April 26, 2017


Think Public Pensions Can't Be Cut? Think Again. : It's happened several times in just the last few years. With so many systems severely underfunded, it's likely that more government employees will to be blindsided. (CHUCK REED, APRIL 26, 2017, Governing)
As John M. Richardson, a pioneer in the study of system dynamics, once put it, "When it comes to the future, there are three types of people: those who let it happen, those who make it happen, and those who wonder what happened."

That's as good a way as any to describe what has befallen so many of our state and local government pensions systems, now facing a collective funding shortfall of $5 trillion: legislative bodies that let it happen by creating unsustainable pensions, policymakers who perpetuated the problem by not fully funding their plans, and retirees who have been blindsided, wondering what happened, when their pensions have been slashed.

Consider, for example, the nearly 200 retirees of California's now-defunct East San Gabriel Valley Human Services Consortium, an employment and job-training agency known as LA Works, who just had their pensions cut by as much as 63 percent. Who's to blame? Policy leaders who set up the risky pension structure; city governments that didn't keep up with pension payments; and the California Public Employees' Retirement System (CalPERS), which oversees the plan and never alerted workers that their employers had fallen behind on payments. It's hardly surprising that the affected employees are questioning how, after paying into the pension fund for 25-plus years, this could have come to pass.

What's happening with LA Works' retirees isn't a unique situation. CalPERS, whose pension debt stands at $170 billion, just last year drastically cut pension benefits for retirees who worked for the city of Loyalton. Many other cities, and several states, are struggling to keep their heads above water in the face of runaway pension costs.

Think it can't happen to your city? Think again. Detroit, Mich., and Cedar Falls, R.I., are polar opposites in many ways, but they have one thing in common: Both slashed their retirees' pensions when the cities filed for bankruptcy.

Governments aren't going anywhere; the benefits are.
Posted by at April 26, 2017 5:35 AM