Chicago Pension Changes Unconsitutional

Mary Williams Walsh just reported that:

A judge in Chicago ruled on Friday that a plan to change city workers’ pensions was unconstitutional in a case being closely watched for its effect on the city’s uncertain finances.

The ruling, by Judge Rita M. Novak of the Cook County Circuit Court, is viewed as a setback to Mayor Rahm Emanuel’s efforts to rein in costs and rescue the city’s credit rating. Officials in the mayor’s office said the city would appeal.

“While we are disappointed by the trial court’s ruling, we have always recognized that this matter will ultimately be resolved by the Illinois Supreme Court,” said Chicago’s corporation counsel, Stephen Patton, in a statement. “We now look forward to having our arguments heard there.”

…………………….

Last year, the city negotiated labor agreements to strengthen two of its pension plans, those for laborers and general municipal workers. The agreements called for reducing the cost-of-living increases that retirees receive each year, increasing workers’ mandatory contributions to the funds and strengthening the city’s pledge to step up its own contributions. In the past, the state Legislature has told Chicago what to contribute, and it has set the required amounts well below the actual cost of the pensions, putting the system into serious jeopardy.

Of the 31 unions whose members were to be affected by the changes, 28 had approved it. But the others sued.

How similar is this to the situation in New Jersey where we have seen:

Will the same scenarios play out in Chicago?

It could ultimately depend on who the judges on the Illinois Supreme Court are beholden to.

82 responses to this post.

  1. Posted by dentss dunnigan on July 24, 2015 at 4:00 pm

    With all the press Chicago is getting on their constitutonally guaranteed pensions that voters passed ,I would think any such thing happing in New Jersey is now zero .They have seen what such reckless guaranteeing does to taxes .We already have the highest taxes in the country with people fleeing I could not imagine what could with something like this

    Reply

    • Posted by Anonymous on July 24, 2015 at 6:28 pm

      The P&B Commission recommendation is for a funding constitutional amendment, freeze DBP, cuts to healthcare. While neither side has hinted towards any negotiations surely if the funding guarantee is absent so will any other reforms. Publics and privates will ultimately crashand burn.

      Reply

      • Posted by Tough Love on July 24, 2015 at 7:10 pm

        It will be a FAR bigger drop for the insatiably greedy Public Sector workers losing their FAT pensions and Platinum+ healthcare benefits.

        Reply

        • Posted by Anonymous on July 24, 2015 at 7:17 pm

          keep dreaming that you taxes will stay the same. they wont regardless if the pension system collapses or not, you will pay alot more than you are paying now. its in the cards. all your repetitive rhetoric will fail miserably in saving you from a substantial tax increase, no matter how maybe nice vocabulary words you employ.

          Reply

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

          So TL are you supportig dentss dunnigan comment that taxpayers shouldn’t support a constitutional amendment for ALL of the P&B reform recommendations, including funding?

          Reply

        • Posted by Anonymous on July 24, 2015 at 7:42 pm

          TL are you supportig dentss dunnigan comment that taxpayers shouldn’t support a constitutional amendment for ALL of the P&B reform recommendations, including funding?

          Reply

          • Posted by Tough Love on July 24, 2015 at 7:49 pm

            I DO support a Constitutional Amendment to require funding of a pension EQUAL TO the retirement packages typically granted comparable Private Sector workers …. but one with a built-in reversal to that guaranteed-funding if pensions are increased above that level in the future.

          • Posted by Anonymous on July 24, 2015 at 7:49 pm

            Sorry for the duplicate post.

          • Posted by Anonymous on July 24, 2015 at 8:13 pm

            Agreed and likewise if the funding isn’t adhered to.

          • Posted by Anonymous on July 24, 2015 at 8:25 pm

            …I DO support a Constitutional Amendment to require funding of a pension EQUAL TO the retirement packages typically granted comparable Private Sector workers …

            As would most of us, if it includes PBGC insurance, premiums paid for by the employer, and criminal penalties for employers who don’t pay their bills, most of which are included in the private sector DB plans.

  2. Please note one basic retirement system of the State of New Jersey has stayed under the radar screen. It is the DC Plan for the State Colleges—it is called the Alternate Benefit Program. It started in 1968 with the employer contributing 8 percent of salary and the employee contributing 5 percent. The STATE has never had a “budget” problem when it comes to writing out its check for the 8 percent. For 47 years the State of New Jersey has always made its contribution on time—never even a day late.

    Reply

    • Posted by Tough Love on July 24, 2015 at 5:50 pm

      NJ Taxpayers should be tickled-pink if they had the option to annually contribute only 8% of pay towards their workers pensions and be done with the obligation …. regardless of investment performance.

