Pensions-Energized Actions!

Reading comments is most interesting to me; a barometer of some sentiment.  I do enjoy an active dialog and always welcome discussions.  This is why I include my email and phone info.

In a prior posting one commentator states; “they (public pensions) must be punished!”  I ask myself how have MA machinists, MI Teamsters, IL firemen, or CA public servants have so injured this pitiable, erroneous wretch?  The answer is they have not.

The American vote is the most powerful tool devised.  When Americans are unified and tell Congress to “listen now or your replacement will”, I am called naïve.  It is not naïve to believe America can work as intended.  Rather, commentators are grossly dysfunctional – they displace (in the psychological sense) their deadly, infectious defeatist concessions off to others

I am asked to write on reforms and will do that soon.  But I would like to offer a thought on reforms now.  My sister and her husband are in CalPERS and about ten or so years from retirement.

I cite the CalPERS Comprehensive Annual Financial Report for the fiscal year ended June 30, 2016.  The number of retirees increased by 6.1%.  Member contributions increased five percent and employer contributions just over nine percent; large increases.  Net Investment Income was about $1.4 billion, down about $5.2 billion from the previous year.  Retirement, Death & Survivor Benefits were about $20.1 billion, more than a six percent increase.  CALPERS paid our much more then it earned.

My question to my sister, and any person having thoughts on pensions, is this.  If a person is not retired and paying into a pension and if the pension is hemorrhaging cash, does a working man have a reasonable expectation that his contributions will be preserved in the fund?  Can my sister’s husband expect to take out that which he has paid over his working career? Probably not!

If you are curious as to how the 2016 CALPERS fund seems to come up about $18 billion short, that is the difference between Net Investment Income and Retirement, Death & Survivor Benefits paid.  No matter how one views the data current working members seem not to be saving but funding retiree benefits.

A simple and first reform could be this.  Pensions, public or private, separate funds between retired and working members.  If retirees must be paid based on their contributions and interest earned only then any abuses where retirees could collect more than contributed will be visible immediately.  The only way existing workers can have any hope of collecting what they contribute is to not fund existing retirees.

Back to actions, as in the title.  The pension crisis crosses all political parties, genders, and races equally and without discrimination.  It is not naiveté to expect the American government to work as intended.  Doing nothing will not work. Neither will loans.  American pensions require a national bailout and reforms, now.  There is sufficient money on the table but it must be allocated now.

I will not support a party or person.  But I do know that Representative Marcy Kaptur (OH) is interested in our pension crisis.  I have personally met with her staff and find them responsive and genuinely interested in working to improve conditions for Americans, a rarity in D.C.

Restoring pensions is the easy bit, funds are available; funds, not loans.  The hard part is to get my fellow countrymen motivated to take action.  I know that if a respected member of Congress gets five or ten thousand postcards on any subject Congress will take notice.

Tough Love, you are my largest critic.  I believe you are wrong on all you say. I do not find wisdom in your words.  You have lost faith in America and are defeated.  What will it take to have you send an email to Representative Kaptur: “you are not my representative but are interested in pensions, as am I.  I support Restore our pensions and ask you to do the same. Signed Tough Love”

What can I say to motivate my defeatist critic?  Will you, and any other reader, take five minutes to send a post card?

Tim Alexander
Triune
805-502-4943
Tim@triunegfs.com

24 responses to this post.

  1. Posted by skip3house on December 7, 2017 at 1:24 pm

    Explains some of the troubles. Mention how we got into this, and how we can fix it, quickly? What of employees responsibilities to believe ‘promises, not actual funding’?

