Public Pensions After Detroit and the New York Times

Just once in my life I would like to see an Editorial Board come out on an issue of the day with but one line:

This is vitally important but, unfortunately, we have no one among us with enough pertinent experience to opine intelligently on this matter.

It would have been preferable  to see that in today’s New York Times instead of the inanities spouted regarding the lessons to be learned from the Detroit Pension debacle:

“One is that state and local governments need to do a much better job managing retirement funds. The other is that they should not pre-emptively reduce hard-earned benefits at the first sign of trouble.”

Dangerously wrong in a myriad of ways:

  • If anything investment returns for public plans, boosted by those imaginary figures attached to alternative investments, have been the good news.
  • If not pre-emptively reduced then is the plan to wait until all the money is gone, including the participants’ own contributions, before considering benefit reductions?
  • Why not then reduce the benefits that haven’t been ‘hard-earned’, like those for elected and appointed officials who leech off the system?
  • It wouldn’t be the ‘first sign of trouble’ if actuaries were doing the job that the public assumes they are doing.

Then there are these lines that appear within three paragraphs of each other:

“Several state and local pension systems around the country are under serious stress.”

“Most government retirement systems are in much better shape than critics suggest.”

So which is it or does that depend on which ill-considered prejudice is being justified at the moment?

15 responses to this post.

  1. Posted by skip3house on August 4, 2013 at 12:09 am

    ‘Times’ pusillanimous, and brings out a paroxysm of antipathy ?

    Reply

  2. Perhaps what they really meant to say is that Detroit’s pension funds are in much better shape than New York City or New Jersey.

    Reply

  3. Posted by art on August 4, 2013 at 1:54 pm

    this will be a huge quandry for the Democrat. All you have to do is spend time in vacation areas to see that public moneys are going to wealthy non minority mostly men(some women esp retired school principals/admins) who are living the time of their lives. Fifty something retired cops, fire, phys ed teachers boating, fishing, golfing all taking money that COULD be used to fix social problems. However to the “left” (and I am not political) all public funded stuff is “good”, most private “bad” so this is killing them. To be fair, when you point this to most Republican (at least in the past) you got a shrug as most of them count on legal business from public workers esp boards of ed so will say nothing(that is why school choice dies..suburban Republicans hate is as thier constituents “got theirs” so why rock the boat

    Reply

  4. Posted by Javagold on August 4, 2013 at 2:19 pm

    take away every last public worker paid health benefits and put them on the wonderful obamacare…..start with that and go from there

    Reply

    • Posted by Tough Love on August 4, 2013 at 2:49 pm

      With Equal treatment of Public & Private Sector workers/retirees as an appropriate goal, putting pre-Medicare Public Sector retirees into Obamacare is not a bad idea …as long as any “subisdy” (BEYOND the normal subsidy rules related to Income and part of Obamacare itself) from the former government employer (meaning Taxpayers) is NO GREATER than what pre-Medicare age Private Sector retirees typically get from their employers … which is usually NOTHING.

      Reply

  5. Posted by jackdean on August 4, 2013 at 5:41 pm

    Good post. I put it on the website this morning for weekend visitors and it’s had about a hundred click-thrus already.

    Reply

  6. Posted by MJ on August 5, 2013 at 8:09 pm

    How is Detroit paying for a brand new hockey rink and paying Christies to appraise their artwork if the city is broke? Just wondering…….

    Reply

  7. Posted by Al Moncrief on August 6, 2013 at 2:09 am

    FYI: COLORADO SUPREME COURT TAKES THE COLORADO PERA RETIREE PENSION COLA LAWSUIT.

    From saveperacola.com:

    “We’re going to the Colorado Supreme Court! Today the Court granted the writ of certiorari for the most important issues raised in the lawsuit against Colorado and PERA. At this time, we do not have any more details than what is presented below on the Court’s website. Only 3 of 43 petitions were granted by the court today. Below is the announcement. Find the original set of announcements at:

    http://www.courts.state.co.us/Courts/Supreme_Court/Case_Announcements/Files/2013/8C16A3AUG.5.13.pdf

    “MONDAY, AUGUST 5, 2013
    No. 12SC906
    Court of Appeals Case No. 11CA1507

    Petitioners/Cross-Respondents:
    Gary R. Justus; Kathleen Hopkins; Eugene Halaas, Jr.; and Robert P. Laird, Jr., on behalf of themselves and those similarly situated,
    v.
    Respondents/Cross-Petitioners:
    The State of Colorado; Governor John Hickenlooper, in his official capacity;
    Colorado Public Employees’ Retirement Association; Carole Wright, in her official capacity; and Maryann Motza, in her official capacity.

    Petition and Cross-Petition for Writ of Certiorari GRANTED. EN BANC.
    JUSTICE EID and JUSTICE MÁRQUEZ do not participate.

    Summary of Issues:

    Whether the contracts clause framework articulated in In re Estate of DeWitt, 54 P.3d 849 (Colo. 2002), applies to all contract clause claims under the Colorado Constitution.

    Whether Colorado Public Employees’ Retirement Association members have contractual rights to the cost-of-living adjustment formulas in place at their respective retirements for life without change.

    Whether SB10-1, which adjusted cost-of-living adjustments to their current level of two percent compounded annually, was constitutional because it (a) did not substantially impair contractual expectations and was reasonable and necessary to ensure the pension funds’ long-term viability, and (b) was not a regulatory taking.”

