Governor Corbett will be scorned, ridiculed and vilified by the government unions and teachers across Pennsylvania when he reveals his plan to save PA taxpayers from seeing their taxes go sky high to pay pensions to retired government workers that are higher than the average pay of a teacher with ten years experience. This story sums it up perfectly. Previous numbskull governors (Tom “color code” Ridge – a Republican & Fast Eddie Rendell – a Democrat) promised far more in pension benefits than they could ever deliver and compounded that by not funding the pension plans. They strolled off into the sunset, writing books and going on TV shows, leaving Corbett with a big shit sandwich.
Corbett is attempting to have an adult discussion about math and the impossiblity of honoring the pension promises that have been made. If he is courageous and stands his ground, he will be thrown out of office next year. This is how we run this country. Anyone who speaks the truth has no chance of being elected to public office.
Of course the numbers they are discussing are far worse than they are willing to admit. All of these state pension plans are using an 8% annual return assumption. They are invested in bonds and stocks. The chances of a long-term annual return of 8% are ZERO. Their bond investments are likely to return 0% or worse with rates between 1% and 3% today. Stocks are priced to deliver a 10 year return of 4.5%. The PA pension funds will be lucky to achieve a 4% long-term return. Using this rate, the unfunded liability goes up by billions.
But let’s just shoot the messenger and elect someone who tells us what we want to hear. So it goes.
Corbett hosts pension crisis meeting for media
By JENNIFER LAWSON
jlawson@thereporteronline.com
Thursday, January 10,2013
HARRISBURG — North Penn School District and Souderton Area School District are both trying to balance their budgets for the next school year, but a big expense is their payments — in the multimillions — into the Public School Employees’ Retirement System.
To continue funding PSERS and avoid cutting programs, the districts are both considering applying for exceptions that would allow them to raise property taxes beyond the 1.7 percent increase normally allowable by law.
It’s a problem across the state, and it’s been brewing for years.
In a sit-down meeting with members of the media in the governor’s mansion Thursday, Gov. Tom Corbett called the pension crisis “a tapeworm in the budget” and laid the groundwork for the pension reform plan that he will announce in his budget address on Feb. 5.
“People before me didn’t do what they were supposed to do,” he said. “People are getting laid off because there’s not enough money to pay the pensions and pay them. That’s the point we’re at.”
Pennsylvania administers two state pension systems: The State Employees’ Retirement System (SERS) handles retirement systems for most state employees; the Public School Employees’ Retirement System (PSERS) manages the retirement system for all public school employees.
Combined, these two systems comprise more than 815,000 total members and pay out nearly $8 billion annually in retirement benefits to more than 300,000 retirees, according to Budget Secretary Charles B. Zogby.
The pension systems are funded through a combination of employer contributions, employee contributions and investment earnings. Of these three, Zogby said, SERS and PSERS rely overwhelmingly on investment returns as the primary source of funding, with 71 cents of every dollar, or 71 percent, coming from investment earnings.
The commonwealth and independent entities pay all of the employer contributions for public employees in the SERS system. For PSERS, the commonwealth and local school districts share the employer contribution costs. The percentage varies — the commonwealth pays at least 50 percent as a general rule, but the amount increases based on the financial conditions of the district. In the poorest school districts, the state pays more than 75 percent of the cost.
In the current fiscal year, Zogby said, the state’s employer contribution costs for both systems are projected to total more than $1.5 billion — $677.4 million for SERS and $856.1 million for PSERS.
Both SERS and PSERS use a formula to determine a fixed amount to be paid in retirement benefits, taking into account years of service, final average salary and a multiplier of 2 or 2.5 percent.
“It’s ultimately the taxpayer that bears the risk of the plan,” Zogby said.
When investment returns go up, the state’s employer contribution rate declines. When investment returns drop below expectations, the state’s employer contribution rate increases to cover the entire shortfall.
Zogby gave an overview of how Pennsylvania ended up in this predicament, saying it was a combination of former administrations along with economic forces.
Retiree benefits became more generous “during the go-go ‘90s,” Zogby said, when the state had, on paper, assets that exceeded more than 100 percent of liabilities. The stock market was booming, “and a decision was made to increase benefits.”
These benefits didn’t require a proportional employee match, resulting in nearly a decade of underfunding by state government and local school districts, as well as investment returns that failed to meet expectations.
“It was actions by previous governors and previous general assemblies that provided benefits that weren’t paid for, and were intentionally underfunded,” he said. “They were supposed to put in x and they put in y which was less than x, kicking the can down the road and pushing it to future generations.”