      Right now, the extraordinarily generous (both in formula and provisions) DB Plan granted all of NJ’s workers require a level annual %-of-pay total contributions of 30-40% for non-safety workers and 45-55% of pay for safety workers to fully fund those pensions over the employee’s working career using APPROPRIATE assumptions (not the extreme rosy assumptions that NJ now uses in it’s Pension Plan valuations).

      Subtract the %-of-pay actually contributed by the workers and the remainder is the responsibility of NJ’s Taxpayers…… rarely less that 25%-of-pay, and for safety workers approaching 50%-of pay. And all while Private Sector Taxpayers rarely get more from their employers than a 3% to 4%-of-pay “match” into a 401K Plan.

      This decades-long financial “mugging” of NJ ‘s Taxpayers will continue until the pension freeze (and healthcare cuts) recommended by the NJ Pension Commission are implemented.

      Reply

      • Posted by S Moderation Douglas on July 24, 2015 at 6:46 pm

        “%-of-pay total contributions of 30-40% for non-safety workers and 45-55% of pay for safety workers to fully fund those pensions over the employee’s working career using APPROPRIATE assumptions”

        Still investing in Treasury Bonds?

        Reply

        • Posted by Tough Love on July 24, 2015 at 7:04 pm

          No S Moderation Douglas, using Moody’s current approach* to PROPER pension Plan valuation ……not the SUPER-ROSY approach now used in the gov’t Sector and likely by Public Sector workers/retirees (such as yourself) because it make their pensions look FAR FAR less costly than they truly are.

          * yes, Moody’s approach, which produces results quite close to the methodology REQUIRED by the US Gov’t of PRIVATE Sector Plan valuations.

          Reply

          • Posted by S Moderation Douglas on July 25, 2015 at 12:15 am

            Girard Miller:

            “As I’ve testified to the GASB during their public hearings, a risk-free discount rate would ultimately result in excessive burdens on today’s generation of taxpayers and invite mischief in the future as this approach is a sure-fire way to produce over-funded pension plans in the long run. (I know this sounds laughable in today’s funding environment, but that is the logical multi-generational result of the risk-free model.)”

          • Posted by Tough Love on July 25, 2015 at 12:25 am

            S. Moderation Douglas,

            Misleading the readers again …. as usual.

            Neither the Moody’s methodology nor the methodology REQUIRED by the US Gov’t for the valuation of Private Sector Plans uses a “risk-free” rate to discount Plan liabilities. The Public Sector pension Plan funding requirements I stated above (and pasted just below) are accurate and reflect Moody’s/Private Plan methodology, NOT a “risk free” rate valuation.
            ———————————————————————————-

            Right now, the extraordinarily generous (both in formula and provisions) DB Plan granted all of NJ’s workers require a level annual %-of-pay total contributions of 30-40% for non-safety workers and 45-55% of pay for safety workers to fully fund those pensions over the employee’s working career using APPROPRIATE assumptions (not the extreme rosy assumptions that NJ now uses in it’s Pension Plan valuations).

            Subtract the %-of-pay actually contributed by the workers and the remainder is the responsibility of NJ’s Taxpayers…… rarely less that 25%-of-pay, and for safety workers approaching 50%-of pay. And all while Private Sector Taxpayers rarely get more from their employers than a 3% to 4%-of-pay “match” into a 401K Plan.

  3. I failed to state that this is the mandatory retirement plan for the higher education crowd. They cannot choose the DB system.

    Reply

  4. Posted by Greg Lamon on July 24, 2015 at 7:47 pm

    Has anyone ever seen any kind of independent analysis that concludes that government workers are more or less greedy than the population at large?

    Reply

    • Posted by Tough Love on July 24, 2015 at 8:05 pm

      Greg Lamon ,

      The consequences of Corporate greed (e.g., excessive executive compensation) are (1) paid for by the company’s SHAREHOLDERS who are free to invest elsewhere if they feel abused, and are (2) reflected in higher PRICES (to pay for that excessive compensation) wherein customers are free to shop elsewhere.

      The consequences of Public Sector greed (typically via extraordinarily generous pensions and benefits) are (1) paid for by the State’s/Town’s RESIDENTS who under the threat of being jailed or having property seized must pay them, and (2) are reflected in unnecessarily high TAXES which the State’s/Town’s residents having no choice but to accept as they cannot shop elsewhere for more reasonably priced Police, Fire, DPW, and other services.

      Get the picture ?

      Reply

    • Posted by S Moderation Douglas on July 24, 2015 at 11:43 pm

      Short answer…….no.

      Reply

      • Posted by Tough Love on July 25, 2015 at 12:29 am

        Not surprising. You indicated you have little experience with spreadsheets, and from many past comments, math is also not your cup-of-tea. Perhaps you should have dome something more intellectually challenging for a living … might have lead to a more intellectually stimulating retirement.

