The Glade 4.0

That's right. Half a trillion dollars.

http://www.californiahealthline.org/articles/2010/4/6/study-california-public-pensions-underfunded-by-over-500b.aspx

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Ezekiel 23:19-20 

And which Obama appointed federal official is largely to blame? He advocated for the huge increases in pension funding for CalPERs based upon an assumption that the stock market would hit 35,000+ in the next 20 years...

Let the state go bankrupt and force all the public sector unions to renegotiate contracts from a blank slate. If they won't agree - the state simply goes non-union.

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"...but there exists also in the human heart a depraved taste for equality, which impels the weak to attempt to lower the powerful to their own level and reduces men to prefer equality in slavery to inequality with freedom." - De Tocqueville

Heh. It's shennanigans like this that make me glad I opted for the 403b rather than the O(hio)PERS pension. I have no idea about what the fiscal state of OPERS is or will be, but it doesn't affect me!

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"Aaaah! Emotions are weird!" - Amdee
"... Mirrorshades prevent the forces of normalcy from realizing that one is crazed and possibly dangerous. They are the symbol of the sun-staring visionary, the biker, the rocker, the policeman, and similar outlaws." - Bruce Sterling, preface to Mirrorshades

Do you pay taxes in Ohio? Is your local economy effected by the tax burden? As a citizen, are you responsible for making up your state's deficit?

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Ezekiel 23:19-20 

I think it's pretty obvious that he means it doesn't affect him directly. Practically everything in that happens financially effects us if we track it with enough degrees of separation.

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"Hysterical children shrieking about right-wing anything need to go sit in the corner and be quiet while the adults are talking."

Yeah, I should have been more specific -- it doesn't affect my retirement accounts.

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"Aaaah! Emotions are weird!" - Amdee
"... Mirrorshades prevent the forces of normalcy from realizing that one is crazed and possibly dangerous. They are the symbol of the sun-staring visionary, the biker, the rocker, the policeman, and similar outlaws." - Bruce Sterling, preface to Mirrorshades

If it effects your earnings, your employers earnings, the value of the money used to pay you, and the ability of your employers ability to employ you then it effects your retirement accounts.

My point here was not to critique you, but to remind you.

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Ezekiel 23:19-20 

I think you guys meant affects.

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In that sense, everything can be said to affect everything else.

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"Hysterical children shrieking about right-wing anything need to go sit in the corner and be quiet while the adults are talking."

Which, frankly, tends to be the case, DE, in a market environment. It does get to a point where it becomes silly to talk about, though, as the effect is diluted enough by either scale or degrees of removal. Talking about how California hiring another janitor is devaluing my currency because they're going bankrupt as is and thus will be bailed out by the Fed with printed money is.. perhaps not a useful topic of conversation when a Glader posts a thread celebrating his new job after months of unemployment, for instance. =)

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"Aaaah! Emotions are weird!" - Amdee
"... Mirrorshades prevent the forces of normalcy from realizing that one is crazed and possibly dangerous. They are the symbol of the sun-staring visionary, the biker, the rocker, the policeman, and similar outlaws." - Bruce Sterling, preface to Mirrorshades

Exactly. Saying something "affects" something else without giving any quantification of degree or how it compares to other effects is simply stating the obvious.

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"Hysterical children shrieking about right-wing anything need to go sit in the corner and be quiet while the adults are talking."

Given that there is but one degree of seperation, a chain that isn't exactly had to follow, I think you are being obtuse.

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Ezekiel 23:19-20 

No, there are actually two degrees of separation. One degree would be if he HAD taken the state retirement plan; a direct effect.

No one is being obtuse here. Saying "It affects you" is simply stating the obvious. How much does it affect him and how does it compare to other effects?

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"Hysterical children shrieking about right-wing anything need to go sit in the corner and be quiet while the adults are talking."

Could you explain this to me please? I'm not very bright when it comes to government and politics, sorry.

How does a state declare bankruptcy? Wouldn't the government bail them out if they did? If that happened, wouldn't it set a precedent for other states to be foolish with their budgets as well because the government would bail them out too? Wouldn't all of this eventually come back around to bite us in the butt? I mean, this money has to come from somewhere.
How the heck do you underfund pensions by 500 billion dollars anyway?

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"Therefore do not worry about tomorrow, for tomorrow will worry about itself. Each day has enough trouble of its own." Jesus of Nazareth

If they go bankrupt they get to renegotiate all of their contracts. I am sure they would beg for the federal government to bail them out before and after their bankruptcy however as the public reaction is so anti-spending at the moment I doubt even our current administration would be foolish enough to do so.

