Mary Williams Walsh notes as follows:
It is hard to know the extent of the problems, because there is no central regulator to gather data on public plans. Nor is the accounting for government pension plans uniform, so comparing one with another can be unreliable.
But by one estimate, state and local governments owe their current and future retirees roughly $375 billion more than they have committed to their pension funds.
And that may well understate the gap: Barclays Global Investments has calculated that if America’s state pension plans were required to use the same methods as corporations, the total value of the benefits they have promised would grow 22 percent, to $2.5 trillion. Only $1.7 trillion has been set aside to pay those benefits.
The old pay as you go schemes just are not very amenable to feeding dollars to Wall Street. If, like Orrick, you have a client that wants to issue tax-backed bonds, in lieu of ordinary capitalism and ordinary capitalist risk, just argue that bonding is the way to go.
UPDATE: What are pension games good for? Perhaps "the world's largest leveraged buy-out." -- Preserving monopoly power in health care. On the Left comes a plan to play to the plight of the poor to collect a tax. On the Right comes a plan to play on the plight of the private outfits that can't squeeze money out of the poor. On the Left-Right comes a plan to have public ownership and give guaranteed (tax-backed) returns on bonds as the government employees take controlling ownership of the monopoly, for their mutual financial gain; both at the expense of the poor. See The Unwitting Joker Of Portland and Dave Reinhard goes off into some alternative universe.
In this post "Notes from all over" there is a reference to a "culture of corruption" in San Diego (and, implicitly, elsewhere). I have to wonder if the commenters can take the open ended post and offer a "Whole Earth Catalog" view toward describing the problem and offering remedies.
My comment there starts: "The City of San Diego pension battle is not between corrupt and not corrupt but between alternative choices that are each corrupt."
That is to say that one cannot become non-corrupt merely by pointing to the corruptness of a political opponent.
UPDATE: Old Thread (Notes from all over)/New Thread (Sound vaguely familiar?)
Comment:
A financially sound pay-as-you-go pension plan has an optimal funding balance of ZERO. It is Cheap Trick to transform it into something that is amenable to the issuance of bonds. The apparent need for bonding of the costs to cover future pension related expenses is logically inconsistent with the alternative of stating the obvious that pension design and pension gifts that result in any "underfunding" are at a minimum "unsound" and likely criminal, even if it might be hard to slam someone into the slammer.
"Look, we [the FBI and the SEC] could drag the lot of you into federal court for criminal prosecution and give you plenty of jail time for harming your local population for your personal benefit. But here is the deal we will offer you -- authorize the issuance of pension obligation bonds and we will not seek to prosecute you personally. As our enforcement tool we will direct the bond credit rating folks to downgrade your rating and thus force your local population to pay even higher coupon rates to supply other valid essential public services unrelated to your personal pension benefits." [source, the reality of the scheme]
In comes the professional Actuary, as cover, to assure, as a federally licensed and qualified expert witness, that 8 percent returns on private investment of bond proceeds is a sure thing, like a gold mine in Gold Hill, Oregon, provided that the investment is made to places far, far away from the local community.
Remember my February Tram argument about personal liability of the CoP council, in the event of termination, and how this was all smoothed over by their subsequent decision to give the go ahead, to ratify the illegal acts that they allowed to continue. Same (Ship High In Transport). Don't forget that the bond rating folks are again the enforcement tool, as a sort of "independent" body.
Will City Attorney Michael Aguirre, and his connected wife, favor the issuance of pension bonds, with the proceeds invested in far, far away places? An essential element in this logic of corrupt culture is the distortion of the motivations of the federal level folks that have a mandate to protect locals from corrupt local officials, and to opportunistically join in the party for their political cut of the take from the locals.
DarePDX -- "all this proves is" -- As To Condos
See New Thread (Sound vaguely familiar?).
DarePDX -- "Across the US in major cities condo towers are going up and being sold way above the standard square footage value of a house. Looks to me that all this proves is that Portland's pride in selling condos is a little overstated."
Early in Clinton's first term in office there was political clamoring for capital gains tax reductions. The argument then became the stall of transactions by folks with "potential" capital gains to collect, awaiting a better deal on the gains that they had already booked, on paper, ready to sell/buy the instant Congress made a change.
That is, the mere prospect of a better deal, via elected anti-public-interest folks for past activities under a then-existing rule of law, IS a problem.
The prospect of an all powerful set of local elected folks with no known personal limits creates an environment where no one will have no incentive to do or start any construction or business activity until they are certain they have maximized their potential for their take from the public trough.
The transaction costs, the rewards direct from lobbying and chummy relations with the elected folks, creates tendency to favor big/superbig projects where the elected folks are willing to saddle the public with bonded debt.
Could I get a special bond, tax break, for a single affordable manufactured house that a poor, non-publicly employed grunt, laborer can pay off in ten or twenty years, and raise a family at the same time? To whom would a renter go to to argue that home prices must be free to fall and thus become "affordable" as measured by the wages -- and rational lending that is not disturbed by the Fed-induced economic stimulus via the effective gift of dollars direct to bankers (but not wage earners) to lend out in their carry-trades?
If price levels fall then so too do the aggregate levels of bonding based on a fraction of the "value" of property. That would be a horror for some and a god send for others; not to mention to the horror of some that their hoped-for capital gains from artificially induced speculative pricing of non-producing-real-estate might never materialize, taxed or not.