        Reply

  5. Posted by Tough Love on July 25, 2015 at 2:28 pm

    For those Public Sector workers/retirees with the deep-seeded mindset of “I Was Promised” (you know who you are) …. conveniently ignoring that those (grossly excessive) pension & benefit “promises” were achieved by their UNIONS’ buying the favorable votes of our Elected Officials with campaign contributions and election support, and that the “promised” level of pensions & benefits were never necessary (to attract and retain a qualified workforce), just, fair (to the Taxpayers), or affordable ………… a reprint of an earlier comment:
    ——————————————————————————————–

    I am (a tax-burdened) NJ resident and feel that the beneficiaries of the state’s pensions (NOT Taxpayers) should bear the brunt of reform measures.

    While there are hundreds of articles on the Public Pension mess in America’s States & Cities every week VERY few address the “generosity” of Public Sector pensions vs those of comparably situated (in wages, age at retirement, and years of service) Private Sector workers. I believe that grossly excessive Public Sector pension “generosity” is the ROOT CAUSE of the problem, and lack of full funding is NOT a CAUSE, but a CONSEQUENCE of that ROOT CAUSE.

    By training and experience, I am very well versed in pension funding and design and can very easily demonstrate that when BOTH the very rich Public Sector pension “formulas” AND the very generous Public Sector pension “provisions” (such as very young full/unreduced retirement ages, very liberal definitions of “pensionable compensation”, and COLA increases … unheard of in Private Sector Plans) are properly taken into account, Public Sector pension are TYPICALLY 3x-4x (4x-6x for Safety workers) greater in value at retirement than those of similarly situate Private Sector workers retiring at the SAME age, with the SAME pay, and the SAME years of Service.

    Several decades ago, considerably lower Public Sector “cash pay” justified greater pensions (although not as large as they were, even then), But today, with very small differences in Public/Private Sector “cash pay”, (and with equal “Total compensation” …. pay + pensions + benefits …. a reasonable goal in comparable Public/Private Sector jobs), there is no justification for ANY greater pensions (or better benefits) let alone the 3x-4x (even 6x for some safety workers) greater pensions that are ROUTINE in the Public Sector almost everywhere today.

    Those hundreds of articles (that rarely address pension “generosity”) rarely fail to included the workers’ protestations that they “paid their share” …. never looking further into what that “share” really amounts to. Here again, (and I can demonstrate quite easily) that it would be very rare for a worker’s actual pension contributions (INCLUDING investment earnings thereon) to accumulate to a sum at retirement sufficient to buy more than 10-20% of their promised pension. Taxpayer contributions, and the investment earnings thereon are “responsible” for the 80-90% balance. Why is this acceptable if they demand such rich pensions ?

    Lastly, in the USA, employer-sponsored retiree healthcare subsidies are all but gone in the Private Sector, while it remains ROUTINE for Public Sector employers (i.e., the Taxpayers) to provide free or heavily subsidized retiree healthcare coverage. That coverage is so generous in NJ that it is referred to as “Platinum+” coverage with a pre-Medicare age annual cost for Family coverage of $25K-$35K. With Private Sector Taxpayers typically getting NOTHING, how can that possibly be justified?

    The above being said, I do not “blame” the workers for the predicament that we now find ourselves. Individually, the workers certainly did nothing “wrong”, although as a group, and via their Unions, they have exhibited insatiable greed and arrogance toward the Taxpayers. While the primary “blame” belongs to our Elected Officials (clearly colluding to trade their favorable votes on pay, pensions, and benefits for Union campaign contributions and election support) the financial “beneficiaries” of that Union/politician “collusion” are indeed THE WORKERS via their grossly excessive pension & benefit “promises”. So THAT’S where the Taxpayer must look the “right this wrong”, by VERY materially reducing the grossly excessive pension/benefit promises in place today …. and for all CURRENT, not just new workers.

    Reply

    • Posted by Anonymous on July 25, 2015 at 2:40 pm

      Ok so we’ve been down this “Long and Winding Road” that leads to “P&B Commission Reforms”. Any way you and others in agreement with this approach (myself included) can focus our energy into making it a reality?

      Reply

      • Posted by Tough Love on July 25, 2015 at 2:43 pm

        Do you not “get it” that likely 95+% Public Sector workers DON’T agree with you …. and they demand “all that was promised”, and not just for PAST service accruals, but for their FUTURE Service as well ?

        Greed is a tough thing to change.

        Reply

        • Posted by Anonymous on July 25, 2015 at 2:47 pm

          Not sure the % is that high but it’s certainly a significant majority. But even if you’re % is accurate wouldn’t there be enough non-publics worker support to make it a reality?

          Reply

          • Posted by S Moderation Douglas on July 25, 2015 at 4:26 pm

            TL routinely fabricates numbers.

