California Dreaming – The Actuaries Role

california dreaming I am halfway through this book and it works as a good primer on the California pension system though the alarm the author seeks to blare is lost on this New Jerseyan. With plans that are 79% funded officially (64% under Moody’s rules) with fairly steady contribution sources from those localities not in bankruptcy Lawrence J. McQuillan first needs to hammer home the 80% Pension Funding Standard Myth before proceeding with his vivisection.  No such detour is necessary when discussing a system at a 32.6% funded ratio.
There will be selected excerpts from the book in the next blog but, for now, the sub-chapter on pages 58 through 61 on “The Role Played by Accountants, Actuaries, and Auditors in the Downward Descent’ is basically what this blog is all about so here it is in its entirety:

One group often ignored when assessing the pension crisis is financial-control personnel: the accountants, actuaries, and auditors at the pension funds. They all maintain deniability because the follow “generally accepted practices,” but the story is more complicated than this.

For example, according to CalPERS’s annual report: “The accounting policies used to prepare these financial statements conform to accounting principles generally accepted in the United States.” Moreover: “The basic financial statements are presented in accordance with the guidelines of the Governmental Accounting Standards Board (GASB).

The same deniability comes from CalPERS’s actuaries. The chief actuary Alan Milligan said in the annual report: “The actuarial assumptions and methods used for funding purposes meet the parameters set for disclosures presented in the Financial Section by Governmental Accounting Standards Board….”The same goes for the auditors.

CalPERS’s annual report said its internal Office of Audit Services “performs assurance and consulting work consistent with the Institute of Internal Auditors’ International Standards for the Professional Practice of Internal Auditing.” And the independent external auditor, Macias Gini & O’Connell, LLP, said: “We conducted our audit in accordance with auditing standards generally accepted in the United States of America,” which arc consistent with the standards contained in Government Auditing Standards issued by the Comptroller General of the United States.

To the extent that California’s pension crisis was driven by an inaccurate picture of the extent of the problem, the cause does not appear to be financial-control personnel ignoring generally accepted practices. Rather, the problem is in the practices themselves that result in actuarial estimates that are “smoothed, stretched, averaged, backloaded, and otherwise spread across time,” as described by the New York Times.

The accountants and actuaries followed the “Generally Accepted Accounting Principles” (GAAP) for state and local governments established by the Governmental Accounting Standards Board (GASB). GASB is a nonprofit professional association, not a government agency. Almost all state and local governments produce financial statements according to GASB’s rules. The accountants’ and actuaries’ job of producing accurate financial statements was made more difficult, in fact, by such things as pension spiking, which injects greater uncertainty into pension calculations. But they appear to have followed accepted practices.

The true culprit was GASB’s rules, which allowed billions of dollars of unfunded government pension debt to accumulate unreported to the public. As John G. Dickerson of the California Public Policy Center said: “The Fatal Flaw is that pension expenses that create unfunded pension debt are reported in the future as chat debt is paid. That’s absurd – the payments of a debt eliminate the debt, they don’t create it. Unfunded pension debt is created by pension expenses in the past – most of which have never been reported to the people,” The accepted practices and lack of transparency allowed lawmakers to hide from the public the true extent of the problem.

An extreme example of this is Detroit. Using actuarial standards, Detroit’s pension fund was shown to be healthy on paper just before the city’s bankruptcy, when the pension fund turned out to be actually billions of dollars in deficit. In reality, Detroit’s municipal debt was around $18.2 billion and public employee pensions and retiree healthcare obligations accounted for $9.2 billion of the liabilities, or about $13,000 per Detroit resident.

GASB’s rules allowed unfunded pension debt to be hidden and reported as a lower amount than it should have been. GASB recently changed the rules on how governments must calculate and report pension finances. The changes are mostly for the better. The new rules will provide a more accurate picture of the financial position of state and local governments. But the new rules do not “tell” governments how much they should pay into their pension funds.

65 responses to this post.

  1. Posted by Anonymous on July 19, 2015 at 8:18 am

    GASB and the lack of similar standards for actuarial reports. Can/does GASB ever mandate funding upon governmental entities?

    Reply

  2. Posted by S Moderation Douglas on July 19, 2015 at 12:39 pm

    There is a fairly steady contribution source even from those localities that are in bankruptcy. So far, at least. Like it or not, most cities see this as a necessary ongoing expense. In bankruptcy they have reduced healthcare or reduced the number of employees, or reduced pay, but maintained pensions.

    It makes sense. Pensions are by definition a very long term program and should be exempt from transitory changes.

    Reply

    • Posted by Tough Love on July 19, 2015 at 1:48 pm

      Quoting …. “Like it or not, most cities see this as a necessary ongoing expense. ”

      Or, like San Bernadino CA, there are responding by (and now have the Bankruptcy Judge’s approval) to outsource their Fire Depart …. BECAUSE their compensation costs are simply too great and unaffordable, and the Firefighter’s Union is unwilling to sufficiently reduce compensation levels.

      I expect that in future Bankruptcies, outsourcing (as well as reduced future service pension accruals for current workers) will play a growing element of the Bankruptcy’s exit Plan.

      It makes NO sense, and there is ZERO JUSTIFICATION for continuing pensions that are greater than necessary, just, fair (to Taxpayers) or affordable, and virtually ALL Public Sector Final-Average-Salary DB pensions fall into this category.

