Posts Tagged ‘default’

More Downgrades To Come

If governments are allowed to break pension contracts because they don’t feel like paying the costs, then the bond holders are in the cross hairs too.

Richard – comment to Another Downgrade

According to documents filed this week by New Jersey defending the state’s refusal to pay a large portion of an already understated pension contribution, defaulting on bondholders was considered.  Page 4 of that brief makes that fact clear:

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Buying Actuarial Opinions

Never has the curtain of deceit in public pension funding been open so wide as in Detroit’s clumsy attempt to create an underfunding in their two pension plans within the parameters used by public plan actuaries for decades to create the appearance of quasi-solvency.   Detroit had been paying Gabriel Roeder Smith & Company (GRS) millions of dollars over the years to mask the true cost of pension liabilities accruing.  Then last May when they needed to have the plans be severely underfunded and unsustainable they paid Milliman, Inc. (Milliman) $350,000 for that opinion (proffered on June 4, 2013 with the general public getting it today) for both the Detroit General Retirement System (DGRS) and the Police & Fire Retirement System (PFRS).

Resist the impulse to wade through these jargon-laced reports.  They were not designed for anyone to understand.  They were designed to have their conclusions accepted without question.

I do not accept them and they raise four questions that are obvious once isolated.

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Pay Orr Else

Detroit is embarking on a novel (after step one) stratagem to disavow pension obligations that could catch on:

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Real Number on Detroit Pensions

The June 30, 2012 actuarial valuation report for the Detroit Police and Fire Retirement System is out.  The financial report for the Detroit General Retirement System is also out but the latest actuarial valuation for them is as of June 30, 2011 so, to make better comparisons, I start with the 6/30/11 actuarial report for PFRS also.  Based on these official numbers Detroit had one of the better funded public retirement systems in the country with a combined funded ratio of 91.4%.  However, as I have been doing for the New Jersey plans, here’s how I see  those numbers translating to reality:

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