You underfund pensions by having the state be liable for any loss on investments due to the market.

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"...but there exists also in the human heart a depraved taste for equality, which impels the weak to attempt to lower the powerful to their own level and reduces men to prefer equality in slavery to inequality with freedom." - De Tocqueville

The geniuses in charge added language to the funding requirements of the pension plans (which for CalPERS was redone in '98?) when they dramatically increased the annual contributions, that in addition to those extra funds going into the system, if the fund lost money via investments, the state would be required to replace that money, such that the value of the fund was never worth less than the amount of money contributed into it.

Of course, this load of crap was sold on the premise by the CalPERS people that the market was destined to hit absolutely absurd (even when things were going well) levels over the next 20-30 years, so that the likelihood of the State needing to do so was non-existant.

Is there still a possibility of things turning around and that money being gained back?
It sounds like renegotiating contracts is their only option but thats not fair to everyone who put all that money in.

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"Therefore do not worry about tomorrow, for tomorrow will worry about itself. Each day has enough trouble of its own." Jesus of Nazareth

Pensions are, at their most basic, a retirement plan in which the enrollees are guaranteed benefits at a certain dollar amount, or an amount adjusted for inflation against some index or what have you. The point is, guaranteed monthly (or yearly, or whatever the pay schedule is) benefits.

The first way is a model where the money you put in when you're working goes into a pension fund that then gets invested in various investment mechanisms. Bonds, stocks, mutual funds, other derivatives, etc. So everybody's money gets pooled to make up one big investment chunk, and then you also draw off money to pay the people who are retired.

You get underfunding when you've guaranteed more money (or, depending on the legislation, perhaps "too much" more money, I'm not exactly sure how the accounting works) than you have. This can happen for a number of reasons: 1) your retirees, as a whole, start living longer than you expected them to when you decided how much money you would guarantee they'd get, 2) your inflation adjustments increase too fast, 3) your investments aren't performing as well as you had projected when you decided how much money you would guarantee they'd get, or 4) you actually lose a bunch of money in the process of investing (which is really just an extreme case of 3).

Essentially, all 4 of those are ways in which either your fund gets smaller than you expected it to be (either because it's actually shrinking when you lose money, or because it's not growing as fast as you thought it would), or you end up having to pay more than you thought you would (because people are living longer and thus you're paying more retirees each year as fewer die than new people retire, or because you're paying bigger amounts to the ones you've got).

edit: Bah, serves me right for getting sidetracked. =P


1. It depends on how quickly the market rebounds (but that's not necessarily a good thing -- it would just mean another bubble was developing) and how many people they're actually paying out to now.
2. "Fair" is something that liberals have been trying to put into the investment world for ages, and just won't work, because risk is already fair. The problem arises when you try to guarantee things and fool people into thinking that risky things are safe. Pensions are a huge example of selling investment as safe, when it's not really. It's low risk, but the risk is still there.

Now, that said, good luck selling that line to the public. Our society wants to believe in safety, even if it means hurting everybody around us (including ourselves) to maintain that illusion. That's what bailouts are about.

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"Aaaah! Emotions are weird!" - Amdee
"... Mirrorshades prevent the forces of normalcy from realizing that one is crazed and possibly dangerous. They are the symbol of the sun-staring visionary, the biker, the rocker, the policeman, and similar outlaws." - Bruce Sterling, preface to Mirrorshades

So does that mean they actually lost 500 bil, or they just didn't get the 500 bil they were expecting? Because to me, that's a big difference.

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"Therefore do not worry about tomorrow, for tomorrow will worry about itself. Each day has enough trouble of its own." Jesus of Nazareth

Who's "they"?

The retirees, the pension managers, or somebody else?

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"Aaaah! Emotions are weird!" - Amdee
"... Mirrorshades prevent the forces of normalcy from realizing that one is crazed and possibly dangerous. They are the symbol of the sun-staring visionary, the biker, the rocker, the policeman, and similar outlaws." - Bruce Sterling, preface to Mirrorshades

See, thats part of the evil genius of the plan... the State doesn't get to reduce its annual contribution if the value of the fund jumps considerably due to wise investments. So, in this example, if the fund value is such that at the time of accounting it is worth $2bn less than the amount "officially" contributed, the state much pay an additional $2bn into the fund over the agreed to annual amount, even though the losses at this point are most likely all paper (ie unrealized). If the next year, due to a huge turn around in the market, the fund doubles in value, the state still has to make its agreed upon payment, with non consideration for the value of the fund.