      Reply

    • Posted by S Moderation Douglas on July 19, 2015 at 2:25 pm

      “virtually ALL Public Sector Final-Average-Salary DB pensions fall into this category.”

      (pensions that are greater than necessary, just, fair (to Taxpayers) or affordable)

      Most of the major economic studies show that public worker total compensation, on average, has been roughly equal to or lower than equivalent private sector compensation.

      Meaning that the increased pensions are offset by lower wages.

      The one infamous study which shows the opposite, clearly shows on a nationwide basis that of those studied* average wages were 12% lower in the public sector, but total compensation was 10% higher.

      Meaning the increased pensions (and OPEBs) more than offset the lower wages. On average.

      But.

      Nationwide, approximately 60% of those state workers were described as either undercompensated or “roughly equal” in total compensation.

      If more than half are “roughly equal” or worse, by the most conservative study available, it is illogical to state that “virtually ALL” are greater than necessary.

      And that is …..if….. you choose to blindly agree with the most conservative study and totally disregard all the others.

      *most studies include both state and local workers, including safety. AEI includes only state workers, and does not include safety.

      Reply

      • Posted by Tough Love on July 19, 2015 at 6:42 pm

        Quoting S. Moderation Douglas ……………. “Most of the major economic studies show that public worker total compensation, on average, has been roughly equal to or lower than equivalent private sector compensation.”

        Really, ??? ……. with a quite modest Public Sector wage “DISADVANTAGE” and a HUGE Public Sector Pension and benefits “ADVANTAGE” ……… you’ve reached new heights with your BS.

        Or, maybe you forgot to qualify that comment (with your favorite, based on just a few % of the total working population)……. that it’s only for Professionals & PHDs, or perhaps you’re including studies from Rutgers Professor Jeffery Keefe who counts (in such studies) as the annual “COST” of a Public Sector pension what the gov’t entity ACTUALLY CONTRIBUTED in the year, as opposed to a proper calculation of the TRUE VALUE of the pension benefit ACCRUED in that year (regardless of what was actually “contributed”). Under his logic, the 2014 employer “COST” of NJ. pension was about $1 Billion, when such accruals, if valued under the methodology REQUIRED by the US Gov’t for Private Sector Plans, a figure closer to $5 Billion would be the correct magnitude.
        ———————————————-

        Interesting “*”footnote, seemingly suggesting that the AEI study’s leaving OUT Safety workers would (if included) bring their results closer to those of your (supposed) “other” studies, when just the OPPOSITE is true. With Safety workers having the highest “wages” and even MORE SO on a “Total Compensation” basis (with the most egregious pensions & benefits), excluding them from the database of PUBLIC Sector workers makes the Public Sector “Total Compensation” ADVANTAGE look SMALLER than it really is.

        Reply

        • Posted by S Moderation Douglas on July 19, 2015 at 8:02 pm

          Interesting “*”footnote,

          The first few times I cited this study, I mentioned that it excluded local governments and excluded safety workers. If I subsequently happened to quote the study without reiterating that, I was accused of misleading by omission.

          When I do add that caveat, I’m trying to mislead?

          Are you really that cynical/paranoid, or am I really that Machiavellian?

          Rhetorical question.

          Reply

      • Posted by S Moderation Douglas on July 19, 2015 at 7:28 pm

        “(with your favorite, based on just a few % of the total working population)……. that it’s only for Professionals & PHDs”

        No, signor, actually. Those are only the public workers *grossly* underpaid, as in:

        “Professional degree holders such as doctors or lawyers and individuals with doctoral degrees appear to receive total compensation roughly 18 percent below private-sector levels”

        In addition to those, according to Biggs:

        “Total compensation for bachelor’s degree holders is about even with private sector levels.”

        If this group is “about even”, their pensions are definitely not “greater than necessary, just, fair (to Taxpayers) or affordable”

        And public sector workers with a bachelor’s degree (or higher) comprise about 60% of the state workforces nationwide. Therefore, again; about 60% of state workers are either “roughly even” (BAs/MAs) ….or…. materially undercompensated (PhDs and professionals).

        Whoa!! déjà vu!! I believe I have said this before. According to the most conservative study, 60% of state workers are …..not….. over compensated.

        As far as the studies of Munnell, Keefe, et al; they are what they are. Feel free to critique them, or do your own study.

        What is demonstrably ….not….. true, according to them and according to Biggs:

        “virtually ALL Public Sector Final-Average-Salary DB pensions” …..”are greater than necessary, just, fair (to Taxpayers) or affordable”

        https://encrypted-tbn0.gstatic.com/images?q=tbn:ANd9GcTDxJrsa2ak8LxAqoD-flk86akivWW7ps1FROHnQq9BU6kmtCYE_Q

        Reply

        • Posted by Tough Love on July 19, 2015 at 9:16 pm

          S, Moderation Douglas,

          You, I, and Robert Fellner (Transparency Manager at the Nevada Policy research Institute) traded about 100 comments on this issue 3 months ago in the comments to an article Titled : Dick Spotswood: The long-term cost of keeping taxpayers in the dark, which can be found here …….

          http://www.marinij.com/opinion/20150425/dick-spotswood-the-long-term-cost-of-keeping-taxpayers-in-the-dark

          and for which the comments can be found here …

          https://disqus.com/home/discussion/dfm-marinij/dick_spotswood_the_long_term_cost_of_keeping_taxpayers_in_the_dark/

          For readers interested in a more in-depth discussion, that’s where to find it. No need to re-hash it again here.

