Fact Checking Detroit Pension Coverage

Detroit cutting pensions has hit the mainstream as have some dodgy ‘facts’.  For example, Huff Post reported:

Are retirees going to lose their pensions?
Maybe. Rhodes ruled Tuesday that pensions, like any contracts in bankruptcy, can be broken. But he also warned city officials that they’ll need to justify any deep cuts that could threaten the lives of retired workers. There are about 23,000 retirees and 9,000 city workers. Most of them receive pensions that are less than $20,000 annually.

Where did those numbers come from?

According the latest valuation reports (June 30, 2012) for both the General (released as of November 5, 2013) and the Police and Fire Retirement Systems:

……………………………..General………….Police & Fire……………..Total
Active Members……….6,234………………..3,587…………………..9,821
Retirees………………….11,943……………….8,451………………….20,394
Total Members………..18,177……………..12,038………………….30,125
.
Annual Payouts….$229,466,507…..$258,660,084………..488,126,591
Average Payout……..$19,213…………..$30,607…………………..$23,935

The “less than $20,000” most Detroit retirees are supposedly receiving per HuffPost applies only to the General Retirement system but it is a more useful number for some than $24,000 especially when the adjective ‘non-uniformed’ gets dropped.

There being “23,000 retirees” is a more bizarre assertion since there could have been a flood of recent retirements to inflate the rolls but I did not find any official backup for any retiree number other than the 20,394 in the June 30, 2012 actuarial reports.  However, I did find an exhibit in the Police and Fire report with a column that broke out 2,783 Pre-69 retirees included in the 8,451 total retirees that someone may have assumed to be additional retirees.

Though these misinterpretations (i.e. lies) can be easily debunked it is the actuarial valuations themselves where ‘facts’ should be questioned especially those in the Solvency Test exhibits which certify as of June 30, 2012 the Detroit Police and Fire Retirement System to be 96% funded and the General Retirement System to be 77% funded.  Who is going to buy that now as fact even if (especially since) those actuaries are using generally accepted actuarial procedures for public plans?

6 responses to this post.

  1. Posted by bpaterson on December 4, 2013 at 7:15 pm

    Statistics when a raw number like “average” is used is usually meaningless toward any argument because it does not address the “mean”. JB1 you got any other numbers in that report that show ranges of pension and pop level? Using a policy decision like capping pensions at $50,000 would not affect those poorer workers and thus would ameliorate any empathetic sentiments from the readers….if something has to be done……

    Reply

  2. Posted by Jack on December 4, 2013 at 7:58 pm

    Unfunded pension obligations 1.5 billion as cited by the Orr, 800k as cited by the unions. Sell the artwork in the Detroit art museum valued at a billion dollars and give those people their pensions. It’s deplorable that some will go hungry while others continue to enjoy the artwork. Let alone the bridge, the stadiums, and the myriad of other assets. They will probably take the COLA and leave the rest. No way will it be 50%.

    Reply

  3. Posted by Tough Love on December 4, 2013 at 9:42 pm

    Two things should be kept keep in mind as cuts to the Detroit retiree pensions are structured.

    (a) Not all $20K (or any single amount for that matter) pensions are equal.
    E.G.,while reducing the $20K annual pension of a 35-year worker who retired at age 65 without Social Security may be a bad idea, there should be no problem at all with a reduction in the $20K pension of a 20 year worker retiring at age 55 (even w/o Social Security).

    (b) a $20K Public Sector pension (that will continue to get annual COLA increases …of say 3%) is equivalent to LEVEL ANNUAL $25K-$30Kpension (depending on the current age of the retiree). Noting that Private Sector employer-provided pensions are almost never COLA adjusted, this difference should be considered in where the cutoff should be set,below which Detroit’s retiree pensions should not be reduced.

    Reply

  4. Posted by NFS on December 4, 2013 at 11:20 pm

    I’ll leave the numbers to you John because you are ALWAYS on the mark.

    HuffPo, WaPo have its own motives.

    As far as I’m concerned, the Unions and their members can choke on their own doings.

    Let’s see if the Unions will now acknowledge they over-promised lavish benefits and will “reform” its own death wish that they used to brainwash its own members, by extorting campaigns with cash for unsustainable promises.

    Reply

    • Posted by Tough Love on December 5, 2013 at 12:26 am

      The “reform” necessary is not just a Detroit issue.

      With Public Sector “cash pay” no less than their Private Sector counterparts, there is ZERO justification for ANY greater pensions or benefits, let alone the CURRENT STRUCTURE (EVERYWHERE) where the Taxpayer paid-for share of Public Sector pensions is ROUTINELY 3x, 4x, (even 5-6x for safety workers) greater in value at retirement than the pensions of comparable Private Sector workers.

      Reply

  5. […] Wrong!  As of 6/30/12 the average payout from the General Retirement System was $19,213 but the average payout in the Police & Fire plan was $30,607 and the overall average payout was $23,935 though the $19,000 amount has been picked up by those who see that as a better number to publicize for their purposes. […]

    Reply

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