government pensions – The Burning Platform

PENSION FIBS

There are only three possibilities regarding these pension obligations. You agree to let them double your real estate taxes, government employees agree to take cuts or the States declare bankruptcy and default on their promises. Which do you think will happen?

Chart of the Day

IL, CA, NJ, TX and PA Worst at Keeping Pension Promises

September 12, 2014: IL, CA, NJ, TX and PA are the five worst states at keeping their pension promises. These states continue to increase their pension debt instead of setting aside enough money to pay retired employees.

State	2012 Unfunded Pension Benefits Due	2013 Unfunded Pension Benefits Due
Illinois	$94.6B	$100.5B
California	$53.4B	$59.4B
New Jersey	$34.7B	$37.6B
Texas	$31.6B	$35.9B
Pennsylvania	$29.3B	$34.0B

· These States promise their employees pensions but do not set enough money aside to pay them

· Pensions should be fully funded yearly, since they are part of employee compensation.

· Future taxpayers will be responsible for paying for these debts – for services they never received

Government accounting rules allow these states (and others) hide much of their pension funding problem from public view. See Hidden Pension Debt: CA, IL, NJ, PA, TX 2009-2013 Check your state by selecting ‘Edit Chart Criteria’ below the chart, select your state, scroll down and ‘Generate Chart.’ READ MORE

TAXING THE POOR & ELDERLY TO DEATH, TO PAY BLOATED GOVERNMENT UNION PENSIONS

The morons running the state capitol of Pennsylvania – Harrisburg – already had to file bankruptcy due to their incompetent management of city finances. Now the brain surgeons running the city of Scranton have decided that dramatically raising taxes and fees on the elderly, poor population of Scranton will solve their budget woes. The government pension obligations haven’t even really kicked in yet. The required pension payments for government workers will skyrocket in the next three years. The real unemployment rate in Scranton is north of 15%. Businesses have closed. The population has declined by 7.5% since 1990. It is a decaying, dying city with only the college supporting the few remaining residents. The government drones running Scranton and other towns across PA are delusional if they think they can raise taxes and fees on aging and unemployed people with no income to pay the bloated pensions of government workers. Math is hard for idiots. Scranton will declare bankruptcy. Book it Dano.

Scranton Residents Plead for Bankruptcy vs. Higher Taxes; Different Than Detroit

City officials in Scranton Pennsylvania have ignored pleas from residents pleading for bankruptcy.

Instead, the city raised property taxes and trash fees nearly 60% and tripled rental registration fees. The city’s school district, which faced a $4-million deficit, raised taxes 2.4%. The City Council, which in 2012 passed a 5% amusement tax on live entertainment, is now discussing a 10% drink tax.

As a result, taxpayer who can are fleeing the city.

The LA Times reports For Scranton residents, bankruptcy is an inviting option

When Detroit filed for bankruptcy, hundreds of residents took to the streets to protest what they saw as a drastic approach to fixing the city’s budget problems.

But in this hilly town of 76,000 in northeastern Pennsylvania, residents have a different view of Chapter 9: They want the city to declare bankruptcy. And soon.

“The silent majority would like to see bankruptcy,” said Bob “Ozzie” Quinn, president of the Scranton and Lackawanna County Taxpayers Assn. “Basically, it’s down to a point where people cannot afford to pay the taxes and are moving out of town.”

The City Council, which in 2012 passed a 5% amusement tax on live entertainment, is now discussing a 10% drink tax. The city’s parking authority is in receivership, and it recently privatized its parking meters: The company in charge upped rates and extended meter hours to 6 p.m., which bar owner Mert Gavin says has motivated workers to skip happy hour and head home to the suburbs straight after work.

“I am one of the last two bars that’s still downtown. Tink’s is gone. Whistle’s is gone, Banshee’s is gone, Molly Brannigan’s is gone,” said Gavin, who runs Mert’s. “Do they expect I’m going to bail the city of Scranton out myself?”

The taxes are especially egregious to some because so many of the city’s residents are elderly and living on fixed incomes. The median household income in Scranton is $37,000, and nearly one-fifth of residents live below the poverty line.

The city’s financial problems were accelerated by a 2011 Pennsylvania Supreme Court decision that found that the city owed its police and firefighters unions back pay — about $21 million. The settlement money became due in 2013, but the city bickered over how to come up with the funds for so long that Moody’s warned in November that Scranton faced the threat of default.

“It’s been nonstop. They raised the water fees, the electric, the gas,” said Richard Laytos, a Scranton native who moved back to the city to retire in 1997 after 44 years in New Jersey.

Gary Lewis, who once ran a blog, scrantonisbroke, that urged city leaders to consider bankruptcy, took a drastic step when they failed to do so: He moved out of the city where he’d spent his whole life.

“I did the math — realized how much it was costing me to live in the city,” said Lewis, who now lives in Indiana, where he says he makes $2,500 more a year because of lower taxes. “That’s the story of my generation. There’s a lot of kids like me, who grew up, went to college at Scranton, but they turn 22 and move out of the city, and they don’t move back because it’s not a financially attractive proposition.”

bankruptcy won’t solve the city’s financial woes, said John Judge, president of the local firefighters union. “It’s a horrible idea — you take local control out of the hands of policymakers, and put it in some judge’s hand,” he said.

Neither the city’s new mayor nor his predecessor, Chris Doherty, returned calls for comment, but former City Council President Janet Evans said she and Doherty had been determined to avoid bankruptcy.

“We are in a different situation than Detroit,” she said. “We were willing and able to do everything within the scope of our authority to continue the recovery of the city of Scranton until it sits once again on sound financial ground.”

My Thoughts

Officials in city hall are either complete financial-morons, beholden to the unions, or beholden to their own pension plans that would take a hit if the city declared bankruptcy.