          Reply

        • Posted by S Moderation Douglas on July 19, 2015 at 10:19 pm

          Classic Tough Love response: “Read my last above comment………………”

          No need to go back three months.

          My statement is clear enough, according to Biggs data, 60% of state workers nationwide (those with a bachelor’s degree or higher) in total compensation, are either “about even with private sector levels.” or “roughly 18 percent below private-sector levels”

          By definition, none of these 60% are “greater than necessary, just, fair (to Taxpayers) or affordable”

          Is that claim incorrect? It’s a yes or no answer, no need to go back three months or otherwise dodge the question.

          Moderation reiterates :

          In the statement “It makes NO sense, and there is ZERO JUSTIFICATION for continuing pensions that are greater than necessary, just, fair (to Taxpayers) or affordable, and virtually ALL Public Sector Final-Average-Salary DB pensions fall into this category.”

          the phrase “virtually ALL Public Sector Final-Average-Salary DB pensions fall into this category.”

          is incorrect.

          And the rest of the statement is just a rehash of the same old rant, CAPS LOCK not withstanding.

          Reply

          • Posted by Tough Love on July 19, 2015 at 10:42 pm

            No, OUR 50+ comments ……. it’s ridiculous. The SAME comments can be read w/o repeating them again ……… including the rebuttals to ALL of what you’ve said here…. and lots more.

          • Posted by S Moderation Douglas on July 19, 2015 at 11:17 pm

            By definition, none of these 60% are “greater than necessary, just, fair (to Taxpayers) or affordable”
            Is that claim incorrect? It’s a yes or no answer.

          • Posted by S Moderation Douglas on July 19, 2015 at 11:21 pm

            Actually, it’s a “no” answer.

            60% according to the most conservative study. Are …..not….. overcompensated.

          • Posted by Tough Love on July 19, 2015 at 11:31 pm

            Sorry, but you don’t get to dictate my replies.

            This Blog focuses on NJj’s pension mess, with (per the AEI study) a 23% Public Sector “Total Compensation” ADVANTAGE ….. which would assuredly be higher (25% ?, 30%?, more ?) if Safety workers had been included.

            I’m fine with INCREASING the Total Compensation of those Public Sector workers who are now demonstrably under-compensated, as long as FOR ALL Public Sector workers TAKEN TOGETHER the net result is a 23% reduction in their Total Compensation ……………… likely meaning that a substantial group now paid 150%-200% of what their Private Sector counterpart earns, will have to give up ALL of that excessive compensation.

            EQUAL, but not more.

          • Posted by S Moderation Douglas on July 19, 2015 at 11:50 pm

            Far be it from me to tell you what to do,

            The claim that :

            “virtually ALL Public Sector Final-Average-Salary DB pensions” …..”are greater than necessary, just, fair (to Taxpayers) or affordable”

            Is demonstrably incorrect.

            No reply is necessary.

          • Posted by Tough Love on July 20, 2015 at 12:27 am

            S. Moderation Douglas,

            I stand by that being a fair and accurate statement, noting that it doesn’t imply (and no REASONABLE person would interpret it to mean) that not even one single Public Sector worker makes less than their Private Sector counterpart when such pension is combined with cash pay and other benefits.

          • Posted by S Moderation Douglas on July 20, 2015 at 12:46 am

            “not even one single Public Sector worker makes less than their Private Sector counterpart when such pension is combined with cash pay and other benefits.”

            I don’t know what you think you said, but I think what you actually said makes no sense.

          • Posted by Tough Love on July 20, 2015 at 11:14 am

            S. Moderation Douglas,

            It makes perfect sense…. think average/overall impact, and employees taken as a group to which the formula/provisions apply, not each individual in the group considered separately.

  3. Posted by Tough Love on July 19, 2015 at 2:25 pm

    Recommended reading

    http://www.nj.com/politics/index.ssf/2015/07/christie_wont_accept_public_employee_pension_payme.html

    Gov. Christie is dead-on in his remarks … every one of them.

    Reply

    • Posted by Anonymous on July 19, 2015 at 3:53 pm

      As we’ve discussed before any reforms (ie the P&B Commission) and dedicatedfunding must be done via a constitutional amendment to de-politize goi g forward.

      Reply

      • Posted by Tough Love on July 19, 2015 at 4:21 pm

        Yes, a dedicated funding source….. but not for “ANY” reforms, but for for reforms that reduce the FUTURE Service pension accruals of all CURRENT workers (and increase the full/unreduced retirement ages, with TRUE actuarial reductions for earlier retirements) to be no greater in value at retirement than those typically granted Private Sector workers …. and with provision to rescind that dedicated source of funding if the Public Sector pensions are subsequently increased to a higher level.

        Yes, a PERMANENT end to the Taxpayers being the “sucker” in the equation.

        Reply

        • Posted by Anonymous on July 19, 2015 at 4:24 pm

          If this is done via a constitutional amendment, as it should be, then any subsequent changes would be done similarly.

          Reply

    • Posted by Anonymous on July 19, 2015 at 8:58 pm

      I know the world is flat and we’re all going over the edge!

      Reply

      • Not all of us, just the Public Sector. The rest of us go over when Medicare and SS go broke.