At least, that is my understanding of the CalPERs contract that was negotiated at the end of the '90's.

Hahaha I'm not really sure, Kaff. I guess by they I mean the State. Did the state actually lose 500 billion of the pension money in their investments, or did the investments just not produce the 500 billion they thought it would? I guess what I'm saying is this an imaginary number that would have been future profits or was this money actually there once and has now disappeared?
If it was never there, then I don't see why they would have to go bankrupt over money they thought they would have that they didn't.
I'm so confused.

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"Therefore do not worry about tomorrow, for tomorrow will worry about itself. Each day has enough trouble of its own." Jesus of Nazareth

It depends. In this case though, the majority of the "underfunding" is directly to due to paper losses incurred with the market collapse. There is also a likelihood that the number of employees pushed into, or offered, early retirement and therefore prematurely drawing benefits, has had an impact as the local/state government try to trim costs.

Before the economic downturn, I don't believe CalPers was underfunded. Before the restructuring in 1998? contributions were around in 200 billion in excess of the pension fund's needs. Ladas has made an appropriate analysis, the sheer number of people retiring early because they can afford to astounds me. It is a huge foolishly unexpected, drain on the pension fund. Where it also ends up costing the State money is that the corporate memory, process knowledge and skills they have to offer are not systematically being handed down to younger employees through training and documentation. Used to be someone would announce they would be retiring at the end of next year, and the bosses would have them write documentation on what they did and train their successor(s). These days the announcement comes in, I went to the retirement planning training last month, and damn, I can afford to retire now. I'm gone as soon as the paperwork processes. We put a bid in on a house in New Mexico (among other recent popular states to retire to) and we'll be renting out our house here until the market improves.

I always planned on getting at least thirty years in before I retired, that is a little over eight years from now, I'll be 63. I won't qualify for full social security benefits, if such a thing still exists, until I am 66 years and 2 months, and I'm considering working until then. All plans change over time, who knows what my health will dictate, and whether I will live that long? The fickle finger of fate gets all of us eventually. Then again, I own my house outright and don't need to move out of State to get a smaller mortgage.

In spite of personal interest, I argued (with work friends) against the pension benefit hike back in 1998 because I thought (and still think) it was foolish to think the one surplus, which was mostly artificial anyway, in 17 years would continue on into the future, and that raising the pensions would create a backlash in the future when the economy cycled back down. We haven't had a budget surplus since, the idiots we elect keep spending more than we make.

I'm not psychic. I didn't know when or how bad this would be, but I did and do know that inevitably, like with all economies, there is a cycle and the good times will end and things will be very bad for awhile. That is why I never 'moved up' to a bigger better house and a much larger mortgage. I just worked on it until I paid this one off.

Remember that once we're back to good times, invest conservatively and only with money you can afford to lose. Home improvement is usually a lot cheaper than home replacement. For starters, you aren't losing the 6-8% sales commission and closing expenses on the sale price of your old home.

Yes LadyKate, someday the cycle will turn around and we will be back in the black, but it won't be for at least another five years, probably another decade.

The Legislature needs to keep its attention on the money they are spending and stop going back to the State Employees for effectively tiny amounts of what they need to fix their problems. They also need to realize that not giving us a cost of living adjustment (we haven't had one in years) is not saving the State money. It is just not spending more money. If they want to fix the problems, they need to look into their own profligate spending habits on both entitlements and pork. Beating the State Employees is mostly just a distraction from where the real problem lies. Other than the Pension upgrade (and the Prison Guards in general), the Unions haven't gotten much for their members in more than twenty years.

Selfishly, if I can ever retire, if the State doesn't cancel our pensions and raid the fund, I want to retire under the provisions currently in our contract. I worked hard for many years under those provisions, now that I'm ready to retire you're going to tell me that the contract was worthless and I'm screwed? Prepare for a class action lawsuit that will tie up all State spending for the next decade and cost the State more than paying the original contractually agreed upon pensions.

Never vote for an incumbent unless you have personally looked at their voting record and agree with the great majority of their voting history. Incumbency and the the political trading involved is what makes the system work this poorly. If the politicians know going in that this is a term of public service, not a career, maybe they will do what is right for the people instead of what lines their pockets. I'm for term limits of one term each in any office for all elected State and Federal positions. maybe somebody who can actually do the job will run for once.

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The U. S. Constitution doesn't guarantee happiness, only the pursuit of it. You have to catch up with it yourself. B. Franklin

"A mind needs books like a sword needs a whetstone." -- Tyrion Lannister, A Game of Thrones