    Reply

    • Posted by Triune on December 7, 2017 at 7:35 pm

      Hi-My name is Tim Alexander and I am an economist. I have explained some of your questions in earlier posts and I am working on more publications now.
      The short and simple is that in the late 1990’s we had banking deregulation. As a nation, we allowed banks to do more “stuff” (that is an economic term :-)). But we neither increased our banking oversight, nor monetary policies. A few years after this, the Federal Reserve, in the name of Monetary Policy, began the single largest interest rate drop in our history. Then after a few more years, the single largest consecutive rate increase, in our history. On hindsight, the Federal Reserve was working on very outdated economic theory.
      Banks, hedge funds, and pensions require that as money comes in, the money must be invested. These investors need stability of interest rates, which the Federal Reserve failed to deliver. When pensions need a minimum interest rate to pay benefits, and rates fall well below such a minimum-requirements, the pension cannot pay benefits. So, pensions stop making prudent, traditional investments, and gravitate to very high-risk investments, such as sub-prime loans.
      A tremendous loophole exists in government accounting standards, and that is the rates and unfunded portion calculation, allowed to be reported. The loophole allows computation of the unfunded portion at a rate that is fictitious. You must read the entire audit report to understand the position of any given pension.
      I neither support of condemn any type of pension, public or private. I know all are equally in trouble.
      I mention my sister and her family; this crisis is personal to me and my family. We bailed out banks, so why not pensions?
      The pension crisis is multi trillion-dollar problem. In another prior writing, I mentioned the California Teachers Pension dilemma. For 2016, contributions increased by about 40% or by $733 million dollars, but the loss was in the $25 billion range. Can you afford a 40% increase in your pension contribution? Given current trends, this teachers pension will fail. It is collecting some few additional pennies while bleeding dollars. Also remember we have had economic expansion for many years now, and look how poorly pensions fair under the best circumstances.
      Based on current trends and reasonable projections, the teachers pension will fail. They do not need new loans but new capital. One estimate is that to save CA teachers pension, the average taxpayer would pay about $37K per year; unrealistic.
      The Federal Reserve announced they would sale about $4.5 trillion dollars worth of securities. Guess what happens to the money? It goes to Congress for spending. I simply say we reserve that money for pension relief and reform.
      From the nature of your questions, may I guess you have little formal financial or economic training? This is an observation. I am working on some publications that will more fully explain my positions. I prefer not to write deep in theory or terminology, I need Americans to understand my work.
      Would you be willing to reach out to me either by phone or email? I think you would be the perfect person to proof read my next work.
      Thank you for your questions.
      Tim Alexander
      Triune
      tim@triunegfs.com
      805-402-4943

      Reply

  2. Posted by Tough Love on December 7, 2017 at 2:27 pm

    Quoting …………

    “Tough Love, you are my largest critic. I believe you are wrong on all you say. ”

    Tim, putting aside that you have not identified any substantive credentials that justify calling yourself an “economist”, it’s your position on this issue (a “bailout”) that I strongly disagree with. And, perhaps you opinions are colored by the fact that (as you stated above) close family members are Public Sector participants in such Plans (specifically, CalPERS).

    Rather than rehashing our prior back and forth commentary, I suggest ……… especially because this Blog focuses on NJ’s pensions problems …….. that you carefully read the just-published final report of the New Jersey Pension and Health Benefit Study Commission. You can find it here:

    http://www.state.nj.us/treasury/pdf/NJPenBenReport.pdf

    Their report does not recommend a “bailout” of any form (including one from the Federal Gov’t). It sticks to appropriate and REALISTIC options.

    Unlike you, the member of this commission ARE real experts and described on NJ’s Dep’t of Treasury website as follows:

    “The panel of experts are tasked with thinking big and being bold when it comes to developing recommendations for how New Jersey can create a sustainable retirement and health benefits system. The Commission’s charge is to think long term and outside of the box when it comes combating these ever growing entitlement costs. ”

    Their bios follow:
    *****************************************************************
    Thomas J. Healey, CFA, Partner, Healey Development LLC, former Asst. Sec. of the US Treasury for Domestic Finances under President Reagan. Mr. Healey will coordinate the work of the Study Commission.