        Reply

        • Posted by Tough Love on July 19, 2015 at 10:01 pm

          Current SS revenue projections (based on CURRENT formula with NO CHANGES) can support 75% of current SS formula payout indefinitely, and relatively modest increases to the NRA and/or increases to the taxable wage base can “fix” the imbalance.

          Anyway, if I were to lose 25% of my SS, it will be a heck of a lot less than the local cop losing 25% of that overstuffed pension.

          Reply

          • That 75% projection is based on “normal” ongoing employment so that the expected revenue stream materializes. My view of the future is much bleaker than that since such a huge percentage of our “employment” is created/supported by Federal borrowing. When that dries up so does the employment and so does the expected payroll tax.

          • Posted by Tough Love on July 19, 2015 at 10:46 pm

            PSDrone,

            I believe WE will become Greece BEFORE SS goes belly-up, and SS won’t be the cause.

  4. Posted by S Moderation Douglas on July 19, 2015 at 8:58 pm

    “The new rules will provide a more accurate picture of the financial position of state and local governments. But the new rules do not “tell” governments how much they should pay into their pension funds.”

    One of my favorite quotes: from “Educating Rita”

    Dr. Frank Bryant: “Found a culture, have you Rita? Found a better song to sing? No, you found a different song to sing, …”
    _____________________________
    The new rules will provide a “different” picture, not necessarily a more accurate one. I have seen some bloggers who seem to infer that the normal cost should be calculated on the risk free rate, rather than the expected return; which would double, or more, the current ARC for most pension systems.

    I don’t think even the most extreme financial economists are proposing that.

    Reply

    • Posted by Tough Love on July 19, 2015 at 9:33 pm

      Only those completely ignorant of (or with no ability or willingness to understand) the new GASB pronouncements, or those with a vested interest (no pun intended) in zero (or financially immaterial) pension reform would say ……

      “The new rules will provide a “different” picture, not necessarily a more accurate one. ”

      ———————————————————-

      How do you explain that in all recent Bond offerings the State/City Public Sector Pension’s financial position has been reported in Bond underwriting documents (to attract potential investors) in a manner CONSISTENT with the new GASB standards.

      Not sure what OTHER liability they might subject to if they reported on the OLD basis, but assuredly, the would get sued by the SEC.

      Reply

  5. Posted by Greg Lamon on July 19, 2015 at 9:11 pm

    I have read McQuillan’s book. First, one should be aware that he is yet another writer affiliated with an Institute, Foundation, of some other so-called think tank that appears to be fueled by an agenda of blowing the pension crisis horn. I none the less began my reading with a goal of hearing him out, giving him the benefit of the doubt. But, he quickly lost me completely in just the Introduction when he blames the bankruptcies of several cities on pensions (Page xix), which is a falsehood. To reinforce the perpetuation of this myth he says it again on page xx of the Introduction in these words “Detroit, which filed for Chapter 9 federal bankruptcy protection in July 2013 primarily because of unaffordable public pensions —“. i have been studying and monitoring the marketing of the pension crisis and various solutions, and I chafe when I see such misrepresentation of the cause of the municipal bankruptcies (Vallejo, Stockton, San Bernardo, Mammoth Lakes and Detroit) assigned to pension costs. The driving force for filing bankruptcy in each of these cases was not pension costs, it was a series of bad decisions by elected officials to plunge their cities into debt in anticipation that the revenue from new bond financed facilities such as convention centers, marinas and redevelopment would pour in to pay off the debt, betting on continued escalation of property values and related property tax,and in the case of Detroit – rampant corruption by the Mayor who is now in federal prison coupled with a collapsing local economy and white flight. With Mammoth Lakes it was the loss of a lawsuit by a developer who convinced a Court that the city’s actions scuttled a major airport related project the city had previously sought and approved. So, when the premise of such a book is based upon a falsehood it begins with intellectual dishonesty, and that makes the whole book tainted and not worthy of serious consideration. This author is not to be believed.

    Reply

    • Posted by Tough Love on July 19, 2015 at 9:51 pm

      Greg Lamon,

      A quick search of your prior commentary suggests that you are quite biased and more one-side than you make yourself out to be … for example, where you said this …

      “If you buy into the many published stories and opinion pieces that public sector employees are compensated better than their counterparts in the private sector, then the fact that private sector pay growth is outpacing that of the public sector is good news.”

      and this …

      Readers need to keep in mind that besides being a former reporter they author is a hired gun who writes for the California Public Policy Center, its anti union “Union Watch” arm, and other similar publications and web sites. While an interesting read, what he writes for these organizations is very predictable including a current campaign to promote the proposed initiative in California….”

      Clearly you (or a family member) are now or will be receiving a Public Sector pension. So why should intelligent readers give any weight to your “opinions” ?

      Reply

      • Posted by Greg Lamon on July 20, 2015 at 1:03 pm

        Tough – I can only hope an objective reader will drill down on opinions expressed here to do their own fact checking and reach their own independent conclusion, including the opinions of paid bloggers such as yourself.

        Reply

        • Posted by Tough Love on July 20, 2015 at 2:44 pm

          Nobody pays me for commenting on this or any other Blog or forum, and I earn no money from ANY activities that support Public Sector pension reform.

          I comment as an educated, well-informed, taxpayer who FULLY understands the huge magnitude of the decades-long financial “mugging” of Private Sector taxpayers (sourced from the grossly excessive, unnecessary, unjust, unfair, and unaffordable pensions & benefits promised Public Sector workers in almost all States and Cities), I’m fed-up with it, and have, and will continue to strongly advocate form VERY material changes, changes that bring the future service pension accruals ALL HE WAY down to a level comparable to what Private Sector taxpayers typically get from their employers.

