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:
Though it might not be through Bridgegate first.
Yesterday Christie announced a National Finance Leadership Team for his 2016 Presidential Campaign. Let’s see how you get on that list.
It is difficult to believe anyone reading this blog would still support Chris Christie after watching the youtubes below from his latest town hall meeting in Myrtle Beach, SC. If you were inclined toward Christie because you…
- oppose the power of public sector unions there is Walker;
- want to hear what is supposed to be straight talk there is Trump;
- are part of the Bush-donor machine there is a Bush; or
- are a public employee (enough said).
Now for the rest of you. Do you like your jobs?
I finished California Dreaming and the suggested solution for their public pension crisis is similar to what Christie is looking to push in New Jersey:
- Freeze the current Defined Benefit plans
- Set up 401(k) plans with profit sharing for everybody
- Use the savings to fund the massive shortfalls developed under the Defined Benefit system
My problem with that (in both states) comes down to:
- There won’t be any savings. Contributions for the current Defined Benefit system have been ridiculously understated (which is the main reason for the massive shortfalls that developed) so a Defined Contribution plan that provides substantially lower contributions would still cost about the same for governments;
- The transparency of Defined Contribution plans would make it a tough sell to public workers; and
- Private sector workers were fooled into accepting 401(k) plans in the 1980s and look where they are.
In any case it was a useful read and below are notable excerpts:
I am halfway through this book and it works as a good primer on the California pension system though the alarm the author seeks to blare is lost on this New Jerseyan. With plans that are 79% funded officially (64% under Moody’s rules) with fairly steady contribution sources from those localities not in bankruptcy Lawrence J. McQuillan first needs to hammer home the 80% Pension Funding Standard Myth before proceeding with his vivisection. No such detour is necessary when discussing a system at a 32.6% funded ratio.
There will be selected excerpts from the book in the next blog but, for now, the sub-chapter on pages 58 through 61 on “The Role Played by Accountants, Actuaries, and Auditors in the Downward Descent’ is basically what this blog is all about so here it is in its entirety:
Charles Wowkanech, president of the New Jersey State AFL-CIO, had an op-ed this morning where he offers what he sees as a “realistic path toward meeting N.J.’s pension obligation” with a four-pronged approach that he thinks would raise $1.6 billion annually as follows:
- $600 million from not paying fees for alternative investments
- $87 million from making the pension payment 11 months earlier
- $600 million from higher taxes on people making over $1 million a year
- $300 million in unanticipated revenue
He is dangerously wrong on all counts and, if his suggestions were implemented, the likely result would be:
- Continue reading