PEPTA Redux (3) Louisiana and Oklahoma

According to the NCTR anti-PEPTA hit piece:

Rauh advised Congressman Nunes when he was first developing PEPTA, and the Nunes materials contain Rauh’s projections.  For example, Nunes/Rauh claim that seven states will run out of money before 2020, including Louisiana and Oklahoma in 2017.  Furthermore, the Nunes materials state that these insolvency dates “are based on generous assumptions concerning the performance of pension plans and are likely the ‘best case scenario.’”

The only problem?  If you check with your colleagues in Louisiana and Oklahoma, they will be happy to inform you that they are not going to completely deplete their pension assets by next year and have to make pension payments out of general revenues.  In fact, as the Government Accountability Office (GAO)—an independent agency that provides Congress with audit, evaluation, and investigative services—said in a 2012 report, Rauh’s exhaustion dates were based on assumptions that it found to be “unsupported.”  Indeed.

So how are Rauh’s run out predictions, made in 2009, working out?

As it turns out the Rauh paper included this list:

rauh run out
It is Illinois with a 2018 run out date that tops the list though it would have been inconvenient for the NCTR people to throw that against Rauh since, even with those additional Pension Obligation Bond issues in 2010 and 2011, the picture is ugly:

illinois pension

As for the New Jersey plans which supposedly have $70 billion in assets  2019 seems a little soon unless you consider:

  • $20-$30 billion of that are the employees own contributions that would need to returned upon collapse
  • All those alternative investments where, the higher the values assigned, the higher the fees those investment providers get
  • New Jersey’s own Pension Obligation Bonds from 1997 that are now in payback stage
  • The return of COLAs (to be argued this coming Monday) that would raise annual payouts from around $10 billion to $12 billion on average

To an objective observer looking at all the facts Rauh’s paper comes off as clairvoyant. Indeed.

54 responses to this post.

  1. Posted by Tough Love on March 11, 2016 at 1:55 pm

    Quoting ….. “$20-$30 billion of that are the employees own contributions that would need to returned upon collapse”

    While they SHOULD BE returned (when those assets are all that is left in theses Plans), I think we both know that NJ will not look at ti that way, insisting that (with just some tweaks) these Plans can still survive, and they will CONTINUE to pay out those (ACTIVE employee contributions) to those already RETIRED.

    And of course, NJ’s POBs, being a legal obligation of the STATE of NJ (for interest and Principal repayment), and NOT the pension Plans, are not even a consideration as far as NJ is concerned.

    Reply

    • Posted by dentss dunnigan on March 11, 2016 at 3:11 pm

      I remember reading a few years ago that if all that if all that is left in the pension is employees money the plan would be terminated and the moneys will be returned to employees …It might be in the bylaws of the pension itself ….

      Reply

  2. Posted by Anonymous on March 12, 2016 at 3:27 pm

    Let NJ totally implode destroying public and private sectors! Then maybe the economy will reset to reasonably affordable levels? We all know the target is “free” market.

    Reply

  3. Posted by Sean on March 12, 2016 at 8:30 pm

    Everyone,

    You know how TL is always pointing out that “Plan Generosity” is at the root of the public pension problem?

    Wanna see a great example proving TL’s point?

    http://blog.transparentcalifornia.com/2016/03/10/how-the-city-of-fresno-dodged-the-pension-tsunami-providing-comfortable-but-not-exorbitant-benefits/

    (If you don’t like what TL has to say about plan generosity, I would suggest you NOT read it)

    I’m sure it was written by one of the Koch brothers…

    Reply

    • Posted by Anonymous on March 12, 2016 at 8:53 pm

      Good point, at least your honest – LOL! Or like The Donald says, don’t like what they say….. Chicago (your home town) et al.

      Reply

    • Posted by Tough Love on March 12, 2016 at 9:25 pm

      Sean, Interesting that your posted a link to that article…..

      I saw it yesterday and put in a comment that hasn’t been posted to THAT article yet (perhaps because its the weekend). But here it is for those interested:

      ————————————–

      It’s likely too strong a description to describe the City of Fresno’s pension as being in such good shape without knowing what their funding ratio would be if their Plans were valued on the exact same basis as that REQUIRED by the US Gov’t of Private Sector pension Plans.

      I would not be AT ALL surprised if it dropped to below 70% if so calculated ….. a rather poor (but not yet critical) position.

      In addition, the article states ….

      “The data reveals the average pension for a full-career retiree of the Fresno Police and Fire Retirement System was $70,627, while the average full-career retiree of the Fresno Employees’ Retirement System received $39,644.”

      Not bad (and reasonable) IF those averages are ONLY for (a) Full-time workers, with (b) with FULL 30 year careers, and from (c) VERY recent year retirees…… because THAT is want is relevant and easily comparable to what similarly situated Private Sector workers get in retirement benefits from their employers.

      However, if those averages include part-time workers, short-career workers, those who retired long ago (on lower salaries and under lower pension formulas), and/or the 50% survivor beneficiaries of deceased retirees, they can be VERY misleading, suggesting a pension far LOWER than those now granted full-time full-career retirees.
      ——————————————————————–
      Want to know Fresno TRUE position ….. ask CalPERS for a “Plan termination” quote, and compare the amount that CalPERS would require in cash today (to terminate the Plan) vs current Plan assets.

      And no, such a CalPERS quote is NOT as out of line as Public Sector Unions/workers would like us to believe ….. being a LOT closer to the results of a valuation using the assumptions/methodology REQUIRED by the US Gov’t of Private Sector Plans, than to the results of a valuation using the very “rosy” assumptions and cost-lowering methodology commonly used in Gov’t Plan “official” valuations.

      Reply

  4. Posted by Smooth Moderation Anonymous on March 13, 2016 at 11:12 am

    Mebbe

    Mebbe THE reason Fresno has fully funded pension system is because the pensions are less generous.*

    Or mebbe there are other contributing factors. Like perhaps Fresno has regularly met their actuarially required contributions.