          You NOT “special” and deserving of greater pensions and better benefits …. on the taxpayers’ dime.
          ———————————-

          And I too encourage fact-checking and in-depth steady of the “ROOT CAUSE” of the pension mess in which many States and Cities now find themselves, that ROOT CAUSE indeed being traceable to grossly excessive Public Sector pension & benefit “promises”.

          Reply

          • Posted by Greg Lamon on July 20, 2015 at 3:15 pm

            Well, then, Mr. or Ms. Tough Love, I stand corrected regarding your motivation to post here. If you have proof that pensions are what drove these cities into bankruptcy, I am more than willing to review it. My understanding, as I stated, is that the root causes were deeper and that pension costs were simply treated by the bankruptcy courts as unsecured creditors like many others. In fact, I believe the Judge in the Detroit case assigned blame when making the statement that Detroit’s fiscal mess was self-inflicted by the elected officials of that city. In my view, the same can be said for the states of Illinois and New Jersey. Here is a link to a 2013 article about Detroit’s bankruptcy cause you might find interesting -http://www.freep.com/article/20130915/NEWS01/130801004/Detroit-Bankruptcy-history-1950-debt-pension-revenue

          • Posted by Tough Love on July 20, 2015 at 4:15 pm

            Greg Lamon,

            While one could assert that the high cost of welfare, infrastructure maintenance and repair, and education-funding are ALSO (as are the costs or promised Public Sector pensions and benefits) huge expenditures and perhaps equally contributing to the financial woes of many of America’s States and Cities, the only SELF-INFLICTED contributory cause is the grossly excessive (by ANY reasonable metric) Public Sector pensions & benefits, ROUTINELY being 3x-4x (4x-6x for Safety workers) greater in value at retirement than those typically granted comparable Private Sector workers retiring at the SAME age, with the SAME pay, and the SAME years of Service. Such pension & benefit promises are clearly the result of the Public Sector Unions BUYING of the favorable votes of our Elected Officials (on pay, pensions, and benefits) with camapign contributions and election support, and under any other venue, such underhanded taxpayer-betraying deal-making would be considered bribe giving and receiving and criminally prosecutable.

            It’s easy to demonstrate the MULTIPLES GREATER PUBLIC Sector pensions noted above. The last demonstration of mine to this effect can be found in the 95-th and 96-th comments (of the 99 comments) to an earlier John Bury Blog article found here ……

            https://burypensions.wordpress.com/2015/05/14/its-embarsaing-and-im-tired-of-hearing-this-i-want-what-i-was-promised/#comments

          • Posted by S Moderation Douglas on July 21, 2015 at 12:19 am

            “The noted 3 “advantages” are multiplicative (not additive) when all apply to the same Plan. Hence the overall Public Sector “advantage” is 1.45 x 1.33 x 1.25 = 2.41 ………..or 2.41 times ……. or 141% “greater” ….. than the pension typically granted (the very FEW) Private Sector workers that still have Final Salary Average DB Plans.”

            Yadda, yadda, yadda.

            Whew!!!

            I am shocked but not surprised that you are still trying to push this specious drivel.

            It is still in no way logically valid. Comparing the value of pensions at retirement for a public and private worker with the same pay, same length of service, and same retirement age is …..still….. after lo these many years, meaningless unless they are also equal in education, experience, responsibility, etc.

            The very nature of deferred compensation is that the worker receives lower wages in exchange for a higher pension. Now your proving he has ………a higher pension. We already knew that, brother. It’s a tautology.

            It does not logically follow that the public sector worker is overpaid. This ain’t rocket surgery. I reiterate, please sit down with a fifth grade math teacher and have her explain the principles of a word problem.
            …………………………….
            LOL! another golden oldie:

            Posted by Tough Love on May 15, 2015 at 9:42 pm

            “see my long comment above …”

            You still crack me up.

          • Posted by Tough Love on July 21, 2015 at 1:35 am

            S. Moderation Douglas, Thanks for quoting part of my demonstration in your first paragraph.

            It’s called math, not “drivel”, and the logic of the Public/Private worker pension comparison is fine, just above your grade level to understand.

            And coincidentally in BOTH your State (CA) and mine (NJ), Public Sector workers have a “Total Compensation” (pay + pensions + benefits) ADVANTAGE of 23% of pay …. per Figure 6 of the AEI Study linked here….

            https://www.aei.org/wp-content/uploads/2014/04/-biggs-overpaid-or-underpaid-a-statebystate-ranking-of-public-employee-compensation_112536583046.pdf

            Lying about that VERY substantial Public Sector Total Compensation advantage won’t make it go away.

          • Posted by S Moderation Douglas on July 21, 2015 at 7:23 am

            “see my long comment above …”

          • Posted by Tough Love on July 21, 2015 at 10:31 am

            Quoting S.Moderation Douglas … “It is still in no way logically valid. Comparing the value of pensions at retirement for a public and private worker with the same pay, same length of service, and same retirement age is …..still….. after lo these many years, meaningless unless they are also equal in education, experience, responsibility, etc. ”

            Logic 1.0

            Per our often-quote AEI study Figure #6, for Public/Private Sector workers (in total … all educational levels taken together as a group) with comparable ..”equal in education, experience, responsibility, etc.” ….. the Public Sector in NJ has a 4% “wage” DISADVANTAGE that swings to a 23%-of-pay “Total Compensation” ADVANTAGE once the MUCH Greater value of Public Sector pensions and benefits are included.

