How Much Is A Public Plan Actuary Worth?


Having gone through reams of public pension actuarial reports in the last few days to update my drop-dead dates for the largest government plans it is now my considered opinion that the public pension crisis would be far less severe had actuaries never been involved. The public would have a clearer picture of the fiasco had they ball-parked liabilities on their own rather than having these professional proponents of wishful thinking enabling politically convenient practices through a smokescreen of claptrap.

This was brought home to me this morning as I was listening to NPR’s Morning Edition reporting on “How Much Is A Firefighter Worth?” which first questioned the need for so many firefighters in Contra Costa with fewer fires before questioning how much of a pension they should be getting.


I’m sure there was some study done in 2002 to justify the pension spike that Contra Costa firefighters got.  That study would have been flawed and this November Contra Costa voters were asked to accept a $75 per home assessment to keep firehouses open.  They demurred.  Who could have predicted the need for such an assessment?  Who should have?*

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* A major problem with actuarial predictions these days is that far too much weight is allocated to the past and not enough to the present.  Who could have predicted that this country would have been successful back in 1776?  Not those who looked only at the prior 75 years of colonial unrest.  But look at who was around back then and it would have been clearer.  Compare that to what we have now.

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22 responses to this post.

  1. Native intelligence finally wins out !

    Reply

  2. Posted by Tough Love on December 26, 2012 at 3:22 pm

    John, Sometime having an actuary on hand is helpful. Remember (about 5 years ago) when, to put to bed ongoing litigation between the city of Allendale PA and it’s Police Union, the mayor sign a “memorandum of understanding”, one new provision of which allowed the police to determine their “pensionable compensation” on the single highest ONE MONTH of earnings. Needless to say, all officers eligible to retire put in one heck of a lot of overtime in the next few months and retired quickly thereafter.

    Had an actuary been on hand, it would have taken him/her about 1 second to say “NO WAY”

    Reply

  3. Posted by eatingdogfood on December 26, 2012 at 4:36 pm

    Corrupt Democrats + Corrupt Unions = BANKRUPTCY !!!

    Reply

  4. Posted by Javagold on December 26, 2012 at 4:44 pm

    simple math will always win out as it can not be tricked

    Reply

  5. Posted by Buster on December 26, 2012 at 7:02 pm

    Lack of stringent funding & accounting rules allowed public plans and their corrupt stakeholders put them in the position they are in. GASB rules are a joke.

    Reply

    • Posted by Tough Love on December 26, 2012 at 10:10 pm

      That’s the secondary result.

      The ROOT CAUSE is the grossly excessive pensions approved with the Unions and out elected officials (who approved these Plans) scratching each others back.

      Reply

  6. Posted by Ricky on December 26, 2012 at 10:41 pm

    How much is a reporter that doesn’t do much research worth?

    Reply

    • It’s a free market. Whatever the Star Ledger can get away with paying.*
      .
      * Something of a cheap shot borne of the Ledger once employing a great reporter like Dunstan McNichol who covered the pension crisis astutely, improving my knowledge along the way, and now……not.

      Reply

  7. All the facts have been repeated mant times here, using various words, so when do we get I&R with no Trenton pre-approval?

    Reply

  8. Posted by Mitchell Sailor on December 27, 2012 at 10:55 am

    A political screed with an agenda. Gee, with a url like “burypensions” what would you expect? Objectivity?

    Reply

  9. Posted by Larry Littlefield on December 27, 2012 at 11:38 am

    People want to rationalize, and not think of themselves as thieves. They want to lie to themselves while they steal from others.

    That’s what pension actuaries are for. And that’s what executive pay consultants are for.

    Reply

  10. Posted by Tough Love on December 27, 2012 at 2:03 pm

    The real abuse happens when, while considered in isolation, an assumption is within a reasonable range, but when in combination with others, they are not. Abuse sneaks in when advisers/consultants give (or choose to give) too little consideration to the reasonableness of combinations of assumptions.

    For example, one might consider a 5-7% range as reasonable for the average investment return over the the next 15 years and might also find a 1.5-3.5% inflation rate range as reasonable.

    But is you were to assume a 7% average investment return together with a 1.5% inflation rate assumption …. yielding a REAL return of 5.5% …. then that COMBINATION of assumptions is not reasonable.

    Professional (paid) advisers should be held accountable for advising, supporting, or looking the other way when the totality of assumptions are not reasonable.

    Reply

  11. Posted by Javagold on December 27, 2012 at 7:51 pm

    what private company did Christie work for, let alone run ?…..What high school did Sweeney graduate from, let alone college ?

    Reply

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