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InvisibleBlack -> RE: New pension law could force municipalities to raise property taxes 60% While most emphasis has been (1/2/2011 1:45:16 PM)
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ORIGINAL: rulemylife
Let's take this point-by-point.
To begin with, a pension is a contractual obligation. It is considered deferred compensation. As such it is a legal obligation under bankruptcy law.
So either you are making this up or you got screwed because you did not know any better.
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In addition, some pension benefits may be insured by the Federal Government. Traditional plans (defined benefit plans) are protected by the Pension Benefit Guaranty Corporation (PBGC), a Federal Government corporation. If a plan is terminated because an employer has financial difficulty and cannot fund the plan, and the plan does not have enough money to pay the promised benefits, the PBGC will assume responsibility for the plan. The PBGC pays benefits after termination up to a certain maximum guaranteed amount.
You've never heard of pension plan default? While the Pension Benefit Guarantee Corporation (a Federal corporation created by ERISA) steps in during a pension default, they do not match promised payouts on a 100% basis and in some cases, pension beneficiaries receive less than 50% of their "guaranteed" benefits.
United Airlines defaulted on its pensions in 2005:
http://www.nytimes.com/2005/05/11/business/11air.html
Bethlehem Steel defaulted on its pensions in 2002:
http://www.fool.com/personal-finance/retirement/2005/07/15/your-incredible-vanishing-pension.aspx
There are other examples but these are the biggest. The existence of the fixed "defined benefit" pension and its security going forward isn't a given, no matter what you wish to believe. Even the multiemployer plans have a cloudy future.
http://www.ebri.org/pdf/publications/facts/0107fact.pdf
I'm not saying this is fair. I'm saying this is the way it is.
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Many municpalities offered pay packages and agreements that simply could not be delivered...
I don't know what to call this other than just plain whining.
You make use of the services those city employees provide you.
And I paid for them at the time they were provided. That's what those taxes for those years were. If that money was misused or wasted or those pensions weren't properly funded, whose fault is that? Why should I (or in this case the citizens of Chicago) be held on the hook for someone else's bad decision or poor judgement? Why is it that as a city employee you should be afforded more protection than anyone else?
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In case you didn't realize it, the police, fire, and other city departments are not known for their lavish pay structures. The reason many people take those jobs is secure employment and the security of a an adequate retirement.
I suppose this depends on your locality. Where I live, the house to the left of my parent's house is owned by a fireman and the one on the right is owned by a policeman, so I'd suppose they're all in the same boat. If they get additional job security that my parents never did (my father got laid off at 55 and ended up taking a job as an adjunct teacher), that's a nice benefit but I wouldn't call it a right. A number of cops and fire fighters live in my neighborhood as well. Their homes don't look particualrly worse than the one I have.
I'd like to have a guaranteed job and adequate retirement as well. I think everyone would. The difference is, I don't view it as a right. If that's something you want, you have to pay attention, keep your eyes open, and work towards it. If things look shaky, you need to reconsider your decisions and make changes. You seem to be saying that because someone works for a local government, their compensation should be viewed as inviolable. I'm telling you that nothing is inviolable. You need to look out for yourself. The fact that you trusted in something you were told by your employer doesn't change that.
If I was hoping for a guaranteed retirement as a municipal worker in California right now, I'd be very concerned. If California can't meet its fiscal obligations, who should be forced to pony up the 70 or 80 billion it needs? They're going to cut benefits and raise taxes. They don't have a choice. Raising the taxes won't get them out of cutting the benefits.
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But no, it's really not your responsibility at all. Just take someone who worked his life in public service for relatively low pay and fuck them out of their pension by saying "oh well, we're short on money, sucks for you but it's not my problem".
Explain to me again why it's my job to make up for someone else's shortfall? And when I run out of money or end up unemployed, who's going to pay for the both of us?
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The only thing farcical here is your amazing "I don't really care about anything but my wallet" attitude.
I don't live in or near Chicago so this doesn't really affect my wallet. I do keep track of my finances and make sure I'm covered on my own and without relying on anyone else's obligations to me because I don't have a lot of faith in any promised program right now, government or private. I would urge you to do the same.
To take me and personal obligations out of the equation - let's look at the OP. Hunky has been sitting there and telling everyone to invest in silver for years now. At least since I've been on the board. I first posted in July of 2009, when silver was around $14. It's now around $30 - so we'll say that Hunky has made a 100% return on his investments. Obviously, he made a very wise investment. Why is he obligated to take the money he's made by personally figuring out the precious metals market and taking a risk and succeeding at it and use it to fund a pension system that Chicago isn't able to pay?
Your underlying issue seems to be one of fairness. It's not fair that some people will have to suffer because their pensions won't get paid. I agree. That's unfair. The people who promised those pensions should suffer. My issue is - why is it fair that anyone else should have to suffer to make them good? There are millions of people who are suffering, all over the world. Life isn't fair. Why do city pension workers get precedence? Because they're low paid? So are McDonald's workers. Because they were promised something and it wasn't true? So were Madoff's customers. If I had a choice I'd donate more to the city's homeless shelters and less to city workers who at least have paying jobs and are getting by.
Since there isn't some secret pool of money out there, if you want to make person A good, you have to take it from person B. Since the city of Chicago has no money, that money will have to taken from someone else - likely a poor Chicago resident who is struggling to pay their bills and make ends meet. Why should they suffer for someone else's mistake?
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Not to mention that somehow you have the misguided notion that state and local agencies can arbitrarily disregard contractual obligations without legal ramifications.
There is no mechanism for states to declare bankruptcy. Historically, no state has ever defaulted. There is one for municipalities in something like 19 states.
http://w3.uchastings.edu/plri/fal95tex/muniban.html
http://www.alleghenyinstitute.org/government/munbankruptcy.html
I believe that Vallejo, California went into bankruptcy in 2008 and is only now coming out of Chapter 9. Other cities and counties have gone into receivership as well. While I'm not an expert on municipal bankruptcy law, I believe generally the state appoints a trustee who oversees the negotiation of the existing debt obligations and contracts. Pension plans are usually not touched - typically bond holders get the shaft - however, I don't think that tactic is going to work this time as even total bond default might not cover the outstanding obligations (and would kill any chance of ever selling any more bonds).
Since for many municipalities (as with many businesses), a significant portion of their outstanding obligations is unfunded pensions, I have little doubt that large pensions will take a substantial haircut. This could be in the form of reduced payouts, reduced medical benefits or accounting trickery - likely all three will be involved.
I suspect in my lifetime, a body of law will be codified to handle state bankruptcy. I think we're going to see a lot of court cases over the next 5 to 10 years dealing with exactly these issues, and evenif they bend over backwards to avoid calling it "bankruptcy" or "default" it will come out to the same thing in effect - i.e. reduced benefits, reduced payouts and reduced obligations.
It's not fair. People may not like it. That doesn't change anything. The difference in our viewpoints, as I see it, is that I also don't see it as fair to make someone else who is uninvolved pay the burden of these mistakes.
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