    Fresno is not a member of CalPERS. It has it’s own system. Out of a total 2015 budget of $261 M, Fresno spent $24 M on retirement contributions and another $13 M on pension obligation bonds. In 2007, the police and fire funded ratio was 129%. General employees system was 146%. Both are now roughly 100% funded.

    But let’s just accept Robert Fellner’s opinion that benefit levels are the reason their system is fully funded, not one of several factors.

    “DON’T PAY THE BILLS, THE DEBT GETS LARGER”
    ___________________________________

    *less generous:

    Police and fire pensions in Fresno provide 75% FAS with 30 years service. COLA is CPI with 5% max. State police pension provides 90% with 30 years service. COLA is CPI with 2% max.

    The post 2013 state pension, with 30 years service would provide 60% at age 50 or 81% at age 57.

    Reply

    • Posted by Tough Love on March 13, 2016 at 11:32 am

      Quoting SMD,

      “Mebbe THE reason Fresno has fully funded pension system is because the pensions are less generous.* Or mebbe there are other contributing factors. Like perhaps Fresno has regularly met their actuarially required contributions. ”

      That’s a VERY misleading pair of sentences because the funding required to fully fund a DB pension is A FUNCTION OF and DIRECTLY PROPORTIONAL TO the “generosity” of the promised pensions.

      Bottom line …….. a less rich pension is less costly, and is hence easier to find the money to fully fund WITHOUT EXCESSIVE TAXES.

      ———————————————–

      Wast was this your latest attempt at more “smoothing” ………….. “nothing to see here folks (i.e., Taxpayers), we’re only ripping you off a little bit”

      Reply

  5. Posted by Smooth Moderation Anonymous on March 13, 2016 at 12:51 pm

    “DON’T PAY THE BILLS, THE DEBT GETS LARGER”

    Imagine if all you had to pay was the normal cost, instead of the normal cost …plus… amortization of the unfunded liability.

    Imagine how much “less costly” that might be!!!

    Reply

    • Posted by Tough Love on March 13, 2016 at 1:17 pm

      (1) Quoting SMD ……

      ““DON’T PAY THE BILLS, THE DEBT GETS LARGER””

      And don’t promise GROSSLY EXCESSIVE pensions and the COST TO fully fund them are a LOT lower.
      ————————-

      (2) Quoting SMD ….

      “Imagine if all you had to pay was the normal cost, instead of the normal cost …plus… amortization of the unfunded liability. ”

      And IMAGINE if we never had ANY unfunded liability had the promised pensions NEVER been GROSSLY EXCESSIVE and THEREFORE, never had funding requirements so high that they were impossible to meet …. thereby CREATING the unfunded liability.
      ————————

      You’re as “smooth” as EX-LAX.

      Reply

      • Posted by Rex the Wonder Dog! on March 14, 2016 at 2:08 pm

        You’re as “smooth” as EX-LAX.
        Dougie may NEVER recover from that smack down TL!

        Reply

    • Posted by Tough Love on March 13, 2016 at 2:14 pm

      SMD,

      And “imagine” if your home State of CA had never passed SB 400, allowing (and encouraging) RETROACTIVELY APPLIED massive pension increases (for PAST service ….. thereby being nothing but a THEFT of Private Sector taxpayer wealth)…. and INSTANTLY creating $10s of Billions of unfunded liability

      Reply

      • Posted by Smooth Moderation Anonymous on March 13, 2016 at 5:01 pm

        Good question ?

        Not related to the topic. The question at hand is, is Fresno’s lack of unfunded liability because of their less generous pensions, or because of the $200M POB on which they will be paying $16M a year until 2029 ?

        You can say all you want that generosity is the ROOT cause, but if you ignore all the other influences, you are just pissing up a rope. How much of a factor is this in Fresno’s funding status:

        “A successful bond strategy helped the Fresno city retirement system remain fully funded in recent years while employer and employees made no contributions.

        “The city has had sort of a holiday — and the employees as well,“ said Kathleen Riley, assistant administrator of the City of Fresno Retirement Systems. “It worked out very well for us.“

        Fresno claimed to have the two highest funded public employee pensions in the state before the crash, one at 148 percent and the other 130 percent. Riley said the contribution holiday may continue, even after the crash.”

        (Calpensions, May 7, 2009)

        Note: the funded ratio for both systems has been steadily declining, to roughly 100% for each this year.
        __________________________________
        FWIW, according to Stanford Institute for Economic Policy Research in 2012 found Fresno had a 78% funded ratio, using a 5.5% discount rate.

        Stanford cautions that it is difficult to directly compare “generosity” due to the complexity of systems, e.g. Fresno has a COLA formula of CPI with a 5% max., with “banking” as compared to the state 2% max, with banking. They also have an elective DROP program; not just for safety, but for all employees. How much is that worth? (Rhetorical question; no math please.)

        It is true according to SIEPR that Fresno has one of the lowest average pensions in CA, but also true that private sector wages in Fresno are some of the lowest in the state.

        According to Sandra Brock, (Planner at City of Fresno) “relatively few employees stay with the City for 30 years.”

        1) I don’t know what she means by “relatively few”. That sounds like TL data.
        2) I don’t know how that affects the average.
        3) I wonder, if true, if the ROOT CAUSE of shorter tenure is the effect of lower pensions failure to “attract and retain” qualified employees.

        Inquiring minds want to know.

        Moderation says, we do not have a definitive link between funded status and plan generosity.

        No matter how many times you raise your voice (caps lock) or stomp your feet (superfluous adjectives), correlation does not imply causation.

        Reply

        • Posted by Sean on March 13, 2016 at 5:34 pm

          SMD:

          “No matter how many times you raise your voice (caps lock) or stomp your feet (superfluous adjectives), correlation does not imply causation.”

          You mean, like:

          DON’T PAY THE BILLS, THE DEBT GETS LARGER. ?????

          Funny how we can see it in others, but not ourselves, isn’t it?

          What is so bothersome, to me, about the above statement (don’t pay the bills, the debt gets larger) is that it is a reckless and irresponsible OVERSIMPLIFICATION. It doesn’t even bother to attempt to ask WHY the bill doesn’t get paid. It’s just too easy. There are MANY reasons why, and blame to be placed on EVERYONE, not just those who are tasked with putting the money into the fund.

