It strikes me that one of the real reasons that union bashing is being pushed so hard in the Indiana Statehouse these days, is that the State's unfunded pension liability is ticking away.
Part of the remedy being chased, appears to be the continued vilification of the very folks who were promised retirement benefits through negotiated contracts. Instead, perhaps, we should be looking at those who should have set enough money aside to fully finance the promises they were making to their employees.
That said, I am going to relate to you, some of the information I found on the web pertaining to all state's unfunded pension liability, but I'll pull out the Indiana information here.
Let's start with this nugget:
Joshua Rauh, Professor in the Department of Finance, Northwestern University, estimates that Indiana's State pensions could run out of money as soon as 2019 - eight years from now. Only Illinois and Connecticut State pensions are calculated to run dry before our State pensions are. And, this is predicated upon an 8% return on investment of the assets we have in those pensions.
To peruse Dr. Rauh's papers on this topic and others, click here, and as you see a title of an academic paper that sounds interesting to you, click the 'download' link.
As I reviewed analyses, it became clear that accurate base data were not available to any of the authors immediately. So, for instance, the Pew Center on the States published their analysis, "Trillion Dollar Gap", on the aggregate and individual State's unfunded pension liabilities in February of 2010, reporting on the conditions in 2008.
For Indiana, the Pew Center said that $9.8 billion (yes, with a B), was the unfunded portion of Indiana's pension liability. The total 'bill' as they noted it, amounted to $35.6 billion. They grade Indiana as a State where there should be 'serious concerns' about the unfunded liability.
Going back to Dr. Rauh's publications on the matter, I pulled a couple of data points over a couple of years. Dr. Rauh's data showed that in 2005, Indiana had a State pension liability of at least $29.2 billion, and had $19.5 billion in assets saved for the purpose of covering those obligations. By 2009, the Indiana State pension liability had grown to $37.3 billion, but the assets saved had grown to only $19.6 billion. The numbers for liability are the State's own estimates. Others, including Dr. Rauh and the Pew Center, say the actual numbers are much higher.
Here is the problem in a nutshell. At budget time, these pensions were not allocated enough money to be prudent.
This is just like in Indianapolis. Under Mayor Steven Goldsmith, the pre-1977 police and fire pension was not funded, creating a ticking time bomb. That bomb went off during Mayor Bart Peterson's term and ultimately cost him reelection.
This is just like here in the Decatur Township school district. I have blogged repeatedly about the district and its promises for high end retirement deals for administrators. Even though the State recognized the looming problem and tried to provide a fix for it back in the early 2000's, our Superintendent Don Stinson has continued to build unfunded liabilities, on top of the benefit promises that were fixed in 2003 and 2004.
The real problem has not been the unions that represent these employees. The real problem has been the unwillingness of elected officials to properly and prudently set aside enough money to fund these pensions as the employees retire. These elected officials made promises but did not back them up as they should have. Now they want to blame the folks to whom they made these retirement promises, instead of fixing the problem they created with insufficient budgets.
Now, I have no idea how to allocate the responsibility proportionately, as I haven't closely followed the State budgeting process. But, Governor Daniels took office in 2005, when our State's pension liability was $29.2 billion, by the State's own estimate. Within 4 years that liability had grown by $8.1 billion and we had saved only 0.1 billion more to fund that expansion. Governor Daniels submits the budget, but then folks like Representatives Brian Bosma and Pat Bauer, and Senators David Long and budget doorkeeper Luke Kenley, dive in and make changes as they see fit. What comes out is that they all bear responsibility. And we voters need to make sure that they fix this problem in a timely manner that doesn't put us all in the poor house.
2018 -- tick, tick, tick.
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8 comments:
The problem with pensions, aside from the obvious lack of funding, is that all sorts of administrations, red and blue, kept giving them out like candy. Obviously we're going to have to fund the existing obligations, but just as obviously, we have to drastically reduce future obligations.
anon - I would not disagree with you. As I understand it, unions have been agreeing to reduced pay and benefits all over the country. We can all shift to the new economic reality as adults. But, the elected officials simply MUST fully fund the future liabilities that they promise. Or, don't promise something.
Wonder if part of the problem regarding pension deficits has been due to poor investments by the pension fund managers and the Wall Street fiasco?
The current legislature MUST enact statute that would put an end immediately to these inordinate pensions for school superintendents. It is not about teacher unions - it is about greedy "leaders" who twisted and turned the statute language.
As long as you include greedy union leaders, and the greedy Democrat leaders who want the contribution money the union leaders squeeze out of the membership, I'm with ya. There's no one greedy group that needs trimmed back. They all need equal treatment.
"But, the elected officials simply MUST fully fund the future liabilities that they promise. "
Teachers' pensions are outrageously high. This money has been stolen from the citizenry by unions and school boards acting in cahoots. The teachers should get whatever they paid in, and nothing more.
The average teacher in Indiana makes twice what they should.
"The average teacher in Indiana makes twice what they should."
That is an unbelieveable statement, based upon the pressures and scope of the job! What are your qualifications to make such a statement?
Any soon to retire teacher should take the annunity separately....cause it may not be there as part of the pension in a few years. I will take the smaller pension amount and use the rest for a safe investment.
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