Benefit Guaranty Corporation, or the PBGC, which is also headed for insolvency, and to put in place reforms to help pension plans survive, such as a slight reduction in benefits.
Democrats and many Republicans said Congress has no choice but to act to stop the pensions from becoming insolvent.
The vast majority of union pension plans are grossly underfunded and will have to cut benefits to retired workers without federal help.
Congress last year passed legislation to protect the pensions and healthcare for 92,000 mine workers.
Senate Republicans also introduced their own multiemployer pension reform plan they said is “designed in a balanced way to avoid tipping more plans into a poorer-funded condition and also to avoid exposing taxpayers to the full risks associated with the largely underfunded multiemployer system and pushing the PBGC into insolvency.”
The measure was authored by Senate Finance Committee Chairman Chuck Grassley, an Iowa Republican, and Health, Education, Labor, and Pensions Committee Chairman Lamar Alexander, a Tennessee Republican.
“We need to act quickly, but we can’t just pour money into failing and mismanaged funds,” Grassley said. “Our plan will provide relief and reform now. Without it, our retirees will be left without the future they worked for.”
The AFL-CIO opposes the Grassley-Alexander plan, arguing it puts too much of the responsibility on the unions by requiring them to provide much higher premiums to the PBGC.
“This document contains no federal financial assistance whatsoever,” AFL-CIO officials said in a statement. “Contrast this to the over $700 billion that the government provided to the banks and Wall Street in 2008 and other corporate tax giveaways in recent years. It is punitive in nature, imposing hefty new costs that even healthy plans will be unable to survive.”
Democrats will have to negotiate a bipartisan solution with the Senate, which is run by Republicans. They'll also have to convince McConnell, of Kentucky, that any pension bailout belongs in a new coronavirus relief measure.
"I’m not going to allow this to be an opportunity for the Democrats to achieve unrelated policy items that they would not otherwise be able to pass," McConnell said Tuesday on the Hugh Hewitt show.

Report: States Face $1 Trillion in Unfunded Liabilities

 


States are facing more than $1 trillion in unfunded future liabilities related to health and life insurance benefits for their retired employees, a growing shortfall that amounts to about $3,100 for every person in the United States, according to a new report by the American Legislative Exchange Council (ALEC).
ALEC, which has come under attack by left-wing advocacy groups in recent years, describes itself as “the nation’s largest nonpartisan, voluntary membership organization of state legislators, with more than 2,000 members across the nation.”
Its mission is “to discuss, develop, and disseminate model public policies that expand free markets, promote economic growth, limit the size of government, and preserve individual liberty.”
The new study, the latest in an annual series from ALEC’s Center for State Fiscal Reform, comes after critics have complained for years that cash-strapped states don’t adequately fund their retiree-related obligations, which has allowed those sums to accumulate.
Its authors say that, “in the end, government must be held accountable for its actions.” Without policy changes, these liabilities could lead to future tax increases or force cuts to core public services in states.
Making governments use “more prudent actuarial assumptions and increasing transparency prevents state governments from making impossible promises and allowing unfunded liabilities to accumulate,” the report states.
These unfunded benefit programs for retired public employees fall under a category that fiscal analysts call “other post-employment benefits,” or OPEB. OPEB excludes public pension plans but includes benefits to retired workers such as health insurance, life insurance, supplemental Medicare insurance, and more. The study examined 132 OPEB plans from fiscal 2013 to 2017, drawing on the most current Comprehensive Annual Financial Reports (CAFRs) and Actuarial Valuation Reports.
“While a trillion dollars is a rounding error in Washington, D.C., at the state level, it’s a huge threat to government programs and taxpayers,” Jonathan Williams, chief economist and executive vice president of policy at ALEC, told The Epoch Times in an interview.