          Douglas, you are always more than willing to elaborate, at length, the general modesty of your positions, but you do not ever acknowledge that perhaps, just a wee little bit, that one source of the problem is that many of the benefits are, unfortunately, not affordable. Maybe, (or do you prefer, mebbe?) the idea of paying for many of the benefits sounded logical at the time, but made assumptions about a whole host of factors, all lining up perfectly, and indefinitely. Sadly, many of those factors have not lined up, and probably will not line up, and if and when they ever DO line up, the funding will not make up for the lost ground. Simply stating that all you have to do is pay in the required amount is avoiding reality.

          Again: Not making the required contributions IS a factor in the problem. It’s just NOT the ONLY factor. Never was. Never will be.

          Reply

          • Posted by Smooth Moderation Anonymous on March 14, 2016 at 12:48 am

            Moderation has never, ever, typed the phrase “DON’T PAY THE BILLS, THE DEBT GETS LARGER”, with or without caps lock. Aside from being naturally averse to unnecessary expenditure of effort, in addition to the interest of accuracy, I always copy/paste this quote (from Mary Pat Campbell.) The caps are hers, not mine.

            Look at the subject of today’s article. Louisiana state police, it appears, have a 3 and 1/3 % x years of service with, I believe, a 100% max. Is that excessive? It’s higher than CA 3% @ 50 with 90% max. Higher still than the 2% @ 50 for new employees.

            But ….average salary for Louisiana police is $39,400. Even lower than the “all occupations” average of $40,190. Oklahoma police average $42,720.

            “not affordable”??? Forget the pensions, some people say the salaries alone are “not affordable”. Again, there is a difference between affordable and reasonable, or fair wages (and benefits)

            My dentist wants to put in an implant (two, actually). I can’t afford it. Near as I can tell, his prices are the going rate, and he has employee and other overhead. I can’t say his prices are excessive or unfair, I just can’t afford them. I have said many times, I don’t know what a cop is worth, in total compensation.

            I have said, many times, that many of the lower educated public workers earn more in total compensation (much more) than they would in the private sector. All the studies agree on that. Does that make them unaffordable, or unfair? Or egregious?

            We can’t be that sure about police pensions. There are too many variables.

          • Posted by Rex the Wonder Dog! on March 14, 2016 at 2:10 pm

            Moderation has never, ever, typed the phrase “DON’T PAY THE BILLS, THE DEBT GETS LARGER”, with or without caps lock. Aside from being naturally averse to unnecessary expenditure of effort, in addition to the interest of accuracy, I always copy/paste this quote (from Mary Pat Campbell.) The caps are hers, not mine.
            YOU posted it Dougie, not Mary Pat!

            You OWN IT!

          • Posted by Rex the Wonder Dog! on March 14, 2016 at 2:14 pm

            I have said many times, I don’t know what a cop is worth, in total compensation.

            Cop= GED job

            Medical doctor= GED + 4 years undergrad college + 4 years medical school college + 1-7 years medical residence = 9-16 years POST GED.

            Average compensation GED cop (Gov Trough Feeder Land) = $200K

            Average compensation private sector medical doctor = $150K

            I am fairly certain a GED cop job is worth only about $25K-$40K in Total compensation in the REAL WORLD!

          • Posted by Sean on March 14, 2016 at 8:18 pm

            SMD:

            “My dentist wants to put in an implant (two, actually). I can’t afford it. Near as I can tell, his prices are the going rate, and he has employee and other overhead. I can’t say his prices are excessive or unfair, I just can’t afford them. I have said many times, I don’t know what a cop is worth, in total compensation.”

            I think you make a good point here, to which I would add the question: So, what do you do about it? Do you:

            1. Suck it up, pony up the money, and move on.
            2. Go without, and suffer those consequences.
            3. Acquire the implants, then leave it to your children and grandchildren to pay.

            As to what a policeman is worth, I agree: There really is no way to determine the value of one. At the same time, the more important issue is, what can a municipality afford to pay, and what is the amount necessary to get quality applicants? Those two questions are really the only ones that matter most. The other questions will never be answered, will only start arguments and never end them, and will ultimately solve nothing anyway.

          • Posted by Anonymous on March 15, 2016 at 1:58 am

            Depends on whether the dentist is in New Jersey or Fresno. Fresno police, it appears, have more generous pensions and, since they are (nearly) fully funded, I guess they are, by definition, affordable. New Jersey police, on the other hand, even though their pensions are less generous, may end up getting stiffed. Even more strange, New Jersey state police may get stiffed while local police and fire get their legally contracted pensions because their local governments paid the required ARC all along. Yes, we know they are somewhat underfunded, but not as hopelessly so as the state.

          • Posted by Tough Love on March 15, 2016 at 3:33 am

            Quoting Anon …. “Fresno police, it appears, have more generous pensions and, since they are (nearly) fully funded, I guess they are, by definition, affordable.”

            “Fully Funded” and “affordable” ?

            On what basis, the extremely “rosy” “official” basis used by Gov’t Plans, or the more realistic basis that the Gov’t REQUIRES of Private Sector Plans in their valuations ?

            100% under the former translates into about 70% or below under the latter

          • Posted by Smooth Moderation Anonymous on March 15, 2016 at 9:32 am

            It’s complicated!!!

            “However, funded ratios at risk-free discount rates are 71 percent and 75 percent on an actuarially basis and 78 percent and 77 percent on a market basis.”

            That’s from Joe Nation at Stanford the risk free rate he used was 5% and the data was from 2010-2011.

          • Posted by Tough Love on March 15, 2016 at 5:26 pm

            SMD,

            It’s difficult dealing with someone like you, who misleads, but often gets away with it because the subject is (as you often say) “complicated” and few of the readers understand the subject (and especially the underlying math) in sufficient detail to recognize GARBAGE.

            Your above comment was responding to my comment (just before yours) where I was taking about how the funding ratio would materially drop (from about 100% to 70% or below) if the interest rate used for discounting Plan Liabilities was reduced from the “official” Plan rate (which I believe in Fresno is 7.5%) to that which the US Gov’t REQUIRES of Private Sector Plans in their valuations…. a rate now about 4%.

