That is yet another reason to leave California. It is well established that our public sector CA pension systems are grossly underfunded, a result of overly generous pension benefits, super early retirement plans, and “kicking the can down the road” by failing to levy high taxes on current taxpayers.
But the math is catching up with CA, as we now face vastly higher taxes or reduced government services to pay for public sector retirees. Pension costs can eat up a quarter to a third of localities labor costs, up from a tiny amount a few years ago.
And this is with a buoyant stock market and booming economy feeding the investment income of those pension plans. Think what would happen if we had a normal recession, or a stock market cut in half (it has quadrupled from its low). How ironic is it that the Trump economy is currently propping up CA tax revenues such that they are exceeding past projections.[/quote]
yup,… in the short run math can be ignored,.. BUT eventually it punishes those that ignore its warnings or fail to think things out in the first place
[quote] Study: Some public pensions funds could run dry in downturn
Many pension funds for public workers already owe far more in retirement benefits than they have in the bank, and the problem will only grow worse if the economy slows down, according to a report released Thursday.
The study from The Pew Charitable Trusts found that the New Jersey and Kentucky funds are in such perilous shape that they risk running dry.
…The Pew study, published by the Mossavar-Rahmani Center for Business and Government at Harvard University, examines what would happen to pension funds in 10 states under various economic scenarios.
…Notably absent from the report was California, which has the two largest public pension funds in the nation. They had a combined $168 billion in unfunded liabilities in 2016, according to another recent Pew report. Mennis said California’s funds were not included in the stress test study because they are so large and uniquely structured.
FYI “a combined $168 billion in unfunded liabilities” in just this state alone IMHO is an optimistic figure based on an unrealistic “high” discount rate which has been in place for decades
[quote] Pensions Are Still Making Ludicrous Assumptions About Future Returns
…Many state-funded pension plans today assume an 8% nominal return for the indefinite future. Some are beginning to forecast lower returns, but very few would forecast lower than 7%. Moody’s argues that somewhere in the range of 4% nominal is more realistic. Notice that the difference after 40 years is well over four times. Even if you assume that magic returns to the markets after 2020 and returns go up to 8% thereafter (the green line in the chart), there is still a gap of $5 billion after 40 years. On assets of $2 trillion, that is a gap of $10 trillion. If you assume only a 4% nominal return for the entire 40 years, the gap is $30 trillion. For the mathematically challenged, that is not a rounding error.
PS one last thing to think about this memorial day,… “derivatives” (as in the movie THE BIG SHORT) are mathematically chaotic which compound the “risk” to the global finance system,… in other words given mismanaged/corrupt public pension portfolio(s) and “the california rule” which placed the average california taxpayer between a rock and a hard place,… if we add in the danger of “derivatives” then imagine being stuck between a rock and a hard place AND THEN KICK IT A NOTCH!!!
