PDA

View Full Version : Pension check may not be in the mail.



Ponce
14th August 2010, 09:20 AM
A view of what is to come.............all over the place.
================================================== =========

Pension chec k may not be in the mail.

Dennis Byrne

August 10, 2010


Illinois public employees who think the state constitution guarantees that they'll get all their pension benefits may have another think coming.

Politicians' and public labor unions' assurances aside, there's another, not-well-publicized school of thought that says if the pension funds go bust, the state has no obligation to step in to pay the benefits. This runs contrary to the popular view that the Illinois Constitution, on its face, guarantees that all public employee pension benefits will be fully paid.

This belief is based on Article 13, Section 5 of the Illinois Constitution: "Membership in any pension or retirement system of the state, any unit of local government or school district … shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired."

Sounds solid, doesn't it? It's not, according to a legal opinion from the Chicago law firm Sidley Austin, provided to me by R. Eden Martin, president of the Civic Committee of the Commercial Club of Chicago


The opinion acknowledges that the constitution creates a contractual agreement between the workers and the state's employee pension funds. But it concludes that neither the constitution nor the law say the state is a guarantor of that obligation.

The Sidley opinion argued that the state can become a guarantor only under section 2l2-403 of the Illinois Pension Code. That provision states that if a state pension fund runs out of assets "(a)ny pension payable under any law . . . shall not be construed to be a legal obligation or debt of the State . . . but shall be held to be solely an obligation of such pension fund, unless otherwise specifically provided in the law creating such fund."

So, does any law creating the pension funds "specifically provide" that the state would become the guarantor? Sidley examined the laws creating the five state pension funds and concluded that while each contains an "obligation of state" provision, none guarantees that the state will step in and pay the funds if they run out of money.

In simple language, that means if the pension funds run short of cash, public workers face the same sort of uncertainties that most workers in the private sector do.

And what are the chances of the funds running dry? Pew Center on the States ranked Illinois dead last in pension funding. The generally accepted view is that Illinois' unfunded pension liabilities come to about $80 billion — that's for a state whose total upcoming operating budget amounts to $26.1 billion, of which $13 billion is a deficit. Even if the state were to shut down every last thing it runs — such as Medicaid, transit funding, law enforcement, education and the legislature — and put all its money into eliminating the unfunded obligation, the entire state would go dormant for three years.

Well, not exactly. It would go dormant longer because the liabilities would have continued to increase during the three years. To get an idea of how fast, consider: From 2006 to 2010, the unfunded liability doubled, to $80 billion, from $40 billion, according to Martin.

Well, not actually. The unfunded obligation could even be greater, Martin said, because of a flawed formula that underestimates the actual benefit costs. If a more standard calculation were applied, the unfunded obligation could run to $200 billion, according to some analyses, he said.

To be clear, it's not that the state has taken $80 billion (or $200 billion) in cash out of the pension funds, a common misconception. Basically, much of the money was never there in the first place because the state has been unable to keep up with the payments needed to cover the ballooning benefits. One way to look at it: The state shorts the pension funds to keep the electricity on.

How that happened is a complex and dark political tale, extending over a half century of wanton spending, borrowing, self-deception and lies. But, if we're to climb out of this nightmare, everyone will have to sacrifice. That includes public employees who, Martin notes, should get on board to work out some solutions. They might have to put up with some small sacrifices, but it's better than waiting until the well runs

Still Barbaro
14th August 2010, 10:48 AM
As Twisted Titan wisely stated, some of the state employees may get a "Love Note" in th email.

"It is with regret that......you're screwed."

Doesn't matter how many years you put into this. The money isn't there.

Illinois seems to be a very real possibility is bagging the pension. 3 others states hurting and many more on the list of being marginal.

We'll have to wait a couple of years, more or less.

I don't expect an economic turnaround to help the pensions.

Ponce
14th August 2010, 10:58 AM
No it wont because even in a turnaround it will take time to built all that was lost........a long time.

Phoenix
14th August 2010, 11:43 AM
Anyone who has ever seen one of these...

http://www.informationliberation.com/files/us_dollar_silver_certificate_large.gif

...and still believes in government promises...

DESERVES WHATEVER THEY GET (or don't get)!!

Fudup
14th August 2010, 11:53 AM
State and Federal pensions are merely Ponzi schemes that benefit the crooks, err, politicians that negotiated and created them and screw future generations of contributors and taxpayers alike.

Taxpayers are the serfs of the state kingdoms now.

Glass
14th August 2010, 03:41 PM
A pension by legal definition is a gratuity. It's a TIP. There is no obligation to pay a gratuity.

Ponce
14th August 2010, 04:00 PM
LOL Glass, I disagree with you but good thinking..........I think ;D

Book
14th August 2010, 06:41 PM
http://img.photobucket.com/albums/v210/aiFen/mix/animalfarm.jpg

At the end of the novel Animal Farm the work horse gets screwed out of his retirement. Sent to the Glue Factory instead of out to pasture. Can't claim we didn't know the game.

:D

agnut
14th August 2010, 08:48 PM
Hi Ponce; good stuff ( Of course, look who’s getting stuffed !).

Here’s Denninger’s take on the U.S. pension s(h)ituation :

“You're not going to get the money you think you were promised”


http://market-ticker.org/archives/2010/08/08.html

=============

A while back, an old friend lost his glazier’s union pension. They said that they had made some bad investments and they were broke.

So what can we expect if/when the stock markets/bond markets crash and burn ? Not to mention what will happen to 401Ks, IRAs, Keoughs, and all of the other paper retirement products that were set up to lose purchasing power through the contributing years.

Me ? I’m 63 and have NEVER expected to get a pension; I’ll probably keep working in my own way until I fall into the machinery, so to speak (I hope). Retiring is a recent phenomena anyway; it's time has come and gone. Besides, staying active is integral with really being alive.

I guess your famous quote “If you don’t hold it, you don’t own it” is starting to hit hard those who don’t follow it.

Best wishes and keep up the great posting,

Agnut