            YOUR response has NOTHING to do with a CHANGE in the interest rate used for discounting Plan Liabilities, as Joe Nation is using ONE interest rate in BOTH sets of percentages (which you seem to be guessing to be 5%) and is only comparing a Plan valued using MARKET VALUE of assets vs ACTUARIALLY SMOOTHED assets. At different times, either could be higher than the other, and they could be close or far apart. Using market value of assets provides a MUCH more accurate picture of a Plan’s true financial position at any point in time. Actuarially smoothed asset values are allowed in Plan valuations to moderate wide year-to-year swings in Plan contributions (and the associated problematic issues for Gov’t entity budgets arising therefrom) that might arise from significant changes in year-to-year asset values.

            So, you are either:

            (a) totally incompetent by “responding” to my comment with someone irrelevant and non-responsive, and not even realizing that you were doing such, or
            (b) you did understand the difference by are intentionally trying to deceive the readers

            Which is it ?
            ————————————————

            And to back up WITH FACTS up my 100% Funding Rate drop to 70% in my earlier comment ……

            There is a “rule of thumb” that periodically comes up in pension articles that states that DECREASING a Plans valuation interest rate by 1% (say from NJ’s “official” 7.9% rate to 6.9%) DECREASES the Plan’s funding ratio by about 10%.

            Well, why rely on “rules of thumb” that may or may not be true …. and can be challenged by the likes of those with SMD’s agenda and mindset. How about we DEMONSTRATE it.

            Plan Liabilities can be looked at as an Annuity Factor …. the Present Value or $ amount needed in hand upon retirement (say at retirement age 60) to provide the promised pension …… and the CHANGE in the value of Plan Liabilities (and hence in it’s it’s Funding ratio) can be measured by the CHANGE in the Annuity factor when calculated at different rates of interest.

            And, the Funding Ratio = Assets/Liabilities (or FR=A/L for short), multiplying the FR by x% is equivalent to dividing Plan Liabilities by x%.

            The following table gives (for retirement at age 60) the Annuity Factors* at 7.9%, 6.9%, 5.9%, 4.9%, 3.9%, and 2.9% as well as the percentage increase in the annuity factor as the interest rate decreases, and the resultant Funding Ratio assuming the funding ratio starts at 100% when valued with the 7.9% interest rate:

            @ 7.9% ……….. $10.37 ……………….. 100.0%
            @ 6.9%…………. $11.26 ….. 8.5% …. 100.0%/1.085 = 92.1%
            @ 5.9% ………… $12.29 ….. 9.2% ….. 92.2%/1.092 = 84.4%
            @ 4.9% ………… $13.49 ….. 9.8% ….. 84.4%/1.098 = 76.8%
            @ 3.9% ………… $14.92 ….. 10.6% …. 76.9%/1.106 = 69.5%
            @ 2.9% ………… $16.62 …… 11.4% .. 69.5%/1.114 = 62.4%

            * For completeness, the annuity factors are specifically the PV of a Life Annuity Due of $1/Year Starting at age 60 ($1/12 paid per month), and the Mortality Table used is the RP-2000 projected to 2007 50%Male/Female – Annuitant.

            So what do we see …..

            (a) that 10% “rule of thumb” is pretty accurate…..

            (b) decreasing the valuation interest rate from NJ’s “official” 7.9% to the rates required by the US Gov’t of Private Sector Plans (best represented by the 3.9% in my above table) decreases 100% funding rate @ 7.9% to 69.5% at 3.9%.

            ———————————————–

            And no SMD, it’s not GIGO and it’s not LOL, it’s just WAY above you grade level.

          • Posted by Smooth Moderation Difficult on March 15, 2016 at 6:50 pm

            Don’ bust a gut, Love!!! Hissy fits are non productive.

            I was quoting someone who has a reputation for being knowledgeable in the field. Joe Nation and the Stanford Institute for Economic Policy Research:

            “MORE PENSION MATH: Funded Status, Benefits, and Spending Trends for California’s Largest Independent Public Employee Pension Systems” Feb. 2012

            Moderation was not “guessing” about the 5% discount rate. It was stated in the study as a footnote under table A40, page 57 ……”Assumes risk-free discount rate of 5.0%” As a rule, when you see these marks: “….” it means I used the copy/paste feature on my word processor. I did ballpark the “data was from 2010-2011.” comment, because the study used data from several years for different elements of benefits.

            What difference indeed. The big difference is that Transparent California says:

            “The CFRS is the only major California public pension plan with a funded ratio over 100 percent……….”

            The SIEPR study says:

            “Based on the actuarial value of assets, CFFP’s funded ratio
            under its assumed 8.0 percent discount rate fell from 128.0
            percent in 1999 to 111.4 percent in 2011. CFERS’ funded
            ratio fell from 121.8 to 116.0 percent.”

            Two things:
            1) Moderation ***assumes*** that the 111.4 percent and 116.0 percent were what SIEPR used to compute the “..funded ratios at risk-free discount rates are 71 percent and 75 percent on an actuarially basis and 78 percent and 77 percent on a market basis.”

            (Because it was a 2012 study.)

            2) Moderation is going strictly from memory, because I have outside work to do. In 2007, using the city’s discount rate, both systems had a much higher funded ratio. One was about 149%, and the other not far behind. In 2015, both are lower than in 2011. The funding ratio has been steadily declining. My guess is, unless there are changes, both will be below “full funding” within a couple of years, if not already.

            Moderation was about to tell you something else about the city of Fresno benefits, but since you insist on being catty and insulting, you can damn well look it up yo own self.

            It …is… complicated!!!

          • Posted by Tough Love on March 15, 2016 at 7:05 pm

            SMD,

            Nice try to SMOOTH you way out of your attempt to deceive ……..

            So as I said above:

            ———————

            So, you are either:

            (a) totally incompetent by “responding” to my comment with someone irrelevant and non-responsive, and not even realizing that you were doing such, or
            (b) you did understand the difference by are intentionally trying to deceive the readers

            Which is it ?

