Tag archive for Discount rate

Unfunded pension liabilities are worse than we thought

State Budget Solutions just released a new report analyzing the funding status of pension systems across the country. The news is far from good. The report, which incorporates data from more than 250 pension plans in all 50 states, estimates pension funding levels far more …

Warren Buffett: Call your city council

Warren Buffett might be considered one of the world’s savviest investors, but his warnings aren’t being heeded in his own hometown. Buffett has called the public pension nightmare a “gigantic financial tapeworm” eating away at city and state finances, and he’s criticized funds for their optimistic investment assumptions. His own Berkshire Hathaway uses a modest 6 percent annual projected return on investments in its own pension funds…

Charter schools are not budget busters

“More accountability, more money,” has been the structure of many, many deals driving K-12 reform over the years. Though reformers premise their arguments on the belief that more money is not the answer (hence the need for policy changes), in practice, increasing spending is a …

Does the average Orange County firefighter make $234,000 per year? No. And that’s the bad news.

UnionWatch.org reports that the average firefighter in Orange County, California pulls in total pay and benefits of $234,000 per year, making them among the best-paid public employees – and, for that matter, among the best-paid of any kind of employees – in the country. But …

Detroit should be held to higher pension management standards than other cities

Detroit Emergency Manager Kevyn Orr values the city’s unfunded pension liability at $3.5 billion, a number much higher than what the two retirement systems themselves claim is the right figure.The study upon which Orr based the higher figure hasn’t yet been made public, but probably will …

The bizarro world of municipal bankruptcy

Ch. 9 municipal bankruptcy may be understood as the pursuit of fiscal stability by alternative means. A city goes into bankruptcy to get something (debt adjustment) that it tried and failed to get outside of federal court.
But developments in Detroit have already illustrated that, in …

Defined benefit pension plans and politics: a toxic combination

David Crane criticizes the Manhattan Institute for advocating the curtailment of public sector defined benefit plans on several occasions. As mentioned in my recent paper, there is nothing fundamentally superior or inferior regarding defined benefit (DB) plans as such.
The fundamental point is that DB plans …

CalPERS’ actuarial magic: can’t have it both ways

The main drama in Stockton’s bankruptcy proceedings concerns a fight between CalPERS and a group referred to in legal documents as the “Capital Markets Creditors” (two bond insurers, a money manager, and a bank (herein “creditors”)). The latter argue that CalPERS is just another “garden …

Pension plan investment assumptions: still way too rosy

Andy Kessler’s wrote a timely article and a worthwhile read published in the April 9th edition of the Wall Street Journal.  He deals with the rosy annual investment expectations, in the 7.5% to 8%, range underlying most public sector defined benefit pension plans.  As he …

Public pension fallacy #5 will not go away

One of the most common fallacies confronting pension reformers is the accusation that we are “projecting” low rates of return on public pension investments. This is public pension fallacy #5 in my recent paper, ”Nine Fallacies Used to Defend Public-Sector Pensions.”
The cliffs-notes response is that we are not …