For once, I got to vote in a primary, and it may make a difference! Woot!
(I was a little taken aback that Ben Carson’s name was still on the ballot. Whatever.)
So in honor of this occasion… I’m looking at failing/failed pensions and finance outside of New York!
No, there’s not really a NY theme. I’m kind of stretching here.
BRAZIL CAN’T PAY PENSIONS
More specifically, Rio de Janeiro can’t pay pensions:
RIO DE JANEIRO, BRAZIL – The government of Rio de Janeiro announced on Wednesday that due to cash flow problems it would not be able to pay over 137,000 state retirees this month. Officials blame the sharp decline in tax revenues and the decrease of oil prices in the international market for the lack of funds.
Calling it a tragedy acting governor Francisco Dornelles said that only those retirees earning less than R$2,000 will receive their pensions in April. Officials admitted that the deficit in the state’s accounts have reached over R$18 billion.
Dornelles also stated that until all active and inactive state employees have received their wages and pensions, he and all his aides would not receive their salaries. According to officials the expenditures with social security payments and pensions have always taken a big part of the state’s revenues. These hefty expenditures, however, were always paid by Rio’s revenues, with petroleum royalties and participation payments.
That’s why you don’t want public pensions to be pay-as-you go, but prefunded in a separate fund of assets. If state revenues are inadequate, it’s not necessarily easy to just raise them by fiat.
Though the theory is that taxes can always be raised.
If state revenues aren’t being raised because the local economy sucks, it’s unlikely raising taxes will help matters.
THE ATTEMPT TO HAVE ‘PRIVATE’ PENSIONS RUN BY THE STATES
This idea has been around for a while. I haven’t covered it much, other than noting the silly attempt in Illinois. The Illinois attempt won’t get anywhere, because they don’t have enough money to administer it. (I will get to Illinois in a minute.)
Instead of addressing the estimated $600 billion in unfunded liabilities in California’s beleaguered public-employee pension system, Democrats in Sacramento have instead decided to “solve” a growing pension crisis in the private sector. In 2012, Governor Jerry Brown signed a measure that created an investment board and authorized a “feasibility study” of various options for a state-backed private-pension system. That study came out last month, and the legislature is now vetting bills that would put its recommendations into action.
The plans under consideration would mandate participation in the new state-run retirement system for firms with five or more workers, though the workers themselves could opt out. Employers that don’t comply would face fines and other penalties. They would automatically deduct 3 percent to 5 percent of each employee’s earnings (the exact percentage is not yet determined) and deposit the money in an IRA, likely managed by the California Public Employees’ Retirement System (CalPERS)—the same union-controlled government entity that uses its investment muscle to promote liberal causes. Unlike the public-employee pension plans (or even Social Security), however, the envisioned private-pension system is a 401(k)-style, defined-contribution plan. It could not accumulate unfunded liabilities, at least in its current design.
The state’s public-sector unions backed Brown’s bill. As it turns out, union-friendly politicians hatched the private-sector pension plan a few years ago as a way to deflect attention from the public system’s massive unfunded liabilities. The idea was to give private-sector workers some modest benefit as a way to dampen public support for pension reforms.
I really don’t see that working.
Anyway, it’s up there with the $15/hour minimum wage bill Jerry Brown signed recently. As well as the layoff coming for low-paid workers at Berkeley.
I’m sure those 500 people whose jobs are being cut are happy to know they could have had access to a retirement account. Only if they had a job to retire from.
My lunch hour is about up, so let me spend my remaining few minutes with Illinois.
Comptroller says Illinois lawmakers will have to get in a long line to get paid
Illinois Comptroller Leslie Geissler Munger plans to delay monthly paychecks for lawmakers and statewide officials, saying there isn’t enough money to pay the state’s bills and that other services should come first.
The comptroller’s office will still process the paychecks, estimated at $1.3 million a month, but lawmakers won’t get the money right away because the payments will be thrown onto the state’s huge pile of unpaid bills.
Munger acknowledged the idea is to apply pocketbook political pressure to lawmakers to spur a resolution to the 10-month budget fight between Republican Gov. Bruce Rauner and Democrats led by House Speaker Michael Madigan and Senate President John Cullerton. She argued that lawmakers’ paychecks are taking away money from nonprofit social service providers and small businesses who have seen their payments delayed during the impasse.
The comptroller estimated that elected officials, whose next paycheck is due April 30, will have to wait until May or June for their April pay. But she also warned that the delay in paying bills “will grow dramatically” in the summer and fall months, when tax collections are down. April is the peak month for tax collections, and still the state has an $8 billion bill backlog, Munger said.
The delay will also apply to statewide officeholders, including the treasurer, secretary of state, lieutenant governor and Munger herself, she said. Rauner, a wealthy private equity specialist who campaigned on a pledge to serve as governor for free, does not collect a salary.
It’s amusing to me, from afar.
Madigan and company in the Illinois legislature have been trying to pin all the blame on Rauner for not “compromising” (that is, giving Madigan et al what they want, and giving Rauner nothing of what he wants), thinking they can just make him unpopular and thus will buckle.
But Rauner’s career is not about being popular. He doesn’t seem to be all that interested in hanging on in political positions, unlike Madigan. He doesn’t need the money that comes from the standard Illinois graft (or whatever the term for the legal version is, that so many Illinois pols do…. though many governors have been caught out by going a toe over the line. tsk tsk).
If Rauner doesn’t get re-elected, oh well. He’s got his personal pile of money. He’s not the kind of person who seems all that interested in whether “The People ™” like him.
These professional politicians need the deal a lot more than Rauner does.
And probably need their salaries.
The other thing I like about this comptroller is her website. Check it out.
In particular, check out the tracker for unpaid bills. As of right now, I see a $7.5 billion backlog. Not sure if that includes pension contributions that need to be made.
Calpers Myths vs. Facts: Page is Gone But The Internet is Forever
Pensions Catch-Up Week: Dallas Police and Fire (and Houston)
Kentucky Update: Republicans Take Legislature, Pensions Still Suck, Hedge Funds to Exit