          • Posted by Smooth Moderation Difficult on March 15, 2016 at 10:30 pm

            “Have you stopped beating your wife?”

            And the answer is…..

            Neither (a)…..
            Nor (b)…..
            ______________________________________________

            Aristotle’s Error

            “Observation versus Authority: ……. Aristotle maintained that women have fewer teeth than men; although he was twice married, it never occurred to him to verify this statement by examining his wives’ mouths.”

            First;

            Posted by Sean on March 12, 2016 at 8:30 pm
            “Everyone,
            You know how TL is always pointing out that “Plan Generosity” is at the root of the public pension problem?
            Wanna see a great example proving TL’s point?”

            etc., etc., etc.

            Second;

            Moderation (“difficult”, apparently); adhering to the Carl Sagan maxim that “Extraordinary claims require extraordinary evidence”, decided to check several other sources, and found that Fellner’s headline was questionable, at best, (in my opinion.)

            Third;

            Posted by Tough Love on March 15, 2016 at 3:33 am

            “Fully Funded” and “affordable” ?
            On what basis, the extremely “rosy” “official” basis used by Gov’t Plans, or the more realistic basis that the Gov’t REQUIRES of Private Sector Plans in their valuations ?

            Fourth;

            Moderation responds with a quote from a reputable source which gave ….both….. “the extremely “rosy” “official” basis used by Gov’t Plans,” ….and a risk free rate, specified as 5%, based on actual data (“teeth”) from the city involved.

            How the hell is that non responsive?

            How the hell is that an “attempt to deceive ……..”?

            You may not be using Surfpuppy Dumb Dog’s IP address, but you do an excellent imitation of his snide attitude and lack of logic.

            Did anyone other than Moderation try to verify the TC claim of the actual level of benefits and funding level, or does Sean just assume their benefits are “comfortable, but not exorbitant” because some headline says so? And TL assumes their benefits are “grossly excessive” because, well, that’s what TL always assumes about public workers?

            Posted by Tough Love on March 13, 2016 at 11:19 pm

            “If that is indeed the formula for Fresno, it is INDEED…grossly excessive …by ANY and EVERY reasonable Metric when compared to the retirement benefits granted Private Sector workers.”

            “If that is indeed the formula for Fresno”

            “If” ?

            Why don’t you count the damn teeth?

            Don’ even get me started about the caps lock and superfluous adjectives.

          • Posted by Tough Love on March 15, 2016 at 11:25 pm

            Quoting SMD (between the lines below)…………
            —————————

            “Third;

            Posted by Tough Love on March 15, 2016 at 3:33 am

            “Fully Funded” and “affordable” ?
            On what basis, the extremely “rosy” “official” basis used by Gov’t Plans, or the more realistic basis that the Gov’t REQUIRES of Private Sector Plans in their valuations ?

            Fourth;

            Moderation responds with a quote from a reputable source which gave ….both….. “the extremely “rosy” “official” basis used by Gov’t Plans,” ….and a risk free rate, specified as 5%, based on actual data (“teeth”) from the city involved.

            How the hell is that non responsive?

            How the hell is that an “attempt to deceive ……..”?

            ——————————–

            Well, by THAT response your answered my question ….. that being that you are (a) totally incompetent by “responding” to my comment with someone irrelevant and non-responsive, and not even realizing that you were doing such.

            And you STILL seem to be clueless. Apparently you are clueless that when I said …………”On what basis, the extremely “rosy” “official” basis used by Gov’t Plans, or the more realistic basis that the Gov’t REQUIRES of Private Sector Plans in their valuations” …….. it MEANS the difference in the Funding Ratio if Valuation interest rates are at say 7.5% vs say 4%, THAT difference (almost always) being of FAR greater importance than whether assets are valued on a Market Rate or Actuarially Smoothed basis.

            Yes, your “responded” with a quote ….. a quote so totally unresponsiveness to the question, that it may as well have been quoting a line from a Justin Bieber song.
            —————————————————————————–
            Quoting SMD ….. “How the hell is that non responsive?”

            Apparently you have a major reading comprehension problem. Read Joe Nation’s quote a few times. Here it is:

            ““However, funded ratios at risk-free discount rates are 71 percent and 75 percent on an actuarially basis and 78 percent and 77 percent on a market basis.”

            CLEARLY he is using the RISK FREE rate on BOTH (do you get that … in BOTH) his percentages for one valuation with Market value of assets and a 2nd valuation with Actuarially smoothed assets. In NEITHER is he using the “official” 7.5% rate.

            And if you had even a modicum of understanding of the subject, that would have been VERY VERY obvious from the closeness of his percentages under the the valuations. Had he used a 7.5% rate in one and a 4% rate in the other, they would have been about 30% different …….. as I DEMONSTRATED above.

            ————————————
            ————————————-

            Soyes, you fall under (a) totally incompetent by “responding” to my comment with someone irrelevant and non-responsive, and not even realizing that you were doing such.

            But I believe you ALSO try to deceive.
            ———————————–

          • Posted by Smooth Moderation Difficult on March 16, 2016 at 12:53 am

            TL:
            “CLEARLY he is using the RISK FREE rate on BOTH (do you get that … in BOTH) his percentages for one valuation with Market value of assets and a 2nd valuation with Actuarially smoothed assets. In NEITHER is he using the “official” 7.5% rate.”

            Smooth Moderation Difficult: March 15, 2016 at 6:50 pm

            “Based on the actuarial value of assets, CFFP’s funded ratio
            under its assumed 8.0 percent discount rate fell from 128.0
            percent in 1999 to 111.4 percent in 2011. CFERS’ funded
            ratio fell from 121.8 to 116.0 percent.”

            Behold: “the extremely “rosy” “official” basis used by Gov’t Plans,”

            And, as I tried to tell you:

            Because (a) this data is 5 years old, (b) the funding level has been steadily decreasing since 2007, and (c) there is a small matter of a POB, for which the city is paying almost as much annually as the ARC.

            Now, don’t you feel like an idiot?

