Public sector pension funds: Not dead yet

[Derechos]

A new report suggests government union benefits won't be bankrupting states, after all

Remember that awful public sector union pension crisis that was going to bankrupt every state from California to Wisconsin? A little less Armageddon in the coffee, please. Reuters is reporting some interesting details from a new report by the National Conference of Public Employee Retirement Systems.

Public pension funds are experiencing a robust recovery from the historic market downturn of 2008-2009 -- reporting strong investment returns, growing assets and funding levels on track to meet obligations," said the National Conference of Public Employee Retirement Systems.

The group, the largest trade association for public sector pensions, surveyed state and local systems representing 7.6 million people and assets exceeding $900 billion.

It found that over the last year, funds have achieved an annual investment return of 13.5 percent, nearly double the 7.7 percent rate most assume. On average, said NCPERS, pension systems are 76.1 percent funded, meaning they can cover more than three-quarters of liabilities. Typically, pensions are considered fully funded when they surpass 80 percent.

http://www.salon.com/technology/how_the_world_works/2011/06/09/public_sector_pension_funds_rebound/index.html

[midnight]

1. K&R

[notesdev]

2. 80 percent is the new 100%

There's an idea, if actual actuarial soundness can't be achieved, just pretend the threshold is somewhere else.

Can anyone find substantiation to the assertion that "pensions are considered fully funded when they surpass 80 percent"? Seems to violate basic math and the definition of the word "full" (which implies 100%) in the English language.

[ChrisBorg]

3. In Ohio our public pensions had to prove that they were funded for 30 yrs out.

All 5 pension plans had to make changes in employee investment, retirement age and yearly increases.

[Derechos]

4. Krugman's take on rest of article

"Things aren’t perfect, by a long shot. But that crushing pension deficit, which everyone knew was going to bankrupt all state and local governments? Mainly a creation of right-wing propaganda. Are you surprised?

Leonard draws a wider conclusion:


But the changed financial outlook does underscore an important point that defenders of public sector unions have been making for several years: Judging the financial prospects of a pension fund in the middle of a historic economic crash is a dumb thing to do. As the economy improves so too will fund performance.

The lesson can be extrapolated to the larger challenges facing the federal government. The best deficit-reducing strategy is a growing economy that generates increased tax revenues. A misguided pivot to austerity, on the other hand, runs the clear risk of inducing slower economic growth, lower tax revenues and higher deficits.

But the bleeding must continue until the patient recovers!"

http://krugman.blogs.nytimes.com/2011/06/10/pensionscare/

[ProgressiveProfessor]

5. This is green eyeshade stuff and we should listen to the actuaries, not pols

nor commentators