Friday, March 02, 2007

New American Pension Plan - Work Until You Drop Dead

Government employees sit smugly as an unremitting stream of news stories swim past detailing the demise of private sector pensions. Cf. United Airlines. To refresh your memory, a federal judge ruled in May 2005 that United Airlines can walk away from $6.6 billion in pension obligations, affecting 119,000 people.

And county, state, and federal employees clucked their tongues and thought "That's too bad. Good thing I've got a government pension."

I'm not sure why they're so self-assured. Here in Illinois, the teachers are painfully aware that Blagojevich & Co., and George Ryan & Co before them, and yes - Jim Edgar before them - are underfunding the pension plans. Oddly, if an individual spent money that was scheduled for another account that would be embezzling. And if that individual isn't a major-party donor, then that individual gets sent up the river.

There are 4 states that have scandalously underfunded pension plans:
West Virginia
Rhode Island

Great. Alabama, Mississippi, even Kansas are doing a better job. And Kansas thinks humans hunted dinosaurs to extinction.

There are bigger horror stories at local levels. Take San Diego. They're going to see the big Orange County bankruptcy (December 1994) and raise it.
Let's see if I can sum up: Increasing focus on the pension plan problem resulted in GASB 45, which calls for retiree health care insurance to be included in pension plan costs. San Diego supervisors reported that this would up their unfunded liability from $1.2 bln to $1.8 bln on a $7.3 bln pension plan. Two supervisors brought forth a plan - essentially cutting health care provisos for future retirees that would save $1.2 bln. Naturally, the retirement association fought back by voting not to let Jacob vote on anything regarding retirees' health benefits.
Meanwhile, the San Diego Diocese is already at the bankruptcy party. The diocese has filed for Chapter 11 bankruptcy protection just ahead of 140 lawsuits claiming sexual abuse by priests. This could be 20/20 hindsight, but it seems a little false economy on the part of the diocese.

To get an idea on what other states are facing, check out Pension Envy and Lobster Traps at Whiskey & Gunpowder.

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