    Tom Byrne, managing member and founder of Byrne Asset Management; vice chairman of the New Jersey State Investment Council
    Raymond Chambers, philanthropist, founding chairman of the NJ Performing Arts Center

    Leonard W. Davis, CFO, SCS Commodities Corporation, manager of private equity, technology, and natural resource companies

    Carl Hess, Managing Director of The Americas for Towers Watson and former Managing Director of Towers Watson Investment business

    Dr. Ethan Kra, Ph.D, Ethan E. Kra Actuarial Services, specializing in analyzing economic and accounting implications of financing strategies and vehicles for employee and executive benefits

    Ken Kunzman, Partner, Connell Foley, co-Counsel since 1978 of the Pension and Welfare Funds for Locals 472 and 172 Heavy and General Laborers Fund of New Jersey

    Larry Sher, October Three ConsultingPartner, consulting actuary and member of the senior leadership team for a full service, actuarial, consulting and technology firm that is a leading force behind the reemergence of defined benefit plans across the country
    Margaret Berger, Mercerconsulting actuary and Principal for the Retirement Practice of a global consulting leader in talent, health, retirement, and investments, with specific expertise in defined benefit plans, nonqualified plans and retiree medical and life insurance plans

    Raj Tatta, Retired Senior Partner, PricewaterhouseCoopers LLP, with emphasis on being the key partner for Human Resource Services. He brought his skills to the Global Fund to Fight AIDS, Tuberculosis and Malaria with restructuring their Human Resources’ policies and procedures.

    Reply

  3. Posted by Tough Love for tough love on December 7, 2017 at 3:24 pm

    Well well well
    How unfortunate we all are that tough love decided to rejoin the commentsphere of this echo sphere of a blog. We all know tough love is okay with not paying the pws the remainder of their already earned wages (now tough love, you and I love to discuss how you’ve already elected your reps who ok’d the people contracts and that you’ve never run yourself). We all also know you have know qualms about abrogating contracts as long as it only applies to pws. How sad and angry. More of the same discussions-tired and angry based-right? Anyway, even though the pensions represent already earned wages and the courts and supreme prescient all agree that monies (not how much) are due…question is how to inter generationally do it in a fair way, which really means everybody pays towards the whole. Expect new revenue sources to appear. Expect the pws to be moved onto the OC exchanges and the savings diverted to the pensions ( no court precedent about the state having to pay for healthcare-even though it’s in the contracts they signed-there are $0 put aside for healthcare). Anyway just words. I’m sure tough love will not herself up and provide some same ole terse response justifying her position as okay (as long as they take from some me one else-not her). Same sad stuff.
    Tough love for tough love

    Reply

    • Posted by Tough Love on December 7, 2017 at 3:51 pm

      You (likely one benefiting from the current structure) throws in everything EXCEPT that the only reason Public Sector benefits are so ludicrously generous ……………yes, 2 to 4 time (4 to 6 times for safety workers) greater in value upon retirement than those of comparably-situated (in wages, years of service, and age upon retirement) Private Sector workers ……….. is because your unions have BOUGHT the favorable votes of our self-interested Elected Officials with BRIBES disguised as campaign contributions and election support.

      There is ZERO justification for Taxpayers to “fund” this theft. The ludicrously excessive promised pension & benefit should instead be VERY materially reduced.

      Reply

    • Posted by Triune on December 7, 2017 at 6:51 pm

      Tough love for tough love-
      your screen name makes me laugh just as reading a volcanic eruption of tired hot, angry gas. Could you imagine what would happen if that grumpy energy was channeled into a productive efforts?
      There is a great deal of back and about the NJ State pensions. It is time I begin reading the annual report. I have noticed your name sake seems to take what is spoon fed rather than reading. I will get back to you with what I find on the NJ State Pensions. It is time I read for my self.
      Tim Alexander
      Triune
      805-402-493

      Reply

      • Posted by Tough Love on December 7, 2017 at 7:30 pm

        Quoting Tim A. …..

        “There is a great deal of back and about the NJ State pensions. It is time I begin reading the annual report. ”

        Gee, I I would expect that true “economists” read relevant financial Reports BEFORE commenting …….. lol

        Reply

  4. Posted by TL for TL on December 7, 2017 at 7:27 pm

    Tim
    I appreciate the feedback. After the same conversations wit TL over and over and over and over-I quit a while ago. Sorry if I droned on. It’s awesome you want to educate yourself. Read a number of annuals myself when they were posted. Now that’s dry! Or if the questions of our time is how we take care of the current generation of elders and how kids today take care of their parents-especially with fewer social support structures available. The pension issue is part of the broader tug of war between labor and capital that’s been waged over the past 150 years and whose pendulum has swung back over the past 25-45 years. May you live in interesting times and enjoy interesting conversations
    Best
    TL for TL

    Reply

    • Posted by Tough Love on December 7, 2017 at 7:33 pm

      Quoting ……….. “It’s awesome you want to educate yourself.”

