STUMP » Articles » Happy September! Quick Whirl Around the Internet, Plus the 80% Pension Funding Club! » 1 September 2015, 12:15

Yikes. I am deep in the weeds (you don’t wanna know), and it’s time for a big ole link dump!

First, thanks to my referrers:

• Jack Dean at PensionTsunami
• Wombat-socho at The Other McCain
• … The Jehovah’s Witnesses?! What?…maybe the same person who came here from the wiki entry on Jehovah?
• Some commenter at this LA Times article… I can’t find the comment, though. Could somebody email it to me?
• Okay, who did this search?

What a weird set of referrers last week. That’s what I get for going on vacation.

DON SURBER, CHRIS CHRISTIE, AND SOCIAL SECURITY

Don Surber doesn’t like what Chris Christie has to say about Social Security:

Once upon a time, I liked Governor Chris Christie of New Jersey. He seemed tough but now as he seeks the presidency, I realize he is not too bright. He keeps touching thee third rail of American politics: Social Security.

He wants to means test it.

No, no, no, no, and hell no.

This pandering to those envious of successful people eventually bites the middle class in the butt.

That is how the income tax began. The Chris Christies of a century ago said it was only fair to tax the super-duper rich.

Today, half the country is now super-duper rich according to the IRS.
…..
The way to fix Social Security is to raise the interest Congress pays on the money it borrowed from Social Security from the 3.6% it now pays to 6%.

=banging my head on the desk=

Yes, let’s have the totally fake accounting move called the Social Security Trust Fund earn 6%. That’ll fix everything.

I’m tired. Somebody else go explain to Don why that won’t work.

I have had this argument with loads of people. I can’t discuss this with people who do not realize the Trust Fund is a big fat lie. So much of a lie that they had to print the “bonds” on paper (page 10).

Real bonds don’t have to be printed on paper.

Social Security benefits are already indirectly means-tested, because the amount that’s taxable depends on your income. They aren’t asset-tested, though.

I believe that Social Security will become more heavily means-tested, not because that’s “fair” and not because it’s what =I= want, but because it’s what can be afforded. And people don’t want the elderly to be destitute.

80 PERCENT FUNDING CLUB

No, I haven’t forgotten these guys. Some of these are completely new entries, and some are ones that were brought to my attention recently but are older than the past few months.

Patrick Rehcamp, Twin Cities.com, Pioneer Press:

The three statewide funds are all in good financial shape. All three are more than 80 percent funded, which is typically considered the minimum threshold for a healthy government pension system.

Ted Dabrowski, Illinois Policy Institute:

3. A well-managed pension fund should be at least 90 percent funded. CTPF is just 51.5 percent funded. The funding level has collapsed due to underfunding and mismanagement.

Ballotpedia:

According to reports based on the most recent available data, most states’ pension plans continued to be underfunded below the 80 percent considered necessary for a healthy fund.

Adam Tobias, Wisconsin Reporter:

Wisconsin’s estimated funding ratio of 67 percent is still below the 80 percent benchmark that’s considered healthy by industry standards, and each resident in the state would have to pay $6,720 to erase the pension system’s $38.6 billion in unfunded liabilities, the study says.

Jim Lockwood, The Times-Tribune:

Pennsylvania’s municipal pension systems are $7.7 billion underfunded. About a third of the 2,600 local pension plans in the state are funded at less than 80 percent of their liabilities; a plan is deemed to be healthy at 90 percent funded.

Yeah, I guess I won’t be retiring this anytime soon. Especially after this last month of equity market returns.

MISH ON A VARIETY OF THINGS

Banned words — China v. U.S.:

Repercussions China vs. US

In China, use of banned words and phrases, or even an analytical report that says a company is struggling will land you in prison or worse.

It is illegal to speak the truth in China. Heck, it’s even illegal to pursue the truth. China has banned in-depth analysis!

Chinese analysts are probably scrambling right now to make sure they do not hint that sales of a company are likely to decline, be worse than expected, less than last quarter, or anything similar.

Those who make a mistake will find themselves on public display with a forced confession. Failure to confess when asked is likely to mean a death sentence or prison for life.

At Washington State University, use of politically incorrect terms will simply affect your grade. Moreover, students have the upfront option to not take inane classes in the first place.

Some of the Chinese-disapproved words: slump, spike, panic, overvalued.

FWIW, I’m teaching a writing course at UConn this semester.

Last night I told my students to remove the word “pubic” from their spellchecker. It’s not exactly a banned word, but pubic pensions are highly unlikely to be a legit writing topic in my class.

A few posts on the mess in Greece with accompanying job losses. I have no idea what’s going on in Greece.

I wonder if the EU knows.

Drawdowns kill public pensions – aka asset death spiral.

Analysis

In spite of the miraculous rally from the low, total returns for anyone who held an index throughout has been rather ordinary.
The first chart is not a reflection of stocks vs. bonds because bonds did exceptionally well during the same period.

Drawdowns Kill!

To be fair, the first chart only shows assets, not liabilities, but we do know that pensions in general are still enormously underfunded, with Chicago and Illinois leading the way.

Negative Flow

Reader Don pinged me with this comment the other day: “Nearly all public pension funds have a negative cash flow, meaning they pay out in benefits each year more than they receive in contributions. For all public pension funds, the negative cash flow is approximately 3% of assets, which means an average fund needs to produce an annual return of 3% to maintain a stable asset value.”

I will demonstrate what’s going on here in a later post.

RANDOM PUBLIC FINANCE LINKS

San Bernardino Pension Shift to Save $2.7 Million — the bankrupt town is disbanding its fire department and going under the umbrella of the county. Ah, that lovely accounting. It’s cheaper to shove the underfunded plan into a better-funded one.

Illinois can’t pay lottery winners during the budget impasse. What a weird way to run a lottery. I always thought these were set up as state-owned corps separate from the general funds.

Speaking of the budget impasse, It’s down to one vote on overriding Rauner’s veto. They’re scheduled to meet tomorrow…let’s see if they vote, and how that goes.

Illinois Senate Bill 1229: An assault on taxpayers — all you need to see is this graph:

Illinois can’t pay all its bills anyway – if the cash ain’t coming in, it’s not coming in. See how judge-ordered spending doesn’t work?

Just imagine when it’s pensions.

Mark Glennon on the struck-down pension reform bill — it was always a scam.

Speaking of court cases nixing pension reform bills, here’s John Bury on why restoring COLAs won’t kill NJ pensions. Because they’re killed even if the COLAs are removed.

And while Bury is worrying about which judge will have to say “Sure, it’s fine to cut pensions, even to current retirees”, it doesn’t really matter which way the judges rule. We all know the pensions will be cut by reality, if not by law.

Illinois is not the only state battling over budgets. Pennsylvania has a Democratic governor and Republican-dominated legislature. It’s going a little bit better than the Illinois stuff. One thing everybody can agree on is the legislators shouldn’t be paid til the budget is passed. (ok, the legislators don’t agree, but who cares what they think?)

I don’t think PA has the cash-crunch that Illinois has, but don’t quote me on that.

A few items on the Chicago Public Schools: Moody’s sees credit negative factors in CPS budget, and protestors take over a Rahm press event.

Phew. I think that clears my tabs.