General Discussion
Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsPhilly schools' pension nightmare
In 2003, the state legislature saw that the funding formulas the system used to determine annual contributions from the state and districts would cause annual taxpayer contributions to soar in coming years because of poor system performance. So they did what so many others did at that time: they punted. Assuming that an economic recovery would ultimately fix the system, the legislature put in place a new funding formula that kept contributions into the system unusually low.
Instead of a recovery, of course, we got a financial nightmare starting in 2008. In an underwhelming bid for reform, in 2010 the legislature reduced benefits for new hires, but that didn't address the underfunding of the system thanks to liabilities for current workers. Still looking for a way out of rising contributions, the legislature also capped contribution rates for school districts at 5 percent of payroll, well below what was necessary to fix the system. Meanwhile, the system's funding level slipped to 66 percent, and was projected to fall to as low as 56 percent by 2018 thanks to continued low contribution rates.
In its research report, the Fordham Foundation uses the PSERS system's projections of future contribution rates to estimate what Philadelphia's school system will need to pay in coming years to adequately cover its obligations within the state's teacher pension funds. It estimates a rapid increase in district contributions from $32 million in 2011 to $139 million annually by 2020, assuming that the state continues to increase its share of funding for Philly's teacher pensions. But that's a big assumption because the burden on the state will grow, too. The total bill for annual pension contributions to the Philly school district by 2020 will be $349 million, meaning that the state will have to kick in $210 million annually by 2020 (it's currently spending $73 million as its share of Philly pensions).
http://www.publicsectorinc.com/forum/2013/08/philly-schools-pension-nightmare.html
The Philadelphia school district's pension problems are representative of hundreds of other state and local pension systems. A huge train wreck is coming and I don't see an easy solution.
reformist2
(9,841 posts)To simplify it in a way that make it clear to everyone, pension funds generally assume the stock market will double every 10 years.
badtoworse
(5,957 posts)The stock market is not one of them.
badtoworse
(5,957 posts)A lot of pension funds are buying infrastructure such as airports, port facilities, parking facilities, etc. as long term investments. Energy infrastructure is a particularly attractive area and many pension funds are aggressively pursuing it.
reformist2
(9,841 posts)I think the only real answer is to increase the contributions to the fund, whether from the workers or from the government. That is, if you want to avoid a big haircut to everyone's benefits 10 years from now.
badtoworse
(5,957 posts)This is actually a pretty competitive space and pension funds are tough to beat with the low cost of capital.
badtoworse
(5,957 posts)The cities and states just don't have the money to make good on all the promises they made.
HERVEPA
(6,107 posts)hack89
(39,171 posts)it is an honest question.
Some from more progressive taxation, a bit from taxing religious institutions, bur my issue is the term "haircuts".
Shows major insensitivity to me. We are talking about money that was counted on for people's retirement .
A little less cavalier attitude would be nice.
badtoworse
(5,957 posts)Haircuts is a pretty common term in financial circles describing a scenario where someone has to accept less money than they were expecting. Wasn't meant to be cavalier and I'm well aware that good people are going to get hurt because of this mess. In the end, the situation is what it is.
pnwmom
(108,959 posts)HERVEPA
(6,107 posts)There's a world of difference. Churches mainly provide benefits to their members. Other charities to the public. Big difference, and laws could be written to handle this.
pnwmom
(108,959 posts)without regard to their religious affiliation or the lack thereof.
And non-religious nonprofits can also restrict their benefits. For example, Group Health Cooperative Hospital here in Washington is a nonprofit that restricts its benefits to members.
HERVEPA
(6,107 posts)badtoworse
(5,957 posts)HERVEPA
(6,107 posts)And again, where in the constitution?
badtoworse
(5,957 posts)These programs do things like feed hungry people, help the elderly, house the poor, etc. Do you seriously believe politicians would vote to take money in taxes from those programs to fund public employee pensions? Did you even consider why non-profits are tax exempt in the first place?
HERVEPA
(6,107 posts)How friggin naive are you anyhow? And you left out harassing women who are entering women's health fatalities.
badtoworse
(5,957 posts)Let's assume you could legally implement a tax on just religious institutions, as opposed to non-profits in general. Such a tax would be just as difficult to pass from a political standpoint as the non-profits tax, perhaps more so. Many churches are struggling financially (mine is) and the congregation would be highly pissed off if the state or municipality passed a discriminatory tax that made their situation worse. The fact that the tax would be implemented to fund public employee benefits that most people in the congregation don't receive, would make it even more unpalatable. There would be hell to pay at the next election and politicians know that. I doubt you could find a legislator who would sponsor such a tax. Even if you did, it would be overwhelmingly voted down.
Yes, churches have power. That's because the people in the congregation vote and politicians are well aware of that. You're pretty naive if you believe that churchgoers won't remember who voted to tax their church when election time comes.
BTW, you didn't mention separation of church and state. I assume that because you want to tax churches, you'd be fine with them participating in the political process.
HERVEPA
(6,107 posts)I don't care about churches being in financial trouble. You join a club, you do what you need to keep it going if it's important to you.
Churches already illegaly participate in the political process.
If they are taxed, then that's fine with me that they participate.
badtoworse
(5,957 posts)You've offered nothing regarding how taxing churches or other non-profits could be accomplished on a political level, so I guess we're done.
Romulox
(25,960 posts)MadrasT
(7,237 posts)Pension funds all over the country are in the same boat and there is no earthly way to fully fund them. It is impossible. That is reality.
HERVEPA
(6,107 posts)You are talking about people's lives.
reformist2
(9,841 posts)I'm not excusing it, just pointing out that it's a term that's out there.
hfojvt
(37,573 posts)Kansas, for example, could fund pensions by actually putting some extra money in the funds instead of, what they actually did, give big income tax cuts to rich people.
Pennsylvania, for example, has a flat income tax instead of a progressive one. How much revenue would a 1% increase on incomes over $100,000 and a 2% increase on incomes over $300,000 bring in?
http://www.itep.org/pdf/pa.pdf
Did this bill pass? http://www.itep.org/pdf/pa.pdf
Republicans continue to propose and vote for legislation which cuts taxes for big corporations and rich people. If they think we can afford $700 million in tax cuts, then why can't we afford $700 million in pension contributions?
cbdo2007
(9,213 posts)devils chaplain
(602 posts)Someone was criminally reckless.
hack89
(39,171 posts)it happens all over America - politicians do not want to adequately fund public employee pension funds because they do not want to raise taxes or they have their own pet projects they rather spend money on. In their eyes, they will be out of office before it becomes a problem and it becomes someone else's problem to fix.
reformist2
(9,841 posts)With gov't bonds yielding so little these days, there's really no way they can avoid a big exposure to equities.
Egalitarian Thug
(12,448 posts)so dumbed down that they just accept nonsense for no reason other than that the nonsense is presented under a cloak of authority.
Spreadsheets are wonderfully useful tools, but they are not a replacement for knowledge and skill.
Demo_Chris
(6,234 posts)It sucks, but there it is. Asking Walmart and McDonald's workers (our nations largest employers) to accept a tax hike in any form to fund the pensions and benefits of public workers making many times their wages simply will not fly. The tax increases must come from the top ten or twenty percent -- ironically, in many cases the very people who benefit from these pensions and benefits.
But this is certain, there is no magical supply of free wealth. If these pensions and benefits are to be funded someone will have to pay for it with increased taxes.
Supersedeas
(20,630 posts)after years of service.
HERVEPA
(6,107 posts)The only profession where people have to steal from supplies at home to bring to work.