[quote=FlyerInHi]SK, let me make clear why pensions are the problem.
CAR said this to make it sound like municipalities make annual contributions and are done.
[quote=CA renter] Again, “taxpayers” (and every public employee is a taxpayer who is paying at least as much as everyone else, especially since they are W-2), DO NOT pay the pension benefits to these retirees. The benefits are paid entirely from the retirement funds, and those funds are funded primarily by investment returns, employee contributions, and employer contributions. The “taxpayer” costs come from the employer contribution side for current employees[/quote]
Of course, CAR left out health benefits to retirees.
SK, as you correctly pointed out, pensions funds are just conduits and public employers are on the hook for the defined benefits they promised. Defined benefits mean that short of renegotiating the contracts or there not being money, those defined benefits must be paid.
But we all know that pensions funds are short of money to pay benefits to everyone that was promised.
So, all else being equal, if you give local governments a bunch of new money (from repeal of prop 13), that money will go to pay the legal obligations first (employees, retires, bondholders). Otherwise, these guys will go to court. And of course, the courts will order local governments to pay up because the money is there. But if they is no money, the courts will force a compromise.
Discretionary spending on services to citizens will not improve, or only minimally improve, by just increasing taxes and keeping the status quo. There is nothing of value to ordinary everyday taxpayers to increasing taxes. (copying CAR by using bold).[/quote]
I could quibble with some details, but I don’t disagree with much here. None of this has anything to do with the paragraph I quoted, which was nonsensical. It wasn’t wrong. It was nonsense. It had no nexus. It was like saying “The water is wet, the dirt is dry, so triangle.”
We can only hope that if revenues increase, that any extra funds will go towards making retirement funds more solvent. They are NOT facing insolvency crisis now. There is plenty of money to pay all current benefits. Long term, they need to be fixed. Higher investment yields will help. That’s happened recently. Higher employee contributions will help, that’s happening. Lower current cost by reducing future benefits will help, that’s happening. Better mandatory funding by sponsors will help, that’s happening. It is a problem. It is not a problem that can’t be solved.