          • Posted by Tough Love on March 16, 2016 at 1:25 am

            Quite astonishing SMD, as you are AGAIN showing that you are clueless…..
            first dropping Joe Nation’s quote …since THAT was unresponsive, and now trying another equally unresponsive quote.

            Repeating your above Quote:

            ““Based on the actuarial value of assets, CFFP’s funded ratio
            under its assumed 8.0 percent discount rate fell from 128.0
            percent in 1999 to 111.4 percent in 2011. CFERS’ funded
            ratio fell from 121.8 to 116.0 percent.””

            So?

            That quote is showing the Funding Ratio drop in 2 separate Plans (CFFP and CFERS) from one period (1999) to another (2011) when the stated valuation basis is a SINGULAR ONE used in ALL of the 4 valuations …… an 8% interest rate and Actuarial (not Market) value of assets.

            That has NOTHING (absolutely NOTHING) to do with the impact on Funding Ratios of CHANGING the Valuation interest rate from the “official” rate (of 8% in this example) to a much lower rate such as 4%…… which, as I DEMONSTRATED above, results in a 30% drop in the Funding Ratio.
            ————————————–

            P.S., It’s NOT “complicated”, you’re just WAY out of your league.

            I trust you were better at (and certainly more suited for) changing light bulbs.
            ——————–

          • Posted by Tough Love on March 16, 2016 at 1:37 am

            SMD, You remind me of Irwin Cory……..

          • Posted by Smooth Moderation Difficult on March 16, 2016 at 2:33 am

            Do the two statements, both from the same study, have to be literally side by side for you to comprehend?

            ““However, funded ratios at risk-free discount rates are 71 percent and 75 percent on an actuarially basis and 78 percent and 77 percent on a market basis.”
            That’s from Joe Nation at Stanford the risk free rate he used was 5% and the data was from 2010-2011.”

            And

            “Based on the actuarial value of assets, CFFP’s funded ratio
            under its assumed 8.0 percent discount rate fell from 128.0
            percent in 1999 to 111.4 percent in 2011. CFERS’ funded
            ratio fell from 121.8 to 116.0 percent.”

            The CFFP’s funded ratio in 2011 was 111.4 percent.
            The CFERS, funded ratio in 2011 was 116.0 percent.
            Both assuming an 8 percent discount rate. Both in 2011.

            “funded ratios at risk-free discount rates are 71 percent and 75 percent on an actuarially basis”

            Again, in 2011

            This ain’t rocket surgery.

          • Posted by Tough Love on March 16, 2016 at 3:01 am

            Well well well you, now seem to finally get it, by showing exactly what I DEMONSTARTED above (you know, with real, not “GIGO” math), a roughly 30% drop in the Funded Ratio when (other things being held constant) the Valuation interest rate is reduced from the “official” Plan rate (usually in the 7.5% to 8% range) to a closer to risk-free rate of around 4%.

            Voila, (2011) Funding ratios of 111.4% and 116.0% using 8%, and mid-70s% at 5%.

            Congratulations, you can now advance to the 2nd grade.

          • Posted by Tough Love on March 17, 2016 at 5:25 pm

            SMD,

            You seem to like quoting Joe Nation’s (Stanford) studies (re your home State of CA).

            He’s working on a new study that should be out in 1 month, but preliminary results are now available …. as given by the title to this article on CA’s unfunded Pension and Retiree Healthcare promises.

            “Preliminary Report Pegs Pension and Retiree Health Care Problem at $1.2 Trillion”

            http://www.foxandhoundsdaily.com/2016/03/preliminary-report-pegs-pension-and-retiree-health-care-problem-at-1-2-trillion/
            ————————————-

            Nah …..not a problem.

          • Posted by Tough Love on March 18, 2016 at 4:45 am

            SMD, If the ABOVE article doesn’t put a dent in your unwavering supoort of the current structure of grossly excessive Public Sector pensions and the associated greed and arrogance toward Private Sector Taxpayers, perhaps this one will:

            http://www.nytimes.com/2016/03/18/business/dealbook/study-finds-public-pension-promises-exceed-ability-to-pay.html

        • Posted by Rex the Wonder Dog! on March 16, 2016 at 12:05 am

          TL, Dougie, you TWO NEED TO GET A ROOM!

          Reply

  6. Posted by Sean on March 13, 2016 at 4:30 pm

    SMD:

    “Mebbe THE reason Fresno has fully funded pension system is because the pensions are less generous.*

    Or mebbe there are other contributing factors. Like perhaps Fresno has regularly met their actuarially required contributions.”

    How about:

    Mebbe the REASON Fresno regularly met their actuarial required contributions is BECAUSE the pensions are LESS GENEROUS.

    Which came first: the chicken, or the egg? The egg, or the chicken? The chicken, or the egg???????

    DON’T PAY THE BILLS, THE DEBT GETS LARGER.

    MMMM HMMMM. But not all bills are necessarily honest debts, are they? Not paying the required contributions is most definitely a problem. I have no problem accepting and understanding, and acknowledging that concept. Now, will anyone in the public sector, “recipient” section of the bleachers stand up and acknowledge the fact that plan generosity is ALSO, VERY MUCH SO, a contributing factor to the problem? Anyone? Anyone? Buellar? Buellar?

    It’s amazing how the vast majority of people with average intelligence can understand the concept, yet, for some reason, a very small percentage of the populace, just cannot (read: WILL NOT) understand it, not matter how many times it is brought up.

    Say goodnight, Gracie.

    Reply

    • Posted by Tough Love on March 13, 2016 at 11:15 pm

      Well Said …indeed !

      Reply

    • Posted by Smooth Moderation Anonymous on March 14, 2016 at 1:49 am

      “plan generosity is ALSO, VERY MUCH SO, a contributing factor to the problem?”