Jonathan Williams of the American Legislative Exchange Council. (Courtesy American Legislative Exchange Council)
“Governments, if they want to spend more money on new programs, need to view OPEB liabilities as a threat, so I think there is something for both parties to like from tackling these liabilities.”
Public pensions have generally been prefunded at 80 percent in order to be considered healthy, “but now a lot of us are thinking 100 percent is better.” OPEB items, by contrast, have generally not been prefunded at all, he said.
“OPEB liabilities have flown under the radar, but they have become more visible as a result of federal accounting rule changes that force states to list them on their balance sheets,” Williams said. Even so, they have been “overshadowed” by fiscal problems in Detroit and Puerto Rico.
“Unfortunately, this new transparency has left us with these very huge liabilities,” he said.
The states with the largest OPEB liabilities are California ($166.6 billion), New Jersey ($130.4 billion), New York ($129.3 billion), Texas ($115.7 billion), and Illinois ($64.4 billion), according to the study. The states with the smallest OPEB liabilities are Nebraska and South Dakota, which Williams said are tied at zero because they don’t pay for retired employees’ health care, followed by Kansas ($285,000), Oklahoma ($9.1 million), and Utah ($210.9 million).
“There is a lot of doom and gloom in the report,” but there are also a handful of states that are doing a good job getting a handle on their OPEB liabilities, Williams said.

Opinion: California pension debt climbs despite strong economy

 

With nation overdue for next recession, aggressive and comprehensive reforms are needed

 

By JOE NATION |

A decade ago, at Gov. Arnold Schwarzenegger’s request, I supervised a graduate student team that performed a comprehensive analysis of public pensions in California.
The goal was to calculate California’s state and local government pension debt, the difference between assets and liabilities.
The team’s conclusions: The unfunded liability was over $500 billion — seven times the number officially reported. That was in 2008.
Joe Nation 
The student team recommended several actions to lawmakers and pension managers. Almost all were ignored.
Over time, it has become clear that the students’ analysis was spot on. Public pension debt doubled to more than $1.052 trillion in 2017, the last year of complete data.
Based on recently reported public pension assets and estimated liabilities, that figure is now more than $1.109 trillion, an increase of $56 billion. That translates into $81,300 of pension debt per California household.
There are arguments about whether the students use of what economists would call a “market basis” to measure pension debt is too conservative. In short, a market basis uses accepted economic and finance principles to estimate liabilities.
But even figures reported by California’s pension systems on a more optimist “actuarial” basis produces the same trendline. Debt per household today is almost $22,800, compared with less than $8,000 when students submitted their work in 2010.
What is remarkable about this trend is that pension debt has continued to climb even as the stock market has soared.
The S&P 500 index, about 800 in early 2010, is now over 3,000. And yet over the last decade, public pension funded ratios, measured by assets divided by liabilities, have moved up only slightly.
The funded ratio for California Public Employees’ Retirement System’s Public Employees’ Retirement Fund was 60.8% in 2009. Now, it’s at best 73%, still far short of full funding.
This, unfortunately, isn’t the most alarming news.
No one knows if or when a recession will hit the global or U.S. economies, but we are due.  Another Great Recession-like downturn in the U.S. stock market could push California’s state and local government public pension system assets down from $918 billion today to just over $700 billion.
The average funded ratio for all public pensions in California would fall from 75% to 56% on an actuarial basis, meaning pensions would have just over 50 cents for every dollar in obligations.
Remember that this is the optimistic scenario.
The average funded ratio on a market basis would fall from 46% today to 34%, or 34 cents on every dollar owed.
Pension debt would climb from $311 billion today to $543 billion on an actuarial basis. On a market basis, pension debt would climb to $1.341 trillion, or nearly $100,000 per household.
A repeat of the Great Recession may be unlikely, but then again, we didn’t expect a sharp decline in 2008-9.
Even a mini-recession in which pension systems’ assets fall by one-half Great Recession levels would be a horrible development. Schools and municipal governments, already cutting programs and services despite strong revenues, would be forced to cut even further.
Taxpayers would be asked to chip in more.  And public employees, especially those in areas where the economy remains weak, would face layoffs, salary cuts, and in some scenarios, reductions in retirement benefits.
If there is any doubt about these impacts, ask Stockton employees who lost retiree health care, Loyalton employees who saw their pensions cut, or Detroit workers who lost both retirement pay and health benefits as the city emerged from bankruptcy.
One thing is certain: Ignoring this problem won’t make it go away.
Public pension debt will continue to grow.  K-12 classroom funds and municipal services will continue to be cut. Legislative attempts at reform barely made a dent in the problem overall.
The question isn’t really the size of California’s pension debt over the next 10 years. It is whether California’s leaders have the courage today to acknowledge and implement the aggressive and comprehensive reforms that are so clearly required.
Joe Nation is a public policy professor at Stanford University and the project director for PensionTracker at the Stanford Institute for Economic Policy Research. He wrote this commentary for CalMatters.



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