“A slew of bad legislative decisions” were passed in 2001, 2002 and 2003 to address the problems, Zogby said, but the efforts didn’t go far enough.
“What followed over the next seven years was 5.9 billion in underfunding of contributions. We were putting in 60 percent of what we should have,” Zogby said. “The cherry on the sundae was investment earnings that didn’t meet contributions. The 2000s are referred to as ‘the lost decade,’ a decade of no returns. You can see the damage that it imposed on the pension system.”
These past legislative decisions expanded retiree benefits without the funding to sustain them. Plus, there was nearly a decade of underfunding by state government and local school districts, combined with investment returns that fell short. So now the state is left with a large unfunded liability, or debt, to the tune of $41 billion, and employers are being forced to contribute more to fund past obligations.
As a result, Zogby said, these costs are taking a greater share of available money, threatening to grab funding away from core governmental programs and services. For 2013-14, this means having to cut as much as $500 million to balance the budget.
Although Corbett didn’t describe his proposal to help solve the problem, saying he would go into detail in his budget address on Feb. 5, he said tax increases are off the table.
“I don’t think you can raise taxes enough to fix this without doing other stuff,” Corbett said.
There are no plans to harm current retirees by cutting their benefits, he said, and he also intends on respecting current state and public school employees. However, changes to benefits might have to be explored.
Other states have also faced this challenge, Zogby said, and Pennsylvania might borrow some ideas from them.
Possible solutions include increasing employee contributions, increasing retirement age, changing how the basic pension formula is calculated and giving incentives to longtime state and public school employees to retire without penalty.
The Corbett administration and general assembly will work with various stakeholder groups and the pension systems to come up with a workable plan on how to reform the system over the next few months.
“The vast majority of the house on the Republican side are new since all of this took place,” Corbett said. “Even on the senate side, the question is, what are they going to do? Can they sit with us and can we reach an accommodation?”
KaD says:
I ended up on the wrong side of a bad case of ‘kill the messenger’ this week. On another website there was a discussion about the gang problem in America and I posted this stunning statistic:
2010: Danny Ubario, Lancaster Shelter Manager (Los Angeles County) – Given the Key to the City by Mayor R. Rex Parris after helping rid the city of more than 1,100 dangerous pit bulls. Ubario’s sweep of pit bulls followed the 2009 enactment of a vicious dog ordinance by the Lancaster City Council. Since its enactment, violent gang crime — which includes homicide, rape, robbery, and assault — dropped a staggering 45%
45% is an astonishing number, no matter how you slice it. I can only imagine better results if they tried this in a bigger shithole like Detroit.
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13th January 2013 at 12:19 pm
BamBam says:
KaD
Not trying to sound thick, but how do pit bulls relate to the other crimes? Or is pit bulls slang for something?
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13th January 2013 at 12:36 pm
Muck About says:
This problem will work its’ way up to national levels with or without dead messengers.
It’ll start local and climb up to State, then national as pension funds go broke as ZIRP kills each and every one.
We are dead walking and don’t even know it. I’m thinking of a good natural garden instead of a front yard which will piss off the HOA no end. It’ll use far less water than grass and have a good ROI/ROE of which grass has neither.
I built my sweetie a mini-garden (150 ft. sq. or so) a few years ago and the total veggie yield is up over 500 pounds – from A to Z – plus we compost all the waste and recycle it into the mini-patch of no-longer-just-sand.
Just begs to be expanded into the front yard but my sweetie isn’t convinced about doing battle with the HOA.. All I’d be doing is getting a head start on a lot of other people by doing it now! What? Two- maybe- three years and these gardens will be popping up like weeds and by then I may be dead.. Oh well, then I won’t need a garden except to recycle me in..
MA
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13th January 2013 at 12:38 pm
Administrator says:
How you feeling Muck?
