Archives for category: Unfunded liabilities

from Bloomberg, a useful list:

  1. Giving out raises faster than revenues are growing.
  2. Giving out raises and increasing benefits when revenues are falling.
  3. Giving out raises and benefits retroactively.
  4. Allowing employees to cash out unlimited amounts of sick leave when they retire.
  5. Providing lifetime health care for retirees.

In San Jose, these mistakes have resulted in a sharp drop in number of public employees per 1000 residents:

(click on chart to enlarge)

The stock market collapse of 2008 decimated public pension fund investments, and municipalities are now being asked for greater contributions to make up for the losses. The impact has been drastic: Three percent of New York property tax collections were used to pay pension costs in 2001; by 2015, pension costs are expected to eat up 35 percent of property tax collections.
Deficits Push N.Y. Cities and Counties to Desperation
Published: March 10, 2012

Earlier this month, we established the fact that 4 is not 2.

35 is also not 2.

School mills, revaluation, etc.

Info from July 1, 2010 (most recent year analyzed in district actuarial report):

  • The district has 271 active employees and 135 retirees. Figures do not included spouses.
  • Average age of IUFSD employees is 44 for men, 46 for women.
  • Of active employees, 43 are currently eligible to retire.
  • As of July 2010, all employees, retirees and their spouses receive free healthcare benefits for life (no co-pay, no deductible).
  • Present value of all benefits (other than pension) is $100,000,000.

I am still learning the meaning of “present value.”

In a nutshell, “present value” means that to cover these future costs, which we have promised to pay, we would need to put $100,000,000 in a bank account today at an interest rate of 4%.

NOTE, however, that state law does not allow us to do this: state law does not allow us to fund (save money for) the benefits we’ll be paying.

By law, we are required to pay-as-we-go, which means that future parents and non-parents alike will have to pay out that $100,000,000 (and the figure will be higher when residents pay it, of course, because future taxpayers won’t have the 4% compounding interest they would have had if the money had been saved and invested).

I’m going to fact-check this post and come back to it.

4 is not 2