Thanks for commenting. Sometimes I think no one is reading.
Here's more: State and local governments use an 8 percent annual growth estimate to figure how fast their retirement funds will grow, and therefore how much governments must contribute to meet pension obligations. The problem is, if the Dow had grown 8 percent per year since 1950s, it'd be 17,500- to 20,000 by now. All these pension funds are massively underfunded. Government bankruptcies, cuts in services, and higher taxes will be needed to meet these obligations that happen to be guaranteed by law in the majority of states.
If I remember correctly, Virginia and Maryland didn't contribute ANYTHING to government employee retirement funds this year though they were supposed to contribute hundreds of millions each. Most states and local governments are either contributing very little or not at all. They're passing the buck to future legislatures. Former mayor Richard Riordan says Los Angeles will likely be facing bankruptcy by 2012 due precisely to pension obligations.
I try to hit LJ once a day but, facebook is a little easier from the iPhone.
The legal obligations of the states and municipalities makes these obligations more onerous. It would be one thing to revise the current pension plans to a 401K system, limiting, government contributions. But, in areas where they are legally required to contribute to a pension...
California: $397 billion in unfunded pension liabilities for state workers and teachers (not counting many cities, counties, and municipalities). Also $62 billion in lifetime retiree healthcare benefits.
Illinois: Something like $115 billion in unfunded pension liabilities.
And most pension funds use 8% annual growth projections to calculate how much states have to contribute - so states have contributed very little. But if that 8% compounded annual growth of investment capital were true, the Dow of the 1950s would be some 17,400 to 20,000 today.
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Here's more: State and local governments use an 8 percent annual growth estimate to figure how fast their retirement funds will grow, and therefore how much governments must contribute to meet pension obligations. The problem is, if the Dow had grown 8 percent per year since 1950s, it'd be 17,500- to 20,000 by now. All these pension funds are massively underfunded. Government bankruptcies, cuts in services, and higher taxes will be needed to meet these obligations that happen to be guaranteed by law in the majority of states.
If I remember correctly, Virginia and Maryland didn't contribute ANYTHING to government employee retirement funds this year though they were supposed to contribute hundreds of millions each. Most states and local governments are either contributing very little or not at all. They're passing the buck to future legislatures. Former mayor Richard Riordan says Los Angeles will likely be facing bankruptcy by 2012 due precisely to pension obligations.
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The legal obligations of the states and municipalities makes these obligations more onerous. It would be one thing to revise the current pension plans to a 401K system, limiting, government contributions. But, in areas where they are legally required to contribute to a pension...
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Illinois: Something like $115 billion in unfunded pension liabilities.
And most pension funds use 8% annual growth projections to calculate how much states have to contribute - so states have contributed very little. But if that 8% compounded annual growth of investment capital were true, the Dow of the 1950s would be some 17,400 to 20,000 today.
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