          • Posted by Tough Love on July 25, 2015 at 4:34 pm

            Spoken by Mr. Greed himself ….. with admittedly little facility with spreadsheets or the “math” I have posted here ………. not even once being able to identify anything incorrect in those “demonstrations” of the MULTIPLES greater Public (than Private) Sector pensions.

          • Posted by Anonymous on July 25, 2015 at 4:52 pm

            Lies, damn lies, and spreadsheets.

          • Posted by Tough Love on July 25, 2015 at 4:59 pm

            Yea ….

            Greed, Public Sector Workers, Greed, COLLUSION with Elected Officials, Greed, Public Sector Workers, Greed, COLLUSION with Elected Officials, Greed, Public Sector Workers, Greed, COLLUSION with Elected Officials, Greed, Public Sector Workers, Greed, COLLUSION with Elected Officials,

            Wash, rinse, repeat ……….

          • Posted by S Moderation Douglas on July 25, 2015 at 9:36 pm

            “not even once being able to identify anything incorrect in those “demonstrations”

            Except the whole logical foundation. You proved that a hypothetical policeman has the same value pension as an imaginary brain surgeon (really!). In other words, nada.

          • Posted by Tough Love on July 26, 2015 at 12:38 am

            In the case of the NJ Police, where their BASE cash wages are $130+K after just 5 years, it not ever arguable that their cash pay ALONE is far more than someone would earn in the Private Sector with comparable experience, knowledge, and skills. And them we layer ON TOP OF THAT, pensions that are 5+times greater in value at retirement (per my previously posted demonstrations), and free retiree healthcare (usually starting in the mid 50s) costing taxpayers an additional $25K-$35K annually for family coverage (that nobody in the Private Sector gets any longer).

            It patently ridiculous and a Taxpayer ripoff of monumental proportions.
            ————————————————————–

            And while it somewhat less extreme for non-safety workers, the absurd level of “Total Compensation”, also far exceeding comparable Private Sector workers (but typically only by about 3 times) is equally ridiculous.

          • Posted by S Moderation Douglas on July 26, 2015 at 12:43 pm

            Seriously,

            Your buddy Surfpuppy, among others, constantly insist that police and “fire whiners” are GED jobs and there are “hundreds of applicants” for every opening.
            If you have a GED, theoretically, you could land a job as a policeman, a janitor, or perhaps a forklift driver. After “just five years” training and experience, do you think all these occupations should pay the same?

            How much is a police officer worth? You obviously have your opinion. Your city and state have another opinion, based on real life experience in the job market.

            You can’t handle the truth!

          • Posted by Tough Love on July 26, 2015 at 10:18 pm

            SMDouglas,

            Perhaps we need to better correlate Police compensation with the REAL expected danger of their ACTUAL day-to-day jobs.

            And perhaps $130K annually in base pay ALONE is the “fair” base wages in very dangerous NJ Cities like Newark and Camden, but it’s a complete farce (and ENORMOUS Taxpayer ripoff) in the 95+% of the bedroom communities in NJ where 99% of the time the Police are RARELY more than “traffic cops”, “traffic accident attendants”, and beat the ambulance to the house where the old man/lady has gotten ill (and where can rarely independently help anyway).

          • Posted by S Moderation Douglas on July 27, 2015 at 3:02 am

            How about the real expected responsibilities and complexity of their jobs.
            And I’m going to assume that:

            “99% of the time the Police are RARELY more than “traffic cops”, “traffic accident attendants”

            Is another manufactured statistic, or just more TL Hyperbole.

          • Posted by Tough Love on July 27, 2015 at 4:48 am

            S Moderation Douglas ,

            “Manufactured complexities” in your biased mind …. to try to justify their absurd pay, pensions, and benefits.

          • Posted by S Moderation Douglas on July 27, 2015 at 5:52 am

            You couldn’t handle the job.

          • Posted by Tough Love on July 27, 2015 at 10:17 am

            And if true, would THAT make their absurdly generous compensation justifiable?

            Another one of your ridiculous comments.

    • Posted by S Moderation Douglas on July 25, 2015 at 3:20 pm

      “Several decades ago, considerably lower Public Sector “cash pay” justified greater pensions”………..”But today, yadda, yadda,yadda.”

      This and similar statements are often repeated on the internet. Today, public pay is generally just as low, comparatively, as it was twenty years ago. Although there is considerable volatility from year to year:

      http://slge.org/wp-content/uploads/2011/12/Out-of-Balance_FINAL-REPORT_10-183.pdf

      Today, all the major studies agree that public workers earn less in cash wages than their private counterparts. At the low end of the scale, public workers earn roughly the same wages as private, and at the higher levels, private workers earn considerably more in cash wages. All studies agree.

      All the studies agree that, at the lower levels, public workers’ benefits raise their total compensation higher (much higher, percentage wise) than their private sector peers. But at the highest levels, even considering the public pensions and benefits, private workers earn more. As much as 20% more.

