Alabama Town’s Failed Pension Is a Warning

[thundley4]

harvey007 (527 posts)         Wed Dec-22-10 09:05 PM
Original message
Alabama Town’s Failed Pension Is a Warning
Source: NY Times

PRICHARD, Ala. — This struggling small city on the outskirts of Mobile was warned for years that if it did nothing, its pension fund would run out of money by 2009. Right on schedule, its fund ran dry.

Then Prichard did something that pension experts say they have never seen before: it stopped sending monthly pension checks to its 150 retired workers, breaking a state law requiring it to pay its promised retirement benefits in full.

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“Prichard is the future,” said Michael Aguirre, the former San Diego city attorney, who has called for San Diego to declare bankruptcy and restructure its own outsize pension obligations. “We’re all on the same conveyor belt. Prichard is just a little further down the road.”

Read more: http://www.nytimes.com/2010/12/23/business/23prichard.h...

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=439x58829

Creative (701 posts)           Wed Dec-22-10 09:15 PM
Response to Original message
1. Governments set themselves up for this, but if the heed Aguirre's advice,
   
there will be total collapse of the bond market and cities would no longer be able to borrow. Subsequently, they would not be able to fund major capital improvements.

No. Greedy unions and willing DemonRats set us up for this.

Downwinder   (1000+ posts)           Wed Dec-22-10 09:18 PM
Response to Reply #1
2. Works for Corporations, why not Cities?

Creative (701 posts)           Wed Dec-22-10 09:22 PM
Response to Reply #2
5. Cities are in fact, incorporated, but unlike a for profit business, they do not produce
   
any commodities of value. Thus, they would have no basis on which to borrow.

Blue_Tires   (1000+ posts)             Wed Dec-22-10 09:18 PM
Response to Original message
3. that's what years and years of bad government earn you
   
if i had been paying into a pension fund for my entire career just to have it yanked, i don't know how i wouldn't start looking for a 'second amendment solution'...

California and other Dem strongholds where this will happen have strong anti 2nd Amendment laws to prevent that.

PoliticAverse (269 posts)         Wed Dec-22-10 09:19 PM
Response to Original message
4. Unfunded and underfunded pensions are a timebomb.
   
Many governments and corporations have done the same thing.

Make that unions instead of corporations and you'd be right.  Funny thing about  that, the Obumbler administration made it easier for unions to hide their pension finances.

As for a local story about this.

In 2001, about 30 percent of the city's property tax levy went into paying down the pensions of its retired police and firefighters. In 2011, 70 percent of it will go toward pensions, even as recent years have seen cuts to other services that draw their funds from the same source, including the Decatur Public Library.

This year the library eliminated the Bookmobiles in the face of cuts exacted upon it by the city council.
Despite such austerity, costs continue to rise due to increasing unfunded liability, caused by higher-than-expected costs that must be paid off at a mandated minimum rate.
 According to city data, Decatur faced about $10 million in unfunded liabilities to its police and fire pension systems. In fiscal year 2011, the city's unfunded liabilities for police and fire pensions are expected to total about $80 million.   

Herald and Review

Decatur has a population under 80K. We're screwed.

[Texacon]

Wonder how Galveston Counties retirement program/funds are doing?

Hmmmmm....

KC

[AllosaursRus]

This is what happens when you let workers work 20 to 25 years, then retire and claim a full pension. Ya think SS works like that? They would be fat city if they made their pensioners wait until they were 65 to collect and invested their money!!!

I was reading where these pensioners pay in around 250 grand including compound interest, thru 20 years, if they start out at around 20 years old. They then retire with a full pension and go do it somewhere else when they're 40. Thus they collect 650 grand by the time they expire on the first one and 250 to 300 grand on the second, without working a total of 20 years on the new job, having only paid in around 350 grand!!!

Numbers seem inflated, but you get the general idea. Rush has it somewhere, I'll try and look up the facts! I know the first time I heard it, it was un-****ing-believable! It's always Public Unions or one of the the other big Private Unions! The rest of us have to wait until retirement age of 65! Thats if we don't want to pay 40% penalty on our 401's!

Maybe one of these DUmmies can tell me how that works????

Must be the "New Math"!

The shell game is up, time to pay the piper!

[DumbAss Tanker]

Al, the pensions involved here were very modest amounts, a lot of the low-end ones are on the order of 12-16K per year, and the highest one I heard mentioned was 39K -- Not the Blue State horror stories we hear about, or to which you refer.  Appears this was a city that has declined in size since boom years in the 60s by about 40%, and those still around aren't about to approve higher taxes on themselves to pay the pensions.

What the city did looks to be completely illegal, they likely should have had to declare bankruptcy instead of defaulting on just the pensions but nothing else.   

[Rebel]

Creative (701 posts)           Wed Dec-22-10 09:22 PM
Response to Reply #2
5. Cities are in fact, incorporated, but unlike a for profit business, they do not produce
   
any commodities of value. Thus, they would have no basis on which to borrow.

Thanks for explaining why capitalist systems work over socialist systems.

[Ballygrl]

I was listening to a local radio show yesterday and the guest was talking specifically about NY, and basically he was saying property taxes and overall taxes will have to continue to rise to pay out the pensions. He also said state and federal pensions should be like private companies do it, matching amounts from employer and employee into a 401K, and medical benefits should have a larger contribution from the employee.

[jukin]

If i had been paying into a pension fund for my entire career just to have it yanked

That's the problem, the public unions do not put into their pensions. As of now, almost every single government employee is a millionaire several times over just from their pension and health care. The private sector that actually has to fund their pensions/retirement are getting nothing in returns.  When the muni-bond bomb blows it will be worse but somehow, someway it will be demanded that a very, very small percentage of people keep their pensions.

[BlueStateSaint]

I was listening to a local radio show yesterday and the guest was talking specifically about NY, and basically he was saying property taxes and overall taxes will have to continue to rise to pay out the pensions. He also said state and federal pensions should be like private companies do it, matching amounts from employer and employee into a 401K, and medical benefits should have a larger contribution from the employee.

Andy Cuomo is rumored to be gearing up for a fight with the public employee unions.  I've gotta say--I can't wait!

[thundley4]

Andy Cuomo is rumored to be gearing up for a fight with the public employee unions.  I've gotta say--I can't wait!

This is going to be happening in lots of cities and states, I think.  Just watch, though.  Whenever it's the Dems in charge, the DUmmies will say it is necessary, but if Republicans are in charge, it will be because they are helping their evil banker friends.

[BlueStateSaint]

This is going to be happening in lots of cities and states, I think.  Just watch, though.  Whenever it's the Dems in charge, the DUmmies will say it is necessary, but if Republicans are in charge, it will be because they are helping their evil banker friends.

Damn--has HNC been feeding you their scripts, or what?

[true_blood]

This is what happens when you let workers work 20 to 25 years, then retire and claim a full pension.

Exactly. Work half their life and get a full pension. All while being "under contract" for their "standard" pay raises, while the private sector has hour/pay cuts.
Something's got to give when that happens and those unions need to take a hit as well.