March 20, 2012
From The Federation of Connecticut
Taxpayer Organizations, Inc.
Contact Susan Kniep, President
Website: http://ctact.org/
Email:
fctopresident@aol.com
Telephone: 860-841-8032
Broken Promises: Pensions All Over
America Are Being Savagely Cut ...Or Are Vanishing Completely
March, 2012, The
Economic Collapse
A
gigantic tsunami of unfunded pension obligations is coming. A lot of
state and local governments are going to go broke. A lot of promises are
going to be broken.
http://theeconomiccollapseblog.com/archives/broken-promises-pensions-all-over-america-are-being-savagely-cut-or-are-vanishing-completely
How would you feel if you worked for a state or local
government for 20 or 30 years only to have your pension slashed dramatically or
taken away entirely? Well, this exact scenario is playing out from coast
to coast and in the years ahead millions of elderly Americans are going to be
affected by broken promises and vanishing pensions. In the old days,
things were much different. You would get hired by a big company or a
government institution and you knew that the retirement benefits that they were
promising you would be there when you retired in a few decades.
Unfortunately, we have now arrived at a time when government institutions and
big companies have promised far more than they are able to deliver, and
"pension reform" has become one of the hot button issues all over the
nation. Many Americans that have been basing their financial futures on
their pensions are waking up one day and finding that their pensions are either
gone or have been cut back dramatically. According to Northwestern University Professor John Rauh,
the latest estimate of the total amount of unfunded pension and healthcare
obligations for state and local governments across the United States
is 4.4
trillion dollars.
America is continually
becoming a poorer nation
and all of that money is simply not going to magically materialize
somehow. So where is that 4.4 trillion dollars going to come from?
Well, either pension benefits are going to have to be cut a lot more all over America or
taxes will need to be raised dramatically. Either way, we are all going
to feel the pain of these broken promises.
There simply is not enough money out there to keep all of
the pension commitments that have been made. Something has got to
give. In the end, millions of elderly Americans will likely be plunged
into poverty as pensions disappear.
Some local governments around the nation are already
declaring bankruptcy and are either eliminating pensions or are cutting them
very deeply. Just check out what just happened in
Central Falls, Rhode Island....
For years, city officials promised robust union contracts
and pensions without raising revenue to pay for them. Last August, the math
caught up with them. Central Falls was broke, its
pension fund short $46 million. It declared bankruptcy.
"My daughters grew up here, went to school here. It's
all gone," said Mike Geoffroy, a retired
firefighter.
He said he could not make the payments on his house after
his pension was cut by $1,100 a month.
When will the math catch up with the city where you are
living?
For years and years most of our state and local politicians
have been ignoring this problem. But eventually a day comes when you
simply cannot ignore it any longer.
Check out what Pensacola Mayor Ashton Hayward said about the
situation in his city recently....
"When our annual pension liability is more than our
yearly property tax revenues, we have to do something"
Keep in mind that taxpayers don't get any new services for
money spent on pensions. It is money that goes straight into the pockets
of retired workers. State and local governments are desperately trying to
pay retired workers what they are owed and fund ongoing government functions at
the same time, but many have reached the breaking point.
All over the country, state and local governments are going
broke. The following is from a recent article by Duff McDonald....
Alabama's Jefferson
County has actually gone
bankrupt. Stockton, California is all but ready to do the same.
And all you have to do is look to Detroit—or any of the nearby auto towns named
after a Buick model of one sort or another—and you see fiscal crisis playing
out right now. Look in your own backyard—or at the potholes on your neighborhood
roads—and you will likely find the same.
Things are so bad in Stockton, California that they are actually skipping debt payments....
The city of 290,000 that rode the wave of the housing boom
in the late 1990s and early 2000s now finds itself littered with foreclosed
homes, saddled with pension, health care and other obligations it can't afford,
and unable to pay its bills.
The City Council voted last month to suspend $2 million in
bond payments and begin negotiations with bond holders, creditors and unions.
And did you notice what is being blamed for the financial
problems in Stockton?
Pension and healthcare benefits.
Sadly, we are seeing pension nightmares erupt all over the
nation right now.
For example, check out what is happening to the Public
School Employees' Retirement System and State Employees' Retirement System in Pennsylvania....
PSERS had an accrued unfunded liability of nearly $26.5 billion, the amount of money the fund is short to cover
existing retirement benefits. That hole is expected to grow to $43 billion by
2019. SERS is $12.5 billion in the red, and that shortfall is expected to climb
to nearly $18 billion by 2018. Unless the stock market makes giant sustained
gains, taxpayers will have to refill those funds.
That doesn't sound good at all.
In California, the Orange County Employees
Retirement System is estimated to have a 10 billion dollar unfunded pension liability.
How in the world can a single county be facing a 10 billion
dollar hole?
This is madness.
The state of Illinois
is facing an unfunded pension liability of more than 77 billion
dollars. Considering the fact
that the state of Illinois
is flat broke and on the verge of default, it is inevitable that a lot of those
pension obligations will never be paid.
In fact, there are going to be a whole lot of broken
promises all over the country.
Pension consultant Girard Miller told California's
Little Hoover Commission that state and local
government bodies in the state of California have
$325 billion in combined unfunded pension liabilities.
That comes to about $22,000 for every single working adult
in the state of California.
So where is all of that money going to come from?
But at least most state and local government employees are
still covered by pension plans, even if they are failing.
In the private sector, pension plans are vanishing at
lightning speed.
According to the Boston
College Center
for Retirement Research, the percentage of workers in America covered
by a traditional pension plan fell from 62 percent in 1983 to 17 percent in 2007.
That isn't just a trend.
That is a tidal wave.
And many of the private pension plans that still exist are
massively underfunded. For example, Verizon's pension plan is underfunded
by 3.4 billion dollars.
So what should Americans do in light of all this?
Well, the number one thing to realize is that the pension
plan you have been counting on could disappear at any time.
We live in an economic environment that is extremely unstable, and about the only thing you can count on in this
environment is rapid and dramatic change.
Do not plan your financial future around a pension
plan. If you do, you are likely to be bitterly disappointed.
Americans that plan to retire in the coming years should do
their best to try to fund their own retirements.
Unfortunately, most Americans are not putting away much of
anything for retirement. As I have written about previously, one study found that American workers are $6.6 trillion short
of what they need to retire comfortably.
Ouch.
Over the next 20 years approximately 10,000 Baby Boomers will be retiring every single day.
A lot of them are going to be blindsided by empty pension
funds and broken promises.
We are facing a retirement crisis of unprecedented
magnitude, and there is not much hope in sight.
And if there is a major stock market crash, things are going
to be much, much worse.
Most pension funds and retirement plans are heavily invested
in the stock market. If we were to see a major financial crisis like we
saw back in 2008 it would be absolutely devastating. Millions of
Americans could see their retirement plans wiped out in short order.
Once again, please do not place your faith in the system.
If you do, you are likely to end up holding a bag of broken
promises.
A gigantic tsunami of unfunded pension obligations is
coming. A lot of state and local governments are going to go broke.
A lot of promises are going to be broken.
If you hope to retire any time soon, you better plan on
being able to take care of yourself.