            While that OVERALL/AVERAGE 23% Public “Total Compensation” ADVANTAGE will differ by specific education level, and for some highly educated Public Sector workers “EQUAL” means increasing their compensation, when the appropriate wages adjustments (up or down) to reach “EQUAL” (for ALL workers) are added up, the net result would be a 23%-of-pay reduction for All Public Sector workers take together.

          • Posted by S Moderation Douglas on July 21, 2015 at 4:43 pm

            It is only logical.

            My point right now; and I’m sure you will see it again, is that your various “demonstrations” of the difference in pensions is moot.

            Logically, they do not prove that the individual is “overpaid”; which, I assume is what you are trying to show. Unless you are comparing equivalent workers, you are only demonstrating mathematically that one person has a higher pension, even though their base wages are the same.

            (Again, that is called deferred compensation)

            It is entirely possible for a public sector lawyer to have the same salary as a private sector engineer, yet the lawyer will have a higher pension because he has accepted a salary lower than the average private sector lawyer. The higher pension, even if it is “2.41 times ……. or 141% “greater”, does not mean the lawyer is overpaid. In fact, our Mr. Biggs says nationally, private sector lawyers earn 20% more than those in the public sector …including… the value of benefits and pensions discounted at the risk free rate.

            Since these demonstrations don’t really prove anything, they are just a polemic designed to anger those who can’t see past the so-called math.

            “23%” is another matter entirely.

            Let me begin by saying it has been amusing to watch your response to that. Like a small dog with a big bone. I believe I predicted that when I first cited the study. But you have exceeded my expectations.

            And your solution is so simplistic it is laughable. Those with the highest percentage advantage over the private sector are the lowest paid. A $3,000 a month janitor might make more in pension and health benefits than he does in salary. I don’t think even Biggs would advise reducing his wage/benefits by half.

            There are reasons things are the way they are. And they are not all nefarious.

          • Posted by Tough Love on July 21, 2015 at 7:51 pm

            Quoting S. Moderation Douglas, …”My point right now; and I’m sure you will see it again, is that your various “demonstrations” of the difference in pensions is moot. Logically, they do not prove that the individual is “overpaid””

            Not only are my mathematical demonstrations (linked in my above comment time-stamped July 20, 2015 at 4:15 pm) accurate and not “moot”, but the logic is indeed proves that NJ Public Sector workers (when are taken together as a group*) are grossly over-compensated … in an amount (per the AEI Study) equal to 23%-of-pay each and every year of employment.

            In fact, the pieces of the puzzle fit quite well. Give the HUGE Public Sector pension ADVANTAGE I “demonstrated” in those above-referenced comments**, it is easy to see how when that HUGE ADVANTAGE is combined with the very small 4% public Sector “cash pay” DISADVANTAGE, that the net impact will be a VERY significant Pubic Sector “Total Compensation” ADVANTAGE ….. just as the the AEI study concludes ….. with it’s 23%-of-pay figure.

            * I’m not arguing that there are no individual Public Sector workers who are underpaid even on a Total Compensation” basis. What impacts the TAXPAYERS is the NET RESULT from ALL Public Sector workers combined ….. that 23%-of-pay “Total Compensation” ADVANTAGE. Taxpayers ……. just think about how much better YOUR retirement would be if YOU had 23% of pay EVERY YEAR to save and invest for YOUR retirement. That is EXACTLY the advantage that NJ’s Public Sector workers (in total, as a group) now have over YOU …….. and YOU pay for almost all of it.

            ** My 2 demonstrations showed that NJ’s non-safety Public Sector pensions are typically worth 2.41 TIMES the pensions of the few Private Sector workers lucky enough to even have Final-Average-Salary DB Plans (of the type granted all of NJ Public Sector workers). And from the 2-nd of my 2 demonstrations, for Police Officers, the above 2.41 multiple rises to 5.41. Stunningly outrageous !

          • Posted by S Moderation Douglas on July 21, 2015 at 9:52 pm

            Stunningly illogical.

            Read the study through a couple of times. Figure 6 will still be there to fall back on. I promise you. I’m considering sending a link to Brietbart and/or Fox; it’s typical grist for their mills.

            Sawz and I have tried to tell you for some time that you will never get the “EQUAL, but not more” you’re obsessed with. It’s a delusion.

            Where you gonna cut? Percentage wise, the biggest advantage is at the lowest level. That $30,000 a year janitor. The one who, if he works 40 years will get a $26,000 pension.

            Still amusing.

          • Posted by Tough Love on July 21, 2015 at 10:49 pm

            You’re right that the Taxpayer’s MAY never reach Public/Private Sector Total Compensation (in comparable jobs)…. that is “EQUAL, but not more” even though that’s all that is necessary, just, fair (to the Taxpayer) and affordable.

            And just as that MAY happen, what also MAY happen (due to the insatiable greed of the Public Sector Union/workers, their refusal to accept the fact that very material pension reforms are necessary, and their buying-off of the elected Official who might institute such changes) is a failed system resulting with very material reductions in the pensions and benefits of those already retired.