      We’ve discussed this before. Biggs and Richwine “Overpaid or Underpaid? A State-by-State Ranking of PublicEmployee Compensation”

      Page 60, table 4: Using nationwide data, it is clear that all those with less than a BA earn about the same, or slightly less, in wages than equivalent private sector workers. But they earn much more in benefits. Biggs calls those with a BA roughly equal in total compensation to the private sector. All those above that level are under compensated. Mildly at the Masters level and extremely at the professional level. For all those below the BA level (about 40% of state workers; see table 1 on page 58) plan generosity is a contributing factor to pension costs. Put these workers on a 3% match and eliminate their retiree healthcare and they will still be making as much or slightly more than the private sector, with billion$ in savings. So far, with one notable exception, I have seen no one seriously pursue this “reform”.

      And no; I do not advocate that reform either. But, like the man said:

      Reply

  7. Posted by Smooth Moderation Anonymous on March 13, 2016 at 5:43 pm

    Is this true?

    ” For a PFRS Tier 1 or Tier 2 member enrolled
    on or before June 28, 2011, the annual benefit
    for a Special Retirement is equal to 65% of
    your Final Compensation plus 1% for each
    year of creditable service over 25 years but not
    to exceed 30 years. The maximum allowance
    is therefore 70% of your Final Compensation.”

    (State of New Jersey Police and Firemen’s Handbook, September, 2011)
    ______________________________________
    City of Fresno:

    ” Tier I Benefit: Sum of (1) and (2)
    (1) 2 3/4% of FAS times years of service before age 50, not-to-exceed 20 years
    (2) 2% of FAS times years of service after age 50, not to exceed 10 years”

    That comes out to 75% at age 50 with 30 years service.

    It would appear that New Jersey has a lower benefit than Fresno, ergo should have a proportionally lower unfunded balance. What happened? Maybe 25 years of not paying the bills?

    (Due to PEPRA, all new Fresno police are in tier 2):

    Tier II Benefit:
    Tier II benefits begin as 2% per year of service times your FAS at age 50 and ramp up every quarter year to 2.7% per year of service times your FAS at age 55 and older.

    That is smooth. Mind if I use it?

    Reply

    • Posted by Tough Love on March 13, 2016 at 11:19 pm

      If that is indeed the formula for Fresno, it is INDEED…grossly excessive …by ANY and EVERY reasonable Metric when compared to the retirement benefits granted Private Sector workers.

      Reply

      • Posted by Smooth Moderation Anonymous on March 14, 2016 at 11:01 am

        If?

        http://www.cfrs-ca.org/PDF/FPRS/FPHandbook.pdf

        Formula: page 22.

        COLA: page 30

        Their “comfortable, but not exorbitant benefits” (Robert Fellner) are higher than New Jersey’s, yet they are fully funded. (Or 71 percent and 75 percent on an actuarial basis using risk free discount rates. (SIEPR)

        “DON’T PAY THE BILLS, THE DEBT GETS LARGER”

        Reply

        • Posted by Tough Love on March 14, 2016 at 4:28 pm

          While Robert Fellner generally supports gov’t expenditure restraint and less generous Public Sector pensions, in THIS case he either simply “got it wrong” or misunderstood the details of Fresno’s Pension Plans.

          And I repeat ….. the Plan you described for Fresno is INDEED …. grossly excessive by ANY and EVERY reasonable Metric when compared to the retirement benefits granted Private Sector workers.

          Also of NOTE is that Fellner’s statement was by way of comparison (NOT to anything even REMOTELY reasonable but) to the undeniably even MORE grossly excessive 3%@50 formula Plans. A Plan does NOT become “comfortable, but not exorbitant benefits” simply because the benefits are less than something that is undeniably grossly excessive.

          ————-

          But nice try at your never-ending “smoothing” efforts ……. “nothing to see here folks (i.e., Taxpayers), we’re not ripping you off TOO MUCH”.

          Reply

          • Posted by Smooth Moderation Anonymous on March 14, 2016 at 8:01 pm

            LOL!!!

            See my …….long…… comment above.

          • Posted by Tough Love on March 14, 2016 at 8:07 pm

            SMD, How long is the list of light bulbs that you changed in your illustrious Public Sector career?

            Did they all take 6 men, 4 trucks, and clearly thousands of dollars in pay and pension/benefit accruals.

            Clearly such work should have been outsourced decades ago.

  8. Posted by Sean on March 13, 2016 at 6:09 pm

    Here’s an excerpt from something I just read on another website. Any words that are in bold are my doing, for emphasis on what I want to know. I will put the link to the entire piece at the end, but I would like an explanation from ANY public sector retiree or currently active public sector worker. Here it is:

    “So in 2002 Sonoma County RETROACTIVELY increased pension formulas to the highest level allowed by law, 3 percent per year of service at 50 years of age for public safety employees and 3 percent per year of service at 60 years of age for general employees. This means employees with 30 years of service INSTEAD OF receiving 60 percent of their salary SUDDENLY RECEIVED 90 PERCENT. Worst of all, due to ERRORS in the RETIREMENT ASSOCIATION’S calculation of the financial impact, there was NEVER a realistic plan to fund these additional benefits SO THE COST HAS FALLEN ONTO TAXPAYERS, EVEN THOUGH, according to Board of Supervisor resolutions, the increases WERE SUPPOSED to be paid for by the EMPLOYEES. This shortfall is MASSIVE because following the increase, employees retired FIVE YEARS EARLIER with pension checks that averaged $16,000 MORE PER YEAR — or $400,000 over 25 years in retirement.”

    http://www.pressdemocrat.com/opinion/5369270-181/close-to-home-county-pension?ref=TSM

    Please, someone in the public sector, explain this. Actually, never mind. I’m sure this paragraph is FULL of inaccuracies, isn’t SMOOTH enough, and the answer is quite simple: Just pay the required contributions, and you won’t have any problems. And always remember: DON’T PAY THE BILLS, THE DEBT GETS LARGER. There. Problem solved. But for those of us who do NOT reside on Fantasy Island…

    Reply

    • Posted by Anonymous on March 13, 2016 at 10:02 pm

      Look boss the PLANE and it’s full of MONEY for the Pension – funny fundec? Sorry for the typo s/b fully – LOL!