      The difference is in the middle. Most studies say public and private workers are “about equal” on average. The other study, American Enterprise Institute, says that on nationwide average*, state workers earn about 12% more.

      Even with the AEI study, they say that, nationwide, about 60% of state workers (those with a bachelors degree or above) earn either “about the same” (50% of workers) or “considerably less” (10% of workers) than the private sector.

      The biggest difference in the studies is the way pensions are discounted. read the studies and decide who you believe. The “experts” have a lot of disagreement here. You be the judge:

      http://www.pionline.com/article/20150429/ONLINE/150429853/estimating-future-costs-at-public-pension-plans-setting-the-discount-rate

      *nationwide average…your mileage may vary. New Jersey, Illinois, Pennsylvania, California, workers generally have higher than average nationwide pensions.

      Reply

      • Posted by Tough Love on July 25, 2015 at 4:21 pm

        Quoting …”Today, public pay is generally just as low, comparatively, as it was twenty years ago.” Followed by more of your misleading, biased, Public Sector mindset nonsense.

        BS, and you know it. And in BOTH our home states of CA and NJ “Total Compensation” (INCLUDING wages, pensions, and benefits) there is 23%-of-pay PUBLIC Sector ADVANTAGE (per the AEI compensation study quoted here several times).

        THAT is the BIG problem that needs FIXING ….. and for all CURRENT workers.

        Reply

        • Posted by S Moderation Douglas on July 25, 2015 at 5:08 pm

          “Followed by more of your misleading, biased, Public Sector mindset nonsense.”

          “BS, and you know it.”

          Nationwide the general trend has NOT seen public (cash) pay catch up with the private-sector. Every word is true; verified by the two links.

          ………………………..
          http://grammarist.com/usage/deep-seeded-deep-seated/

          Reply

          • Posted by Tough Love on July 25, 2015 at 5:38 pm

            And where did I use the words “catch up” …….. be specific, where ???

            Looking above, my exact words were:

            “Several decades ago, considerably lower Public Sector “cash pay” justified greater pensions (although not as large as they were, even then), But today, with very small differences in Public/Private Sector “cash pay”, (and with equal “Total compensation” …. pay + pensions + benefits …. a reasonable goal in comparable Public/Private Sector jobs), there is no justification for ANY greater pensions (or better benefits) let alone the 3x-4x (even 6x for some safety workers) greater pensions that are ROUTINE in the Public Sector almost everywhere today.”

          • Posted by S Moderation Douglas on July 26, 2015 at 3:46 am

            LOL

            “See my long comment above.”

  6. Posted by Anonymous on July 25, 2015 at 3:00 pm

    Why should anything be guaranteed to public workers? anymore so that anything is “guaranteed” to all the rest of us. They are already “guaranteed” thier jobs whether they perform well or not. Plenty of blame to go around but guaranteeing an already corrupt and unsustainable system……… Grasping at straws if you ask me. I surely hope the citizens of NJ realize the inherent danger in that scheme. It will be interesting to see how Chicago pays their pensions

    Reply

    • Posted by Anonymous on July 25, 2015 at 3:32 pm

      Ok DD.

      Reply

    • Posted by Tough Love on July 25, 2015 at 4:29 pm

      Quoting …”Why should anything be guaranteed to public workers? anymore so that anything is “guaranteed” to all the rest of us. ”

      Clearly, it SHOULDN’T, but those who make Laws and Regs. are Public Sector Officials:

      (a) whose favorable votes (on Public Sector pay, pensions, and benefits) are BOUGHT with Public Sector campaign contributions and election support, and
      (b) who very often by virtue of Public Sector jobs for themselves (or family members) BENEFIT by participation in the SAME grossly excessive pension & benefit Plans.

      As another Blog commentator stated ……….

      “An initiative to control the union’s ignorance and greed is needed. Since the people actually pay, let the people decide. No more negotiating because snakes negotiating with snakes produces THIS big mess!”

      Reply

    • Posted by S Moderation Douglas on July 26, 2015 at 5:34 pm

      Quoting …”Why should anything be guaranteed to public workers? anymore so that anything is “guaranteed” to all the rest of us. ”

      Why should anything be guaranteed to military retirees? You serve twenty years, you get 50% of final pay, for the rest of your life, beginning as early as age 38 plus, family medical care for life. Thirty years gets you 75%, and forty gets 100%. (Plus Social Security when you reach age 62+.)

      Military pension is strictly pay as you go, as opposed to pre funding in most public sector DB plans. In either case, the obligation exists independent of the financing method.

      There was never a stipulation that pensions are contingent on satisfactory returns on investment. There are, in fact, many public sector DB programs that are still pay as you go. They are essentially 100% “unfunded” . Many retiree healthcare systems are pay as you go. Again, 100% unfunded, by design.