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13th January 2013 at 12:44 pm
KaD says:
BamBam-I think it’s obvious from that story that pits are the number one choice of dog breed for lowlifes, criminals, and sociopaths. (That’s not to say everyone who has one is a lowlife, criminal, or sociopath). Why? Because pit bulls are the number one breed for canine homicides (killing people), serial attacks, rampage attacks, and failing a second chance after killing or mauling a person or their pet: http://www.dogbitelaw.com/dangerous-vicious-dogs/serial-attacks-and-rampage-attacks.html
People get these dogs because of and for their viciousness. Twenty kids were killed at Sandy Hook. In 2012 37 Americans were killed by dogs, 25 of them by pits and pit mixes, with a few more by related breeds like bull mastiffs. Of the dead 15 were children, and 10 of those killed by pit bulls alone: http://www.dogbitelaw.com/dangerous-vicious-dogs/canine-homicides-july-2006-to-present.html
They use the dog as a weapon, and a fairly effective one. In England one pit bull put 5 police in the hospital: http://www.guardian.co.uk/uk/2012/mar/22/dog-mauls-five-police-officers
In most instances it takes several shots to kill a pit bull because they were bred to have a high pain tolerance; this instance it took 12-15 shots: http://www.newhavenindependent.org/index.php/archives/entry/pit_bull_attack_draws_crowd_cop_gunshots/
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13th January 2013 at 1:34 pm
Eddie says:
I’m no fan of pit bulls, but I fail to see the tie-in to a drop in gang crime. Correlation is not causality. Just sayin’.
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13th January 2013 at 1:37 pm
KaD says:
Muck, your gardening is admirable and this is EXACTLY what needs to happen all over. But fighting with the HOA is ugly. You’d probably have an easier time of it if you and a few friends run to get voted in and amend the law or just disband the HOA entirely.
http://www.naturalnews.com/038646_home_gardens_fines_Orlando.html
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13th January 2013 at 1:39 pm
Eddie says:
A front yard garden is an excellent idea. Somebody in the neighborhood has to be the first one.
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13th January 2013 at 1:39 pm
KaD says:
Eddie, read that statistic again. A 45% drop in crime. Violent crime. Can you name me anything else that would provide a 45% drop in violent crime? Correlation or causality or whatever, it’s a huge result.
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13th January 2013 at 1:41 pm
IndenturedServant says:
Hey Muck,
Perhaps you’ve already tried or the HOA reputation precedes them but why not bring up the topic at their next meeting? You could bring about a larger awareness of what is coming to those who don’t know and there may already be others who would like to do what you are proposing.
I’ve been thinking it would be great to get my neighbors involved in a variation on the community garden concept that might make it easier for everyone to participate. Instead of one large communal garden, each resident grows just one or two different vegetables in their entire home garden. Each resident shares the vegetables equally and agrees to rotate crops every year to minimize disease and soil depletion. I figure it would be easier for each resident to maintain a garden at home as you could more easily spend five or ten minute periods of time each day on maintenance instead of dedicating larger blocks of time to a communal garden.
Advantages would be enormous and incalculable! I’d even allow those who did not want to contribute to share in the bounty! It might just bring them around to participating. Gardening knowledge could be shared along with labor for prepping a garden. Food costs would like decrease. You’d get to know your neighbors better and people who know each other, subconsciously look out for each. Crime and vandalism would drop. Residents could hold harvest party’s where excess veggies are canned, dried or prepared for freezing. Local gardening clubs and county extensions hold regular gardening classes and services including soil testing and advice on disease diagnosis and eradication. An idea like front yard gardens on a nationwide scale could even reduce or eliminate hunger and malnutrition in the country.
I think something like this could really lead to some profound changes in our communities and nation at large. Meaningful interaction between individuals could lead to some great things.
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13th January 2013 at 2:04 pm
Eddie says:
“Can you name me anything else that would provide a 45% drop in violent crime?”
Surging gas prices making drive-by shootings less affordable?
Criminal’s grandmothers getting SSDI, making stealing unnecessary?
A spike in abortions performed for single mothers in the county 16-20 years ago?
Homeowners using AR-15 instead of 911?
The thing is..it could be ANYTHING. To suggest it’s a direct result of a dog control ordinance seems like a bit of a reach to me. ‘Nuff said.
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13th January 2013 at 2:15 pm
card802 says:
This nation wide public pension problem will accelerate faster in the next year or so as soon as interest rates start to rise.
On one hand I’m happy that the promises made will have to be broken as will the power of the government. But then I’m fearful of what the government may do in the interim to fulfill those promises.
Confiscation of personal retirement plans? Taxes on net worth of personal retirement plans? Some way the little guy who is just trying to mind his own business is going to get screwed over.
Speaking of minding your own business and growing a garden. My yoga instructor was fined up the ass for growing a garden in her yard. The local gov considered her garden weeds as most of her plants were herbs and other wild edible plants. She had to tear it out, she’s not sure if she will plant anything or not. She does not want a yard with grass, but will be forced to comply or face more fines.
