Why employee pensions aren't bankrupting states

[one...two...tree 2,762]

WASHINGTON — From state legislatures to Congress to tea party rallies, a vocal backlash is rising against what are perceived as too-generous retirement benefits for state and local government workers. However, that widespread perception doesn't match reality.

A close look at state and local pension plans across the nation, and a comparison of them to those in the private sector, reveals a more complicated story. However, the short answer is that there's simply no evidence that state pensions are the current burden to public finances that their critics claim.

Pension contributions from state and local employers aren't blowing up budgets. They amount to just 2.9 percent of state spending, on average, according to the National Association of State Retirement Administrators. The Center for Retirement Research at Boston College puts the figure a bit higher at 3.8 percent.

Though there's no direct comparison, state and local pension contributions approximate the burden shouldered by private companies. The nonpartisan Employee Benefit Research Institute estimates that retirement funding for private employers amounts to about 3.5 percent of employee compensation.

Nor are state and local government pension funds broke. They're underfunded, in large measure because — like the investments held in 401(k) plans by American private-sector employees — they sunk along with the entire stock market during the Great Recession of 2007-2009. And like 401(k) plans, the investments made by public-sector pension plans are increasingly on firmer footing as the rising tide on Wall Street lifts all boats.

Boston College researchers project that if the assets in state and local pension plans were frozen tomorrow and there was no more growth in investment returns, there'd still be enough money in most state plans to pay benefits for years to come.

"On average, with the assets on hand today, plans are able to pay annual benefits at their current level for another 13 years. This assumes, pessimistically, that plans make no future pension contributions and there is no growth in assets," said Jean-Pierre Aubry, a researcher specializing in state and local pensions for the nonpartisan Center for Retirement Research at Boston College.

In 2006, when the economy was humming before the financial crisis began, the value of assets in state and local pension funds covered promised benefits for a period of just over 19 years.

At the bottom of Aubry's list is Kentucky, which would have enough assets to cover 4.7 years. Other states do much better: North Carolina local government pensions are funded to cover 19 years of promised benefits; Florida's state plan could cover 17 years; and California's plans about 15 years.

"On the whole, the pension system isn't bankrupting every state in the country," Aubry said.

States having the biggest problems with pension obligations tend to be struggling with overall fiscal woes — New Jersey and Illinois in particular. Many states are now wrestling with underfunding because they didn't contribute enough during boom years.

more....

Read more: http://www.mcclatchy...l#ixzz1FrTHkFhm

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At the bottom of Aubry's list is Kentucky, which would have enough assets to cover 4.7 years. Other states do much better: North Carolina local government pensions are funded to cover 19 years of promised benefits; Florida's state plan could cover 17 years; and California's plans about 15 years.

"On the whole, the pension system isn't bankrupting every state in the country," Aubry said.

States having the biggest problems with pension obligations tend to be struggling with overall fiscal woes — New Jersey and Illinois in particular. Many states are now wrestling with underfunding because they didn't contribute enough during boom years.

Most state and local employees government across the nation have defined-benefit plans that promise employees either a percentage of their final salary during retirement or some fixed amount. The Bureau of Labor Statistics estimates that 91 percent of full-time state and local government workers have access to defined-benefit plans.

Several states_ including Florida, Georgia, Ohio, Colorado and Washington_ have adopted competing defined-contribution plans, or a hybrid plan that provides government employees both a partial defined benefit in retirement and a supplementary defined-contribution plan.

This whole article can be boiled down to one sentence:

"On the whole, the pension system isn't bankrupting every state in the country," Aubry said.

So it's not every state, just some states?

Well, ok then.

[one...two...tree 2,762]

This whole article can be boiled down to one sentence:

"On the whole, the pension system isn't bankrupting every state in the country," Aubry said.

So it's not every state, just some states?

Well, ok then.

More from the article (but not posted in the OP):

Defenders of the public pension system say anti-government, anti-union elected officials and interest groups have exaggerated the problem to score political points, and that as the economy heals, public pension plans will gain value and prove critics wrong.

"There's a window that's closing as market conditions improve and interest rates rise, the funding of these plans is going to look better than depicted by some," insisted Keith Brainard, the director of research for the National Association of State Retirement Administrators in Georgetown, Texas.

Critics of public sector pensions paint the problem with a broad brush.

"Unionized government workers have tremendous leverage to negotiate their own wages and benefits. They funnel tens of millions of dollars to elect candidates who will sit across from them at the negotiating table," said Thomas Donohue, the chief executive of the U.S. Chamber of Commerce, in a Feb. 24 blog post. "This self-dealing has resulted in ever-increasing wage and benefit packages for unionized government workers that often far outstrip those for comparable private-sector workers."

In a Feb. 23 radio interview, Rep. Devin Nunes, R-Calif., called federal stimulus efforts to rescue the economy "essentially a federal bailout of public employee unions." Nunes described money owed to state pensioners as a crisis "about ready to happen."

Except that two out of every three public-sector workers aren't union members.

The Bureau of Labor Statistics reported in January that 31.1 percent of state public-sector workers were unionized in 2010, compared with 26.8 percent of federal government employees. The highest percentage of unionization, 43.3 percent, was found in local government, where police officers and firefighters work. Teachers can fall into either state systems or local government.

Ironically, in Wisconsin, where Republican Gov. Scott Walker is trying to weaken public-sector unions and reduce pension benefits, he's exempted police and firefighters, who are among the most unionized public employees. And Wisconsin's public-sector pension plan still has enough assets today to cover more than 18 years of benefits.

The most recent Public Fund Survey by the National Association of State Retirement Administrators showed that, on average, state and local pensions were 78.9 percent funded, with about $688 billion in unfunded promises to pensioners. Critics suggest that the real number is at least $1 trillion or higher, using less-optimistic market assumptions.

Read more: http://www.mcclatchydc.com/2011/03/06/109649/why-employee-pensions-arent-bankrupting.html#ixzz1FrWoOo9J

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OK so you're trying to get us all to focus on the problems in Kentucky and New Jersey.

Thanks. Thanks a lot.

[Gary and Alla 3,694]

Did you know that the Wisconsin Public Employee Pension program owns millions and millions of dollars of Georgia Pacific stock? GP is owned by Koch Industries.

Delicious isn't it? They confiscate money from the residents paychecks, give it to public employees who have it confiscated from their paychecks to give to the union who then gives it to the Koch brothers who then give it to Governor Walker who then chokes out the unions.

It is the circle of life.

OK so you're trying to get us all to focus on the problems in Kentucky and New Jersey.

Thanks. Thanks a lot.

Wait. New Jersey charges $12k per year in property tax and they have PROBLEMS?????????????

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Wait. New Jersey charges $12k per year in property tax and they have PROBLEMS?????????????

The beast just gets fatter the mroe you feed it.

[Gary and Alla 3,694]

The beast just gets fatter the mroe you feed it.

So other states should just be able to look at New Jersey and see that they do not want to be like THAT. Don'tcha think?

[Ban Hammer 13,352]

The beast just gets fatter the mroe you feed it.

tea party member found!

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tea party member found!

i would be a lot more sympathetic to the tea party if they came across as less unhinged about the 'foreignness' of our president.

Edited March 7, 2011 by \

[Mr. Big Dog 10,747]

The beast just gets fatter the mroe you feed it.

You shouldn't talk like that about your governor.

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ha

[Boiler 45,545]

The Colorado one is fine. As long as its assumption of a real 8% plus return on investment come true.

Nobody mentioned CA....