      Whether or not you agree with the amount of the existing pensions, they are much cheaper as a result of the pre payment and investment than they would be as a pay-go system. The ROI , criteria paribus, reduces the cost to the employer (taxpayer). If, because of market conditions, or, in many cases, failure to properly prefund the pension system, there is an “unfunded liability”, that in no way mitigates the original contract.

      Taxpayers are not “backstopping” public sector pensions. They are merely fulfilling a legal contract.

      23

      Reply

      • Posted by Tough Love on July 26, 2015 at 9:37 pm

        Quoting …”There are, in fact, many public sector DB programs that are still pay as you go.

        And what does “many” mean as a % of the total of all such Plans … 1%, 2%?.

        I doubt it it higher.

        Reply

      • Posted by Tough Love on July 26, 2015 at 9:42 pm

        Quoting … “Whether or not you agree with the amount of the existing pensions, they are much cheaper as a result of the pre payment and investment than they would be as a pay-go system. ”

        Bullshit. Pre-funding doesn’t make them “cheaper”. Every dollar of investment income gained by the Plan is lost by the contributors (and in proportion to their contributions), the workers and the Taxpayers.

        Reply

      • Posted by MJ on July 27, 2015 at 6:39 am

        SMD–It was not my intent to include military in my comment about guaranteeing public workers anything. Obviously, military service (assuming one actually served on the front line in actual combat situations) is different than the cushy state, county and municipal jobs here in NJ. Whole different animal. The same as what TL mentioned comparing Camden and Newark cops to the bedroom and seaside community cops. Whole different animal and should be compensated as such.

        Reply

        • Posted by S Moderation Douglas on July 27, 2015 at 8:15 am

          MJ,
          I take it you were the “anonymous” who posted at 3:00 pm:

          “Why should anything be guaranteed to public workers?”

          It certainly isn’t my intention to denigrate the military. Nor do I begrudge their pensions.

          The point of my response is that public sector pensions are somehow compared to a 401 (k), as in, “if my 401 (or IRA) loses money, no one bails me out. Why should we bail out the public pensions when they lose money?”

          My answer is, the pension contract exists sui generis. It is not legally contingent on the success or failure of the returns on investment.

          The contract says if you work 20 years and retire at age 60, we will pay you a pension of 40% of final salary. It doesn’t say we will pay you …..if….. our investments work out. The military has a similar contract. Work 20 years, retire as early as age 38, we will pay a pension of 50% of final salary. Theirs is pay as you go, with no pre funding.

          In either case, no one is being “bailed out.” It’s a simple contract, totally unrelated to the financing method.

          Incidentally, depending on who you ask, or how they define it, those who actually “see action” in the military are as much as 15% or possibly as low as 1%

          Reply

          • Posted by Tough Love on July 27, 2015 at 10:13 am

            That Public Sector pension/benefit “contract” at the States, City, and lower Gov’t levels was not only negotiated with nobody at that “negotiating table” rightfully looking out for the Taxpayers interests, but actively making choices directly AGAINST their interests ….. knowingly granting compensation greater than necessary, just fair, or affordable.

            Hardy something the Taxpayers should (or can, OR WILL) honor.

          • Posted by S Moderation Douglas on July 27, 2015 at 11:15 am

          • Posted by Tough Love on July 27, 2015 at 12:50 pm

            Taxpayers who believe that the Public Sector Unions will voluntarily give back even 10% of what justifiably SHOULD BE (and needs to be) given back …. are fools.

            It will be forced upon CURRENT (and perhaps retired) Public Sector workers as larger groups of Private Sector taxpayers become better educated as to the enormity of the Public Sector pension/benefit financial “mugging”, and the Tax-increase consequences of non-action …. or and without doubt when Plans assets run out (in about 5 years) and massive service cuts take hold.

        • Posted by S Moderation Douglas on July 27, 2015 at 1:49 pm

          “See my long comment above.”

          大声で笑う

          Reply

  7. Posted by PatB on July 25, 2015 at 5:16 pm

    TL- you can take your ball and go home because you have won. The court decision allowing Christie to short the pension payment is the last shovel full of dirt into the pension grave, since no governor will make anything more than cursory payments. The plans will drop like dominos, starting (with remarkable irony) with the judicial pension. It will be up to the courts to figure out what to do with a defaulted plans, but that is still years from now. I guess that gives you lots of time for blogging.

    The question for us public employees is what to do in the face of the inevitable. Every new employee is being promised a pension based on the current laws, and they are not going to get it. They will have to look at it as a job having a 7-10% reduction in pay, their contributions, which they may or may not get back. I advise them to look for other jobs with an employer who actually funds whatever plan they sponsor. The result will be like private industry, with little loyalty and lots of turnover. So be it.