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13th January 2013 at 2:16 pm
Gean Calvin says:
Violent crime drops 2% in Detroit as housewives turn in spears.
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13th January 2013 at 3:25 pm
Ron says:
The wages and pension plans offered in many places make no sense.The math dosent add up.
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13th January 2013 at 3:30 pm
AWD says:
The POS unions (for teachers and government employees) own the democrats. The democrats own the government. The government will give Penn., Illinois, California and every other socialist state a bailout, the pensions will be paid. The economy and government will collapse, the dollar will devalue by 50-75%, the pensions will be worthless anyway.
Doing the same thing over and over and expecting different results (now two definitions: insanity and government).
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13th January 2013 at 3:38 pm
card802 says:
The government has to bail out the public pensions, they are guaranteed to be paid for by the PBGC. and last year the Pension Benefit Guaranty Corp, took over 134 underfunded pension plans.
And where does the government get it’s money from again?
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13th January 2013 at 4:19 pm
JIMSKI says:
Agree with card. Great way for the federal government to start the confiscation of retirement. A new bond scheme promising 8% but you have to turn EVERY DAMN DIME over to them AND keep up the payments to them. That will give them enough funds to run this mother another month or two.
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13th January 2013 at 5:22 pm
llpoh says:
As I have said, the government and the leeches and the spenders and the non-productive and the govt employees and the unions all have a fallback plan – they intend to take evrything the productive have produced and saved. After they have done that, and there is no more for them to take, the reset will happen.
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13th January 2013 at 5:31 pm
card802 says:
I think if the market suffers another decline this summer (or whenever) people will demand their government “Do Something” and the something will be converting personal retirement plans into a government plan. As Jimski states, it will be totally taxpayer funded, which will never be enough to fund, guaranteed to return a set amount, which it never will, and it will also be guaranteed to fail.
It always works this way doesn’t it? We demand and government complies, in our best interest of course.
Save me a spot wherever you’re heading Llpoh……..
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13th January 2013 at 7:13 pm
llpoh says:
Card – will do!
When I was a kid, all of my friends had dreams, and every dream revolved around being successful at something – business, sports, education. Successful people were admired and kids aspired to be like them.
Today, the majority of people want to take from those that have been successful, as they have determined it is easier than actually being successful themselves. And in the short-term it will work for them., until those that have been successful either run out of assets to steal, or walk away so as to prevent further theft of what they have achieved. Then the collapse will come apace.
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13th January 2013 at 7:20 pm
TeresaE says:
Funny thing, my town just published – I received it Friday – their quarterly public school newsletter. The board is putting a ballot request to fund “improvements” at the schools, (and “relief” to the poor teachers whom average over $70k annually, PLUS benes) via a $195 million dollar bond issue adding “only” 2.2 mills to our taxes, thanks to the precious, needed, benevolent banks that will probably only fuck us hard for a generation or two.
They even provided a nice little chart that showed that we HAD to issue the debt because – you guys will love this – we have the LOWEST debt/tax for debt rates in the county. So, instead of taking our formerly (still crazy) prudent ways and learning to live with less (like those of us in the non-union world have to), they are going to issue a butt-load and DOUBLE OUR FUCKING DEBT!
Between my marriage and this fucking country, I’m at the end of my rope. Went to a gun show yesterday and heard multiple people – at a gun show, buying guns and ammo – saying the government “has to start somewhere” with gun laws.
Oh my gawd.
I’m just, well, nearly fucking despondent.
Can’t grow our own food, can’t refuse vaccinations, can’t enjoy an ounce of non-tracked privacy, can’t opt out of the constant erosion of our human dignity, can’t have accidents, can’t protect yourself or your family from armed thugs, can’t refuse to comply with any, all, and more coming, regulations, rules, laws and punishments, can’t get people to not be sheeple (and I now realize how rare it is for enough to wake up and rebel, history doesn’t show us good odds. Plus we have NEVER been more distracted and less in tune with the world and our own bodies as we are now, but I digress), can’t leave without being bankrupted, can’t smoke a joint, can’t find a good job, can’t sell the fucking house, can’t shake those awake that refuse to wake the fuck up.
Jeebus freaking cripes, we are 1000 fucking ways FUBAR.
I’m now to the point where I hope for solar flares and magnetic fields wiping out electricity so that the PTB have real problems that cannot be avoided.
I dream of going Galt daily. Sadly, it seems it is a dream I am nearly alone in having.