    My comment: I am very pleased that the Colorado Supreme Court has agreed to hear the appeal in the case, Justus v. State. In 2010, the Colorado General Assembly abdicated its policy-making authority relating to the Colorado PERA pension system to 27 statehouse lobbyists who represented self-interested parties. These lobbyists successfully persuaded a majority of Colorado legislators to attempt to shift the accumulated pension debts of the State of Colorado and many Colorado local governments onto the backs of elderly Colorado PERA retirees, whose PERA pension contracts are fully-vested. Since most Colorado PERA retirees are ineligible for Social Security benefits, they are entirely dependent on their PERA pension contracts.

    As the Colorado General Assembly demonstrated last year with the adoption of SB12-149, it is capable of adopting prospective public pension reform that does not trample on fully-vested pension contracts to which the State of Colorado is a party. (SB12-149 put in place prospective pension reform for Colorado county government pension systems, honoring the pension contracts of these county government retirees.) Numerous prospective pension reform options were available to the Colorado General Assembly in 2010, but were unfortunately ignored.
    Colorado is the 15th wealthiest state in the nation, it can afford to pay its debts. Colorado is better than breach of contract.

    Sadly, it appears that Colorado Supreme Court Justice Monica Marquez will be unable to participate in any ultimate decision in the case, Justus v. State as she has “worked on the case” according to a letter of recommendation written on her behalf by former Colorado Supreme Court Justice Jean Dubofsky. Further, Justice Marquez has previously advised Colorado PERA officials. From my perspective this is unfortunate as I believe Justice Marquez to be an unusually talented jurist, and I have complete confidence in Justice Marquez’s objectivity and dedication to the rule of law.

    2009.
    Attorney Jean Dubofsky, at the request of Colorado PERA, provides PERA with a legal opinion arguing that the Colorado Legislature could legally take Colorado PERA retiree pension COLA benefits: “at request of PERA (Public Employees Retirement Association) in 2009, provided legal opinion that general assembly could repeal automatic 3% cost-of-living adjustment for retirees without violating their vested rights;”
    http://lawweb.colorado.edu/files/vitae/dubofsky%20.pdf

    August 30, 2010
    Former Colorado Supreme Court Justice Jean Dubofsky, author of the Colorado PERA “COLA-taking” legal opinion: “I worked on” the case, Justus v. State, with Colorado Supreme Court Justice Monica Marquez. The author of Colorado PERA “COLA-taking” legal opinion wrote a letter of recommendation for Monica Marquez to serve on Colorado Supreme Court: “In particular, I’ve worked on several cases where she provided superb briefing, argument and/or advice for the Attorney General’s office, including congressional redistricting, the challenges to voter-approved Amendments 41 and 54 to the Colorado Constitution, and the current challenge to the amendments to PERA (Justus v. State), the government’s pension system.”

    “ . . . and Ms. Marquez would bring to the court sophistication about the numerous cases that involve, for example, TABOR, ballot titles, election issues, voter-initiated constitutional amendments, property tax, public pensions, labor law, and regulations issued by a wide variety of state agencies.”

    “Sincerely, Jean E. Dubofsky.”

    http://www.scrib.com/doc/36638245/Letter-for-Monica-Marquez-by-Jean-Dubofsky

    Support public pension contractual rights and the rule of law in Colorado. Contribute at saveperacola.com. Friend Save Pera Cola on Facebook!

    Reply

    • Posted by Willy05 on September 15, 2013 at 12:00 pm

      Re the Colorado and NJ COLA

      An automatic fixed COLA is as bad as a frozen COLA. Neither is equitable to participants or taxpayers. Look (hope?) for the Court to render a decision forcing the legislature to come up with a fair flexible formula.

      In NJ, where the COLA is frozen but otherwise reasonable, look (hope) for a negotiated or Court imposed reinstatement.

      COLA – Cost of Living Adjustment

      Reply

  8. Posted by eatingdogfood on August 6, 2013 at 7:38 pm

    To All Public Servants And Retirees; Repeat After Me : ” EVERYBODY GETS NOTHING ” !!! Repeat 1000 times !!! Now, Doesn’t That Feel Better !!!

    Reply

    • Posted by Al Moncrief on August 7, 2013 at 12:43 am

      Thanks again dogfood for your cogent analysis of public pension legal doctrine.

      Reply

      • Posted by Tough Love on August 7, 2013 at 12:50 am

        Al, And don’t you think the readers are equally disgusted with your endless re-posting of your 5,000 word diatribe ?

        Kiss your lucky stars if the ONLY thing you lose is the COLA.

        Reply

        • Posted by MJ on August 7, 2013 at 6:11 am

          Thank you TL! Al, your endless pages are getting old. Contracts are no good to anyone if there is no money to pay for them. I agree with TL, be thankful if the only thin you lose is the COLA!

          Reply

  9. Posted by Willy05 on September 15, 2013 at 11:50 am

    I was having a discussion the other day and someone stated that in NJ we have switched to a defined contribution plan. So it was time to go to the source. See below for links.

    The key is the long term trend. The cap on defined benefit pensions keeps them focused on middle income employees. Many of the other abuses, like early retirement have also been addressed. Higher employee contributions and a more conservative formula also help.

    Administrators and salaries over the cap are now under a defined contribution plan which avoids the headline issues we constantly see in the newspapers.

    With a return to normal economic times in a few years the pension system will look much better. And yes, they are coming.

    ============

    Fact sheet 14 refers to 5 tiers of defined benefits for TPAF & PERS

    So its DB for most employees with a cap

    http://www.state.nj.us/treasury/pensions/pdf/factsheets/fact14.pdf

    New administrator hires and earnings over the cap are defined contribution:

    http://www.state.nj.us/treasury/pensions/pdf/factsheets/fact79.pdf

    Given these terms I would agree that the State had accomplished real pension reform and will be on a path to solvency so long as the annual payments are made going forward

    ===================

    Admin please post in a new comment section. Thanx

    Reply

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