    Reply

    • Posted by Tough Love on July 25, 2015 at 5:31 pm

      In the Private Sector, they’ll get 401K Plans, likely with a 3%-4% of-pay “match” …… a far cry to the TRUE value of the currently promised Public Sector DB Plans that would (to fully fund over their working careers) require a level annual total 30-40%-of pay if a non-safety worker, and 45-55%-of-pay if a safety worker … with the Taxpayers responsible for all but the 10-20% share of total Plan costs actually paid for by the workers.

      Yup ….. they’ll join the real world … where we don’t get to choose (i.e., “elect”) our bosses, who return the favor with grossly excessive pensions & benefits paid for by betrayed 3-rd parties (the Taxpayers).

      Reply

  8. Posted by Tough Love on July 25, 2015 at 8:37 pm

    This Blog post of Mr. Bury’s being about Chicago’s pensions, and as John says, “How similar is this to the situation in New Jersey” …………..so I’m posting below a comment made elsewhere today (discussing Chicago’s pension problems) from a fellow with the Handle “Sean” (I hope he won’t mind), as it fits oh-so-well to NJ’s situation. Enjoy !
    ————————————————————————————–
    “THANK YOU nixit71! I and millions more like you, are tired of the whole “They need to obey the law and pay our pensions… a promise is a promise” etc etc ad nauseum. Yeah, guys like Paul (above) love to play the law-abiding society crap, claiming that we “dissolve into chaos” if we don’t take a moral view of paying our debts. What garbage. News flash Paul, and all you other hogs at the trough: Promises and contracts formed by extortion ARE NOT MORAL, and should not be legal. Enough of your moral whining already. Mathematics and gravity can be defied for only so long, so in the end, you are going to get what you deserve, brought upon you buy your reckless greed and refusal to do the right thing. These benefits are neither fair, nor realistic. The markets will force reality down your throats. Then, we can hear you guys all start whining and blaming your union leaders, those evil politicians (who were once your friends when you were stealing from taxpayers), and finally, all the taxpayers who “don’t want to help us poor middle class workers (except you are not middle class workers, you are the 1%). Oh, and don’t forget to blame the republicans, the Koch brothers, and those rich hedge fund managers. Blah blah blah. Enough is enough. Stay tuned, because REALITY is coming to a theater near you.”

    Reply

    • Posted by Anonymous on July 25, 2015 at 9:05 pm

      You/Sean left one important point out, the end result of what you’re indicating which is social revolution w/o law enforcement b/c you screwed them to. Hey whatever work for your blah blah blah, let’s roll!

      Reply

  9. Posted by S Moderation Douglas on July 25, 2015 at 11:50 pm

    The obvious similarity between New Jersey and Illinois is neither has been paying their ARCs for twenty years.

    Reply

    • Posted by Tough Love on July 26, 2015 at 12:45 am

      And that BOTH (along with almost all other States and Cities and Counties and Towns, and Boroughs, and Villages, etc.) promise pensions & benefits many MULTIPLES greater than necessary, just, fair to taxpayers, or affordable ……… that being the ROOT CAUSE of the problem.

      Reply

    • Posted by Anonymous on July 26, 2015 at 8:11 am

      SMDouglas, NJ has not been paying because there is simply no way to fund the overly promised, overly generous, unrealistic pensions and benefits that were “promised” to public workers. If the unions and politicians were in cahoots as TL speaks about then why wouldn’t they just pay and be done with it? Because there is no possible way to make good on any of it without cuts, reductions, reforms and workers paying more into the system. Way way too much was promised to way too many doing way too little for way too long. Unfortunately, the chickens have come home to roost and the laws of economics and math trump empty promises every time. I don’t consider the publics “greedy” its just that they have been in an isolated bubble for so long without having to think about how any of this might play out. Promise after promise with their jobs guaranteed no matter what the performance. Now it is a whole new normal and I beleive that their reactions are normal. Denial is the first step, anger, bargaining……….It would be more honorable to make the reforms now so that those close to retirement at age 58:) can make any necessary changes.

      Reply

      • Posted by Tough Love on July 26, 2015 at 10:26 am

        Yes, and starting with working to SS age 66 BEFORE they can get an unreduced pension … as those in the Private Sector must.

        Reply

      • Several comments on this ongoing diatribe:

        All politicians are liars. In NJ (and apparently IL), they simultaneously lied in different ways to both taxpayers and their primary supporters (Public Sector unions and workers) to garner votes and financial assistance. Now the lies have to be paid for and there is no money to do so.

        Public sector workers are not necessarily more greedy than others, but unlike the unorganized public at large they had the machinery (unions and corrupt politicians) available to allow them to pursue collective greed. They did not pursue their selected career choice because of the incentives, challenges and competition available in the for-profit sector – they entered “public service” and agreed to perform mundane, repetitive and often boring tasks for 20, 30 or more years because of lifetime job security, pension and medical benefits.