I suspect a combination.

Different Than Detroit

“We are in a different situation than Detroit,” says former City Council President Janet Evans.

Indeed.

Detroit is better off.

In bankruptcy, Detroit has a chance to dump union contracts and onerous pension promises. Detroit may have hit bottom.

The economic-jackasses in Scranton are going to extract every ounce of blood they can from taxpayers, then eventually declare bankruptcy anyway.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com

GOVERNMENT PENSION TAPEWORM WILL KILL US ALL

It sure is easy for politicians to make promises. It just ain’t easy to fullfill them. The story below is about the Pennsylvnia state budget. It is the same story across all states. Politicians sign legislation giving out goodies to get re-elected. The time bomb doesn’t explode for a decade or more, after the slimy politician is running the Department of Homeland Security or being paid as an Obama shill on MSNBC. The lack of courage, fortitude, honesty and intelligence extends across both parties. Tom Ridge signed legislation in 2001 that provided gold plated pension benefits to government workers and the slimy politicians that voted for the legislation. Ed Rendell further extended and increased these benefit promises. You can see from this chart that PA is not even the worst offender.

A recent study estimated that the unfunded pension liabilities for state government workers exceeds $4 trillion. In classic government fashion, Governor Corbett of PA is being branded a scrooge for drastically cutting spending and impoverishing school districts across the state. That is humorous since this year’s budget is $27.3 billion and next year’s budget will be $27.7. Only in this land of delusions could a $400 million increase be described as horrific cutbacks in government spending. There is never a mention about the fact that every school district in the state went on a spending spree in the mid-2000s because the real estate taxes from the housing boom were rolling in like waves on the ocean. Well the waves have receded from the shore and a Tsunami of unfunded promises are about to wash over the delusional morons who spent all the money and made all the promises to government employees.

The wailing and grinding of teeth over this year’s budget is laughable when you consider what is coming. The taxpayers must foot a $1.2 pension expense for the government drones this year, or 4.3% of the state spending. These pension payments are on automatic pilot. In 2016, the taxpayers of PA will be on the hook for $6 billion of pension expense, or approximately 20% of the state spending. This is called math. Either the taxpayers of PA will have to pay a whole lot more in taxes or drastic spending cuts will need to occur in other parts of the budget. There are 5.2 million households in PA. Each would have to pay over $900 more per year in taxes to pay for the pension promises made to government union drones. We all know that the FSA in Philly and Pittsburgh don’t pay taxes, so the average hard working middle class schmuck would have to ante up over $1,200 more per year to satisfy the insatiable appetite of government union workers.

This tapeworm was introduced into the digestive system of Pennsylvania by a Republican governor in 2001. He’s rich. He earns money for speaking engagements. He started our beloved DHS. This brilliant guy even invented our color coded terrorist warning system. We are now at Shit Your Pants Yellow alert. By 2016 we’ll be at Commit Suicide Red.

Will any politicians have the guts to confront the government unions and kill this pension parasite before it kills us all? I doubt it. There are elections to be won and promises to be made. That tapeworm looks harmless.

Funding Pa. pensions is ‘tapeworm’ in budget talks

Wednesday, June 6,2012

It’s crunch time in Harrisburg. In other words, it’s budget time.

As school districts across the state reel from the effects of an austere spending plan put forth by Gov. Tom Corbett, Republicans in the state Senate have created their own budget and restored many of the cuts proposed by their fellow Republican governor. The state House is expected to vote on that version this week, possibly as early as today. Then both sides likely will hammer out a final version with the governor.

Here’s the good news: Some education funding is likely to be restored, in particular when it comes to higher education.

Here’s the bad news: It won’t necessarily solve the fiscal woes afflicting school districts.

Now here’s the really grim news: None of this even addresses the elephant in the room, the biggest budget crisis in the state.

That, of course, would be the ocean of red ink inundating the state’s two large public employee pensions, those covering the bulk of state government workers and public school teachers.

This year the state’s on the hook for $1.2 billion in pension payments. That increases to $1.6 billion next year and an astronomical $6 billion by fiscal year 2016-17.

Kaboom!
Perhaps that is why Corbett is reluctant to start restoring money to the budget. He refers to the pension crisis as “the tapeworm” in state budget talks.

The pension crisis has been exacerbated by several factors. First, while enjoying a bullish ride on Wall Street for years, the state and districts looked at more rosy predictions and cut their contributions to the fund. Then the market tanked.

Also crucial was a deal cut by former Gov. Tom Ridge back in 2001 that boosted the payouts for pols and teachers while cutting taxpayer contributions.

Now the bill is coming due, and it’s a whopper. It won’t solve the current dilemma, but some denizens of Harrisburg with an eye on the future are offering an important change.

State Senate Majority Leader Dominic Pileggi, R-9 of Chester, is proposing legislation that would derail this gravy train for all future public employees. Instead of the defined benefit plan those workers now enjoy, they would instead join the rest of us in a defined-contribution plan, similar to a 401(k).

It’s a common-sense move that is long overdue. Sure, it would be easy to harpoon Pileggi and several other Republicans for cutting someone else’s retirement benefits while theirs remains intact. It won’t change the fact that the current system is unsustainable.

More importantly, it does not address how the state is going to fund its current pension woes.

What almost no one in Harrisburg is willing to say is the very real possibility of someone actually proclaiming what many are thinking – that as currently constructed the system, will not be able to pay out what was promised.

One possible solution would be to reconfigure pensions to their pre-2001 levels. That no doubt would be met with catcalls from those approaching retirement.

The move to get public employees out of defined-benefit plans is a start. But it must be accompanied by a solution to the more immediate problem — that $6 billion tab lurking in the distance.

One thing we’re sure of. This tapeworm is hungry. And it’s not going away.

— Journal Register News Service