After yesterday I just don’t see any coherent movements, or even conversations, regarding reality in this world.
We only speak of those things that the government directs us to speak of, and everything else is dismissed as, “it can’t get like that, this is America.”
No it ain’t, and yes it can.
Thank gawd I’m a tough broad whom can’t leave my children alone, a lesser one would have stuck a soon-to-be-verboten handgun in her mouth and pulled the trigger.
And thank god for my children, if not for them I know I’d already be in some black hole prison being reprogrammed or disappeared permanently.
Happy Monday all, looks like I need to go and do anything else to lower my blood pressure again.
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13th January 2013 at 1:14 pm
crazyivan says:
Teresababy,
Divorce that bastard, sell the shit, load the u-haul with what will help and drive that son-of-a-bitch to Montana and come live with me.
So.
If you ignore this offer I will know well into the future that you are just again another whining wench.
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13th January 2013 at 3:02 pm
TeresaE says:
@CI, thank, would love to.
Problem is I can’t get my wee one out of the state. For now, my someday-to-be-ex (and I start interviewing for a new job within a couple weeks) has more money than I. Because I simply will NOT destroy my child to “win” in a divorce, I won’t, can’t and couldn’t, take her from him. Just because he is a part-time drunk, full time MSM led sheeple, doesn’t make him a horrible father and his daughter loves him.
But watch what you offer sir, it’s funny how life works out.
And, for now, I’m just looking for a job and then I find a small farm and go from there. Someday I’ll be free of this shithole state for good. Until then, thanks at least for responding.
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13th January 2013 at 3:20 pm
Chicago999444 says:
Trouble is, whenever the PTB have problems, we have much more. So don’t hope for the collapse of our tech civlization. It could happen easily enough as it is, and if it does, it will NOT be “liberating”.
To say the least.
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13th January 2013 at 3:41 pm
crazyivan says:
Does anyone EVER get laid on TBP?
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13th January 2013 at 3:53 pm
Llpoh says:
CI – not me. I gotta put the laptop away first.
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13th January 2013 at 4:01 pm
crazyivan says:
My point exactly llpoh.
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13th January 2013 at 4:31 pm
Kill Bill says:
Does anyone EVER get laid on TBP? -CI
I exist for the booby pics on TBP…izzat close enuff?
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13th January 2013 at 5:07 pm
Kill Bill says:
Oo Oo
There is one now
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13th January 2013 at 5:09 pm
Kill Bill says:
Lay me WordPress Just Lay Me You Whore!
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13th January 2013 at 5:10 pm
AWD says:
“I exist for the booby pics on TBP…izzat close enuff?”
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13th January 2013 at 5:10 pm
Kill Bill says:
Boobys
Not Ob’s
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13th January 2013 at 5:13 pm
Kill Bill says:
that son-of-a-bitch to Montana and come live with me. -CI
Montana…MONTANA??
Idnat where Dick Cheney is from??
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13th January 2013 at 5:16 pm
ThePessimisticChemist says:
@TeresaE – “Because I simply will NOT destroy my child to “win” in a divorce, I won’t, can’t and couldn’t, take her from him. ”
Divorces suck, no matter which way you cut it. Sorry its come to this point for you.
@crazyivan – “Does anyone EVER get laid on TBP?”
Not near as often as I’d like. I’m hoping our new house (get the keys on thursday) will remedy this issue.
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13th January 2013 at 5:27 pm
crazyivan says:
Dick Cheny called Wyoming home, much like Hillary Cuntin called New York home. These people don’t have homes, they have houses, and P.O. boxes. No, our congressional reps are of much higher quality.
http://www.youtube.com/watch?feature=player_detailpage&v=M5Y9X5ggxzA
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13th January 2013 at 5:28 pm
crazyivan says:
“Not near as often as I’d like. I’m hoping our new house (get the keys on thursday) will remedy this issue.”-tpc
Does this mean that us on TBP (after all that is what we were talking about) are going to be treated with a hidden web-cam broadcast from your new laundry room?
Helpful hint: Throw a couple of boots in the dryer and put it on high speed before everyone gets worked up. If you don’t own any boots, I suppose a couple of cinder-blocks would work as well.
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13th January 2013 at 5:41 pm
TPC says:
@CI ” If you don’t own any boots, I suppose a couple of cinder-blocks would work as well.”
I have plenty of both, actually. Which would work better?
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13th January 2013 at 9:48 pm