        As unpalatable as it may be to contemplate, our collective standard of living has been going down since 2000 and will continue to do so. Arithmetic, economics and global competition will see to that. In the private sector this has manifested itself in reduced (or eliminated) defined benefit pensions (since ERISA passed in 1974), and ongoing rightsizing, downsizing, layoffs, offshoring, outsourcing, etc. etc.. The Public Sector has been digging in their heels fighting this inevitably, but reality has now entered the fray. Their oft repeated refrain of asking the taxpayer to not encourage a “race to the bottom”, ignores the fact that much of the formerly taxpaying public is already at the bottom. Demanding constitutional protection against economic certainty is fruitless, so logic and rational action must prevail to save as much as can be saved for as many as possible.

        Reply

        • Posted by Tough Love on July 26, 2015 at 3:24 pm

          Hopefully, where you said ………. “Now the lies have to be paid for and there is no money to do so. “…………. you mean the vast majority of which will come by way of pension/benefit reductions (for the future service of all CURRENT workers, and, if NJ’s financial circumstance so necessitate, for the PAST Service accruals of current actives and retirees as well), and not by way of tax increases.

          And for what it’s worth, (although there is a segment of KNOWLEDGEABLE Public Sector workers that ARE indeed very greedy, several of whom comment on this Blog, most Public Sector workers are just clueless and believe the garbage coming from their Unions), I agree that better than a blanket statement that Public Sector workers are greedy, YOUR statement describes the situation better ……………. “Public sector workers are not necessarily more greedy than others, but unlike the unorganized public at large they had the machinery (unions and corrupt politicians) available to allow them to pursue collective greed. “

          Reply

          • Posted by dentss dunnigan on July 26, 2015 at 5:26 pm

            Mish nails it 100% …I’ve always the people moving into our state will be paying for past services employees pensions with less service to show for the higher cost .Were paying for legacy cost ,and what need to be done ..Halt defined benefit pension plans for new employees
            Eliminate collective bargaining of public unions
            Scrap Davis Bacon and all prevailing wage laws so that cities do not have to overpay for services
            Enact right-to-work legislation
            Pass bankruptcy legislation allowing cities, municipalities, and other taxing bodies the right to declare bankruptcy
            http://globaleconomicanalysis.blogspot.com

          • Posted by Tough Love on July 26, 2015 at 5:59 pm

            dentss dunnigan,

            All great ideas, EXCEPT that you stated …..”Halt defined benefit pension plans for new employees”.

            Not sure how tight you are on the underlying pension “math”, but changes only for NEW workers won’t even scratch the surface of meaningful near/mediun-term reform. The CLEARLY NEEDED pension/benefit reductions AT A MINIMUM must all ply to ALL CURRENT workers …. and we CANNOT afford to fall into the trap of excluding the MOST egregious (and hence costly) pensions & benefits, those for Safety workers (Police, Fire, Corrections, etc.), and judges.

  10. Posted by Tough Love on July 26, 2015 at 10:35 am

    Another comment on the Chicago situation that equally fits oh-so-well to NJ’s situation. (from a commentator named Peter):

    ——————————————————-
    “The realpolitik of the pension situation is that sooner or later the degradation of public services and increased taxation to fund the benefits will get on the average citizen’s radar. The 60% or more who never bother to vote.

    Right now we’re playing legal academia games regarding constitutional interpretation, interplay of the various pension codes and legal citation “gotcha” games so loved by the $400 an hour crowd with honorable mention to equitable principles of fairness.

    The rubber will hit the road when the apathetic masses awaken and the politicians and judges see their elected sinecures threatened. I don’t think the folks with a vested interest in these issues really understand the fiscal degradation being experienced in the majority of private sector households. When the rubber band snaps, it won’t be pretty.

    My advice to the public sector unions: Cut a deal while you still can and have the leverage to protect your most vulnerable members.

    Reply

    • Posted by Tough Love on July 26, 2015 at 12:06 pm

      Yup, the above comment seems just about right, especially considering a 7/20 comment about Gov. Christie form Wendell Steinauer, president of the NJEA……

      “The ball is in his court to fund the pensions according to the law he signed. We will not negotiate against ourselves. We will not concede one inch to this governor.”
      —————————

      Oh yea, THAT’S a strategy.

      Reply

  11. Posted by Anonymous on July 27, 2015 at 1:12 am

    • Posted by Tough Love on July 27, 2015 at 1:39 am

      Considering the Recent NJ Supreme Court Lawsuit, clearly a nonsense/frivolous lawsuit.

      The Judge should immediately dismiss it …. AND tell the Fund Trustees that they cannot pay their lawyers with ANY Funds sourced from the Taxpayers.

      Reply

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