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.
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.
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
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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