Thanks to SK for summarizing funding considerations for a DB plan. Pretty amazing that you can do something like that over your phone. I would like to emphasize one of your points where you say that plan sponsors negotiated retirement plan increases in lieu of current compensation increases and the impact on benefit and funding obligations. In 1999, Gray Davis signed SB 400 which effectively doubled the retirement benefit to be paid to state workers, allegedly based on actuarial forecasts predicting that no additional contributions would ever be required because investment returns were going to be so high. This benefit increase applied to past service, a point which cannot be overemphasized in its impact on the funding. The truth of what the actuaries told the politicians is debated, there are certainly several parties with an interest in CYA here, but the bottom line is that benefits were increased substantially with retroactive application.
It is probably a waste of time to talk to a partisan like CAR where he/she has resorted to the favorite union tactic of calling people “haters” in an attempt to devalue their viewpoints. However, I note that the unions have really missed an opportunity to take the higher ground and retain allies among the moderates who are not already committed on the public employee pension issue (there may be 2 or 3 of us left). If the unions had been smart, they would have disavowed abuses like spiking, fraudulent disability pensions, double dipping, and offered to give back the gifted benefits increase from 1999 with respect to at least the retroactive portion (that was a gift because when the work was done under those contracts, the benefits were at the bargained for lower rate). These practices also skew the actuarial funding assumptions.
CAR’s point about what to cut in legitimate in that there will be pain for all. Inevitably. And this even ties in to real estate because taxes are going to go up even if benefits to state employees are reduced, the numbers just are that bad.