    • Posted by Anonymous on July 19, 2015 at 11:28 pm

      I was watching NOVA and some sceincetists (don’t know if they were public or private) proposed a solution to the financial delimea. A targeted meteor, 50% of public sector DBP retirees and 25% of social security and Medicare receipents. Eyes to the sky.

      Reply

      • Posted by Anonymous on July 19, 2015 at 11:36 pm

        Ok some typos but it’s late and of course I’m not being serious.

        Reply

        • Posted by S Moderation Douglas on July 20, 2015 at 12:40 am

          We are the Borg. Lower your shields and surrender your ships. We will add your biological and technological distinctiveness to our own. Your culture will adapt to service us. Resistance is futile.

          Reply

          • Posted by Tough Love on July 20, 2015 at 1:33 am

            The Greeks thought so too … until recently.

          • Posted by Anonymous on July 20, 2015 at 8:58 am

            Not working very well for Greece’s public OR private sector.

            All the more reason why it makes sense for everyone to come together and resolve this matter as amicably as possible.

          • Posted by Tough Love on July 20, 2015 at 11:07 am

            Anon,

            And from listening to the news coverage, which Sector do you think is the cause of the problems.

            Hint. …….. as Italy’s officials stated, why should our citizens pay for the Greeks to retire earlier than we do ?

          • Posted by Anonymous on July 20, 2015 at 1:45 pm

            The point t is we (NJ & US) need to fix our problem. Greece is the EURO’s problem. Unfortunately in this global economy there’s always a ripple effect.

      • Posted by Anonymous on July 20, 2015 at 11:43 am

        I like the meteor idea especially since I am not in any of the categories mentioned slated for destructruction. Its as good a plan as any.

        Reply

  6. Posted by Greg Lamon on July 24, 2015 at 3:15 pm

    Tough love – I think I can rest my case that the author of the book is incorrect in assigning the blame for municipal bankruptcies to date to pension costss, as you seem to acknowledge there are other cost related programs and serves in play also (though you ignore the outright corruption that is at play in some cases as well). . As for your multiplier exercise, that is not addressing my point that the author misrepresents cause and effect. If you are trying to prove that public sector defined benefit retirement plans provide a higher level of retirement security than do the private sector 401(k) models, and thus bestow a better benefit on the government worker, I can’t’ quarrel with that point. But the questions are (1) why are private sector workers not demanding a better retirement plan than a model that has proven inadequate for all but the highest paid (many of whom also retire with cashed out stock options in the 7 figure range) and (2) why drive those who do have a reasonably secure DB plan down to that inadequate level? Let’s pull working people up, not push them down so we have an aged population that can maintain a middle class standard of living in their so-called golden years..

    Reply

    • Posted by Tough Love on July 24, 2015 at 7:41 pm

      Case ? You presented no valid case, only incorrect supposition/opinion.

      I suggest that re-read YOUR above comments any MY earlier replies.

      And Quoting ……. “(1) why are private sector workers not demanding a better retirement plan than a model that has proven inadequate for all but the highest paid (many of whom also retire with cashed out stock options in the 7 figure range) ”

      Because unlike PUBLIC Sector workers, PRIVATE Sector workers don’t get to elect their bosses, who return the favor by granting pensions and benefits MULTIPLES greater than necessary, just, fair to the Taxpayers (who are responsible for 89-90% of total Plan costs), or affordable.

      And Quoting …. “(2) why drive those who do have a reasonably secure DB plan down to that inadequate level? ”

      Earth to Greg Lamon, “market rate compensation” is rightfully determined by the 85% of all workers employed in the Private Sector whose employers compete for their services via compensation packages ……. not by the 15% of all workers employed in the Public Sector where collusion between the Public Sector Unions and our self-interested, contribution-soliciting, vote-selling, taxpayer-betraying Elected Officials is the order of the day.

      Bottom line …. your unjustly obtained …….”reasonably secure DB plan” ….. to the extent that it exceeds the FAR SMALLER amount that it would be in the absence of the Public Sector Union/ Elected Official COLLUSION, is nothing but a THEFT of Private Sector Taxpayer wealth that justifiably should be taken away.

      Reply

      • Posted by Greg Lamon on July 25, 2015 at 1:27 am

        Re-read my first sentence above in which I note that you agreed with my case. Hello? And, you totally ignored the malfeasance and corruption factors that play out in places such as Detroit and New Jersey. You unfortunately have a narrow, hateful view of government and seem to prefer to play the role of victim of a fantasy conspiracy concocted by labor unions and elected officials.. Sad case. You are good and spouting the public employee hate speech used by the reform industry to make unsubstantiated allegations – latest examples include financial mugging, insatiably greedy, fat pensions, platinum health care benefits. These are terms right out of the paid blogger syllabus, whether you admit to being pad or not. Who else could be everywhere at any moment spouting the same jargon? No sense for anyone to engage with you as your mind is closed and you spout hate because you are an attack dog Fortunately, everyone is not entitled to your opinion. Rather than tell you how I really feel I will stop here.

        Reply

        • Posted by Tough Love on July 25, 2015 at 3:52 am

          What I “agreed to” is that there are indeed other HUGE costs of Gov’t… besides pensions …. educations, welfare, infrastructure maintenance & repair, to name a few.

          Sure, NJ would have little financial problems if any one of those could be materially reduced, but none can likely be reduced by even a small amount.

          However NJ’s grossly excessive pensions are an enormously expensive self-inflicted wound, a wound that is financially burying NJ and exists BECAUSE of the Union/Politician collusion.