      Yeah, it sure is “awesome” that an “economist” would want to do THAT (educate himself).

      Reply

      • Posted by Anonymous on December 7, 2017 at 8:38 pm

        As opposed to just making stuff up as you go along.

        Reply

      • Posted by Anonymous on December 7, 2017 at 8:43 pm

        As opposed to someone claiming to know it all. Most educated individuals know learning is a journey not a destination. Such narrow minded unbending suppositions are DOA!

        Reply

        • Posted by Tough Love on December 7, 2017 at 9:25 pm

          And some people have learned more-than-enough ALREADY to understand/recognize the decades-long financial “mugging” perpetrated upon Private Sector taxpayers by the insatiably greedy Public Sector Unions/Workers and the in-the-Union’s-pocket Elected Officials who (in exchange for campaign contributions) granted these ludicrously excessive pensions & benefits.

          Reply

    • Posted by Triune on December 8, 2017 at 10:57 am

      Hi, I am in the office now. As you can imagine, I have an existing practice, and allocate my time accordingly. I cannot be an expert in all pensions, at once, apologies for that. Once I hit send, I will be reading five or ten NJ pension annual reports. I am so impressed by the first commenter of this piece, skip3house, that I will dedicate my new writing to them, today?
      The pension crisis is a passion for me. I am certain the easy bit is adding new capital and reforms. It is the hard bit that is causing me grief. Our pension crisis, relief, and reforms is not about intellect or reason. It is not about fact-just look at the back and forth banter. It is all about emotions; commenter states emphatically; “I claim the moral high ground because I AM ALWAYS RIGHT!”
      The hard bit is to find a way to dial back emotions and increase reliance on fact, intellect, and reason. Have you ever noticed that when a volcano vomits hot gases, it is all emotion and intellect? Have you ever taken the time to examine comments of my most angry critic under the light of reason? Comments make no sense and bounce back and forth faster than the Millennium Falcon dodging Tie fighters. (Apologies for my occasional use of strict economic terminology.)
      Stay tuned! And never be afraid to reach out by phone or email, any time.
      Tim Alexander
      Triune
      805-402-4943
      tim@triunegfs.com

      Reply

      • Posted by Tough Love on December 8, 2017 at 1:40 pm

        You certainly missed your true calling ………. a preacher.

        Reply

        • Posted by PS Drone on December 8, 2017 at 2:39 pm

          Yes; it is certainly not economics or any rational input vis-a-vis underfunded defined benefit pension plans.

          Reply

        • Posted by Triune on December 8, 2017 at 3:46 pm

          My name is Tim Alexander. My bible is very important to me, within I find wisdom and inspiration. I am motivated by another great economist. He said never let theory overshadow compassion, the highest good. This economist I admire is Jesus Christ.
          I have no interest in your or any man’s souls. As an economist, I am interested in their belly. I will not tolerate seniors diving in my dumpsters for food.
          I travel the nation and have randomly pulled into a diner in TN, OH, MI, WI, and the list goes on. I have sat next to a terrified black man, a retired father in TN, teamsters in MI, and the list goes on. When a man worked his whole life, being a good citizen, and his pension is gone, how much advanced theory will he listen to? Do you think he wants to hear of elasticity, volatility, or other excuses, no.
          Do you have any idea how pitiful you look when you snark and argue in the comment section? I am reminded of two men arguing the proper positing of a smoke detector while the house is on fire, clueless of how foolish they appear.
          I am not here to preach or save souls, just bellies by saying we can Restore Pensions (with capital and reforms). I think it great you have your angry, wrong opinions. I hope they keep you warm at night and your cupboards full.
          My name is Tim Alexander and I am an economist. I am working to solve problems. I am trying to take my message to Congress, and looking for some few people to help me get there.
          Tim Alexander
          805-402-4943
          tim@triunegfs.com
          PS-so far one reader has reached out to me via email-yeah!