      Reply

  9. Posted by Smooth Moderation Anonymous on March 13, 2016 at 9:44 pm

    Since we just discussed Fresno and their “comfortable, but not exorbitant benefits”, here are two sources comparing Fresno to Sonoma County. Both seem to be remarkably similar, and each is below state average in wages and benefits, in spite of the “RETROACTIVELY increased pension formulas.

    http://publicpay.ca.gov/Reports/Cities/Cities.aspx

    Fresno
    Average wages: $59,109
    Average retirement & health cost: $17,425

    http://publicpay.ca.gov/Reports/Counties/Counties.aspx

    Sonoma
    Average wages: $57,162
    Average retirement & health cost: $14,679

    All Counties average
    $60,831 average wages
    for all county employees
    $24,135 avg. retirement & health cost
    for all county employees
    ____________________________________________________________
    http://siepr.stanford.edu/sites/default/files/publications/Nation_More_Pension_0.pdf

    Fresno

    In 2009-2010, the average pension benefit for CFFP
    service retirees was $51,684, well below the 20-system
    average of $64,581 and fourth lowest among the state’s
    largest 20 systems. For CFERS service retirees, the average
    annual benefit was $24,720, again below the 20-system
    average of $31,912 and second lowest among those systems.

    These pension costs were determined using the systems’
    8.0 percent investment return assumptions. Under those
    same assumptions, for the 2011-2012 fiscal year, the systems
    project pension costs at 11.3 percent of city expenditures.

    Sonora

    In 2009-2010, the average service retirement benefit
    for SCERA miscellaneous employees was $28,680, slightly
    below the 20-system average ($31,912). The average
    service retirement benefit for SCERA safety employees was
    $48,768, well below the 20-system average ($64,581) and
    second lowest among the state’s 20 largest independent
    pension systems.61

    Pension costs were determined using SCERA’s
    investment return assumption (7.75%). Under that same assumption,
    for the 2011-2012 fiscal year, SCERA projects pension costs
    equal to 6.9 percent of county expenditures.

    Funding level according to SIEPR: (2012)

    Fresno:

    Both CFFP and CFERS currently meet the 80 percent
    funded status minimum standard. However, funded ratios at
    risk-free discount rates are 71 percent and 75 percent on an
    actuarial basis and 78 percent and 77 percent on a market
    basis

    Sonora:

    SCERA meets the minimum funded ratio of 80 percent,
    assuming a 7.75 percent discount rate. Using a risk-free rate,
    however, the funded ratio falls to 65 percent.

    Note: as of Jan. 1, 2013, Pension formulas for all new employees was reduced.

    Reply

  10. Posted by Anonymous on March 14, 2016 at 2:58 pm

  11. Posted by MJ on March 14, 2016 at 3:01 pm

    You can all go back and forth all you want until you are blue in the face…the fact remains that there is no money to fully fund NJ or CA and the taxpayers are out of money………The mature and responsible thing to do is to significantly reform now so that anyone still working in the public sector can adequately plan for their own retirement. As for those already retired, perhaps small decreases and required health benefit payments.

    Reply

    • Posted by Tough Love on March 14, 2016 at 4:40 pm

      Quoting ….. “As for those already retired, perhaps small decreases and required health benefit payments”

      The pensions “promised” those already retired (especially those who retired in the years post the many RETROACTIVELY APPLIED pension increases) are also ALSO undeniably grossly excessive.

      Give the RARITY of employer-sponsored retiree healthcare benefits in the Private Sector today, there is ZERO justification for the free or heavily subsidized Public Sector retiree healthcare benefits. And, their pensions may also need to be reduced MORE THAN by …”small decreases”, because the alternative ………… to increase taxes on those (the PRIVATE Sector) who get SOOOOO much LESS ……… is much MORE unfair and much LESS justified.

      Reply

  12. Posted by eric blair on March 22, 2016 at 9:57 am

    A blueprint to nationalize all US private retirement accounts.

    A Comprehensive Plan to Confront

    the Retirement Savings Crisis

    By Teresa Ghilarducci and Hamilton “Tony” James

    Under the Retirement Savings Plan (the “RSP” or “Plan”), all those who don’t have access to a workplace pension plan would be enrolled into a Guaranteed Retirement Account (“GRA”)—and those with 401(k)-type and all other plans would roll their savings over to a more suitable GRA.

    This includes part-time and self-employed workers.

    Page 14

    Can a spouse inherit a deceased partner’s GRA?

    Pre-annuitization GRA accounts would be inheritable by the spouse. After annuitization, which occurs on the household level, the annuity would already reflect longevity assumptions and would not be inheritable.

    Page 21

    Who would be responsible for investing the funds? Is this plan way to get more money for Wall Street to manage?

    This plan will increase competition among retirement investment managers, which will be good for retirement savings. The individual saver will choose their own manager, and there will be many to choose from— including traditional money management firms, mutual fund companies, state agencies that now manage public pension plans, a self-funded, national entity that could potentially be set up by the Federal Government, and maybe even Berkshire Hathaway—all competing for your business.

    This new class of “pension managers” would work like endowment and pension plan administrators. They would focus on asset allocation, risk management, and the selection of individual investment managers and sub-advisors to handle the actual buying and selling of particular investments. These managers would have a fiduciary obligation to the GRA holders and would need to be federally licensed and regulated.

    Individual GRA holders would select their pension manager based on fees and investment performance. They would be able to choose their preferred manager or change from one to another at the beginning of each year. Accounts would be fully portable and the assets would transfer based on the account balance. A national exchange of managers would be the best way to facilitate this process.

    A cottage industry could even arise to advise GRA holders and rate different managers (similar to Morningstar and mutual funds).

    Page 22

    Does the combination of mandating GRAs and ending tax breaks for 401(k)s and IRAs take retirement savings decisions out of the hands of individuals?

    No. Each individual will control their own account. For too long, the American people have been left on their own when it comes to preparing for retirement. That’s why almost no one is prepared for retirement today. The word “mandate” may be politically charged these days, but research and experience make it clear that it’s the only thing that will work.

    Page 23

    http://www.economicpolicyresearch.org/images/Retirement_Project/Retirement_Security_Guaranteed_digital.pdf

    Reply

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