Reality is closing in on public pension liars and deniers trying to keep docile government workers and taxpayers in the dark about how catastrophic our public pension crisis actually is. Politicians’ false promises guarantee huge tax hikes and draconian government service cuts for decades, but one public pension expert thinks “Pension benefits are a component of compensation not best determined by the people.”
Keith Brainard, research director of the National Association of State Retirement Administrators, acknowledged Thursday in response to a question about recent California city voters cutting future benefits that “they have that right, but it’s far better for compensation to be determined by a smaller group … instead of the passions of the popular vote.”
His response came during a web presentation Thursday by NASRA and the Center for State and Local Government Excellence, an organization founded “to promote excellence in local and state governments so they can attract and retain talented public servants.
“Pension Reform Landscape” panelists ignored the question of who is going to make up more than $4 trillion — and growing fast — in pension shortages to focus on recent reforms that might, if markets never decline again, take pressure off taxpayers 30 years from now.
As for what to do about the crisis now, SLGE research vice president Joshua Franzel cited in the “Lessons Learned” presentation an idea pension reform advocates have been pushing for almost a decade: “Use quality data.”
Franzel said that includes, “periodic review by independent actuaries.”
Our public pension catastrophe was not caused by the Dot-Com Bubble in 2001 or the Great Recession. It was caused by state and local politicians using pensions as their secret charge cards, exploiting delusional accounting to bypass legal limits on public debt and dumping it on future taxpayers.
Well, the future is here, and somebody has to pay the bill.
Exactly how big is that debt for retirement benefits promised? The Pew Center on the States this week used fictitious official numbers to update its “Widening Gap” survey of state and local government retirement promises. Even using lies, this gap widened 38 percent in less than two years.
But official numbers do not include more than $4 trillion in false pension promises politicians made to public workers that there is no — and never will be — enough money to pay.
Brainard dismissed the Pew report because it “is based on fiscal year ’10 information … and markets have improved significantly.”
No, they have not. The quarterly Census survey of the largest municipal and state pension plans showed they ended calendar year 2011 down $30 billion from the same time the previous year, and $80 billion below where they were in 2006.
These are investments that must show 8 percent gains every year forever to pay benefits. They have fallen and can never get up.
Soon that hard reality must be revealed as better accounting standards and practices bear down on public pensions.
It is going to be a lot harder for politicians to lie, cheat and foist pension costs upon future taxpayers.
The biggest change is new guidelines from the Government Accounting Standards Board set to kick in next year. GASB, which is controlled by the very governments it suggests standards for, chickened out at the last minute and left politicians enough wiggle room to push the day of reckoning off some more if they are willing to make it worse.
But, as Brainard pointed out Thursday, the new voluntary guidelines “require placing on the balance sheet a share of unfunded liability.”
Sure politicians and pension fund administrators can still lie, but at least they can’t hide the lies anymore after 2014.
However, two other forces will shine a cleansing light into the pension abyss.
One is National Association of Bond Lawyers‘ “considerations” intended to get them off the hook, when a bond issue bellies up because of pension debt. Pensioners are in line ahead of bondholders for taxpayer money.
The other is the Actuarial Standards Board‘s “Discussion Draft on Pension Risk” issued this week. It would for the first time set standards for pension actuaries — the geniuses who perform the mind-boggling calculations — to provide “an analysis of the potential range of future pension obligations, costs, contributions or funded status.”
Finally, pension plans may get that “independent actuarial review” Franzel mentioned in the SLGE presentation Thursday.
But as of right now, any public pension actuaries who try to do that are at risk of getting fired, and there is no professional standard to back them up.
That will change when the ASB standards go into place a couple of years from now.
The need for that standard proves public pensions have been run by politicians, not mathematicians, which is why we are more than $4 trillion in the hole.
It also is why, no matter what NASRA and SLGE officials say, the ultimate solution is political.
Our public pension problem will be resolved by the people, and the longer politicians stall reform the more savage that resolution will be.
More recent developments:
- Public pension liars and deniers just lower their standards
- Fiscal reality wins a victory in Wisconsin
- Study calls for ‘drastic reform’ of public pension system
- Taxpayers get crushed when pensions and bonds collide
- Municipal, state pension reform message gaining momentum
Article courtesy of Statebudgetsolutions.org.
Frank Keegan is editor of Statebudgetsolutions.org a project of sunshinereview.org. The State Budget Solutions Project is non-partisan, positive, pro-reform, proactive and anchored in fundamental-systemic solutions. The goal is to successfully engage political journalists/bloggers, state officials and opinion leaders in a new way of thinking about state government and budgets, fundamental reforms, transparency and accountability.