          Reply

          • Posted by Tough Love on December 8, 2017 at 4:00 pm

            Do you realize that those who you wish to become your clients Google those who they may consider hiring (e.g., Triune, meaning you)?

            The more you post, the more you sound like a fruitcake.

    • Posted by Triune on December 8, 2017 at 11:40 am

      Thank you for your blessing. I do live in interesting times, and we are having interesting conversations!
      I am a Capitalist. But not a pure capitalist, such as Freedman. When he speaks of the magic equilibrium between supply and capital, this is Tinker Bell, fairy tale nonsense. How much history need to be observed to realize unrestrained Capitalism leads to abuses, including monopolies and oligopolies. Moderate restraint in Capitalism will always lead to an efficient economy.
      Do you like riddles? Answer my riddle-how capitalism will always end in zero employment, and why should this be supported?
      If you want an answer, send an email.
      Tim Alexander
      Triune
      tim@triunegfs.com
      805-402-4943

      Reply

  5. Posted by TL for TL on December 7, 2017 at 9:09 pm

    Tim,
    The website tied to triune isn’t linking on Google-it’s odd. You may want to see what’s going on triunegfs
    TL- so refreshing to know you haven’t changed…still so angry
    I’ll leave you to keep yelling into the echo.
    John-while I appreciate the existence of your site as an aggregator, your presentation bias takes away from everything your site could be.

    Reply

    • Posted by Tough Love on December 7, 2017 at 9:28 pm

      While I do recall responding to TL for TL once or twice in the past, if you and I have exchanged comments many times before, you must have been using a different handle. What was it ?

      Reply

      • Posted by Anonymous on December 8, 2017 at 2:05 pm

        Same as yours for the year of the hissy-fit… Anonymous.

        Reply

        • TL has been here spewing the same old hate….. over and over. Nothing has changed. Thankfully she has no teeth and it’s just obviously a jealous rant. Copy paste material. Go read the blog from many years ago. She types the exact same venom. Ugh. It’s why I left, only to find she left. But alas, she is back.
          What I do know…. come January…. Public Sector workers will finally have a seat at the table. Christie and Tough Love will vanish into the void. The PFRS will take over their fund. Much of Ch 78 will be changed to benefit the workers, as it should be. All the bills that Fatboy vetoed will now pass. And this blog will live one, but I’m sure with much more anger and jealousy.

          Reply

          • Posted by Tough Love on December 9, 2017 at 1:27 pm

            Venom ?How many times have I called for “EQUAL, but not better” Public Sector compensation?

            A few hiundred?

            Sure, YOU have a problem with that because as a Pubic Sector retiree, your a “moocher”.

    • Posted by Triune on December 8, 2017 at 11:08 am

      Thanks for the observation on my web site. I have had the same one for years, I have just taken it down and am in the process of rebuilding it now.
      My primary business is to advise banks on the structures of commercial loans. These can get very complex.
      After our recent depression, I wanted to do more, so I became active in new banking rules and regulations. If you are interested, try googling Basel III, CECL, or Stress Testing. I am delinquent on sending out comments on the European Central Bank Stress testing there. Rather a funny story here. Stress testing was performed on most but not all of the largest banks. Then the results are touted as proof the European banking system is fine. But adding the few skipped banks, pulls the stress test results down. Credible economists are very critical of the results. These are some of my current projects I am working on.
      As I have previously said, I live in an northern suburb of Los Angeles, called the San Fernando Valley. As time goes by, I see more and more people in my dumpsters, looking for food, not recyclables. I am seeing more and more seniors in my trash. THIS IS NOT ACCEPTABLE IN AMERICA!
      We can do better and I am working on that aim.
      Above, I cite the office of Representative Mary Kaptur. I need to check with her staff to verify I can cite her work.
      Wow, busy day. Pensions, stress testing, and I forgot sharing thoughts on CECL.
      Now you know about me. Got to dash, I need more caffeine and to peddle faster.
      Tim Alexander
      Triune
      805-402-4943
      tim@triune.com

      Reply

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