          And yes, there exists substantive evidence of corruption and malfeasance likely costing NJ $ millions annually, but NOTHING, absolutely NOTHING even remotely come close in magnitude to the $166 BILLION (per Mr. Bury’s most recent estimate) asset shortfall that now existed just for NJ’s pensions …. and add ANOTHER $50-$75 Billion for unfunded retiree healthcare promises that should END * period.

          * VERY VERY VERY few in the Private Sector are actively earning employer-sponsored retiree healthcare benefits any longer, so why should the Taxpayers pay for yours?
          ————————————

          As as to the rest of your comment ……. all nonsense. You’re simply a another example of the insatiable greed shown by so many Public Sector workers …. with an “I Was Promised”/”Taxpayer-Be Damned” attitude.

          You’re not “special” and deserving of greater pensions and better benefits on the Taxpayers’ dime.

          EQUAL …. but NOT better.

          Reply

  7. Posted by Greg Lamon on July 25, 2015 at 1:09 pm

    There you go again with the language of the anti-government lobby – this time it is “insatiable greed” again. Throw in “special” to try and label me, and then conclude that anyone who sees through your radical agenda and scripted terminology just has to be a government worker. Jumping to conclusions is not analysis. Your mission is transparent and that’s fine with me as it comes across as unsubstantiated and hysterical. As for New Jersey’s fiscal mess, setting aside the issue of decades of corruption for a moment, it is like someone taking out a mortgage to buy a home and then deciding to not make the full payments and then crying victim when the bill is coming due. It does not work that way. If taxpayers are not responsible for the financial result of the malfeasance of their elected officials, who is? BTW – here is another fallacious statement made by the author of this hit piece publication- “Four California cities have filed for bankruptcy since 2008 largely due to pension costs: Mammoth Lakes, San Bernardino, Stockton and Vallejo. ‘ (Page 29) Wishful thinking on his part.

    Reply

    • Posted by Tough Love on July 25, 2015 at 1:32 pm

      I believe I already directed you to the “analysis” (demonstrating that NJ’s Public Sector pensions are 3, 4, even 5 tines greater in value at retirement than those of similarly situated Private Sector workers), but is not, here is is again in comment #s 95 and 96 of the 99 comments attached to Mr. Bury’s earlier post …..

      https://burypensions.wordpress.com/2015/05/14/its-embarsaing-and-im-tired-of-hearing-this-i-want-what-i-was-promised/#comments

      You, as one on the receiving end of this gravy train, just keep up with the same hollow arguments. We both no that what drives you is simply … GREED.

      Reply

      • Posted by Greg Lamon on July 25, 2015 at 2:24 pm

        Scripted radical . One of the radical rules you seem to be following “The enemy properly goaded and guided in his reaction will be your major strength” How’s it working out for you?

        Reply

        • Posted by Tough Love on July 25, 2015 at 4:37 pm

          Greg, the real question is (assuming that you will be relying on a NJ Public Sector pensions) ….. how will you get by WHEN (not IF) it is materially reduced ?

          Reply

  8. Posted by Greg Lamon on August 2, 2015 at 6:50 pm

    Your prediction of NJ retirees experiencing a materially reduced pension is wishful thinking on your part, it seems. Why? Because the NJ pension boards finally wised up to their liability of being a party to the state’s perpetual underfunding of pension funds and is filing a suit against the state for billions owed. The taxpayers have been benefiting, supposedly, from the spending of money that should have gone to the pension systems annually for other state services, and now the bill for those years of expanded state services at the expense of funding pension obligations will come due when the Supremes rule. Taxpayers, get ready!

    Reply

  9. Posted by Greg Lamon on September 7, 2015 at 6:17 pm

    Early in this post I was critical of the author of California Dreaming for claiming in several places in his book that pension costs were the reason that cities like Stockton, San Bernardino and Detroit filed for bankruptcy because that just is not so, as much as pension reformers might wish it. To further my statement, here is a link to an article by the former City Manager of Stockton that appeared in the August 4, 2015 edition of the Sacramento Bee Newspaper – http://www.sacbee.com/opinion/op-ed/article2605713.html – in which he clearly states that CalPERS (retirement) costs were not the cause of Stockton’s bankruptcy.

    Reply

  10. More anti-public employee propaganda from some “think-tank fellow” ….can we just call this what it is? More right-wing anti-tax, anti-Big-Gummint propaganda. You’d think the Koch Brothers were trolling every newspaper, and now the Internet for opportunities to trash the people who clean the toilets in public libraries, fix the light fixtures in the court house, sort out the computers in public schools, all the people who typically work for a lot less in the public sector, and BARGAIN to have some other deferred compensation like a Pers pension benefit.

    Granted there are some high-end pensions that need to be lowered (city managers, school supes etc draw large pensions) but the fact is the average state pension in CA is around 1400 a month. Teachers often do not participate in Social Security so that is their ONLY retirement income.

    Anyway, the point is, these creeps that make a living by bashing the custodians, librarians and teachers are just parasites, or worse. This is the same John Bircher BS we’ve heard all along. In fact you can go all the way back to FDR and Social Security, where the GOP and it’s propaganda machine said it would bankrupt the country, blah blah blah…same with Medicare, Obamacare and all along public employees are blamed….for what? Hey, Mcquillan, get a real job…..

    Reply

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