The Lies States Peddle on Pension ‘Savings’
Pensions are fast becoming the time bomb that will destroy the financial well being of our state budgets. Because public employee unions have been allowed to outrageously grow their retirement benefits by supplying billions in campaign donations to compliant politicians, most state pension plans are deeply in the hole.
Many states have at last begun to realize that the golden goose (or as we call them, the taxpayers) was long ago killed by this self-serving triangle of unions, bought and paid for politicians, and similarly bought and paid for courts that implement union demands.
So states have begun to employ some fancy accounting tricks to fool the voters into thinking they’ve begun to address the problem. One is called an “actuarial trick.” But this head-fake is starting to get real actuaries worried that the sleight-of-hand trick is making matters worse by hiding rather than fixing the mess America’s states are rushing headlong into.
What the states are doing is cutting pension benefits for future hires (not the current ones) and then claiming that these “savings” are real today. Then taking this unrealized, but possible savings and applying them to today’s budget claims. This allows the states to appear as if they are saving money and cutting costs.
Unfortunately for the truth, no pensions have been cut, the exorbitant benefits that greedy unions have paid politicians to give them are either still growing or at the least staying constant, and budgets are still in the red.
Cuts for workers not yet hired do not save much money in the present – but that’s where actuaries can work their magic. They capture the future savings for use today by assuming, in essence, that 100 percent of today’s work force is already earning tomorrow’s skimpier benefits. When used in actuarial calculations, that assumption has a powerful effect. It reduces the amount a government must put into its workers’ pension fund every year.
The cuts and changes to pensions will take decades to be realized but states are trying to fool everyone into thinking the savings are already happening.
Illinois is the state that brought this accounting trick to the attention of actuaries. With its claims as reported in the media, Illinois was claiming all sorts of savings that seemed dubious to some actuaries. These experts began to look into the claims of other states and found the fake savings claims to be widespread.
“Responsible funding methods do not work this way,” said Jeremy Gold, an independent actuary in New York who has been outspoken about the distortions built into pension numbers. He said the technique was much like the mortgages with very low teaser rates that proliferated during the housing bubble.
“You aren’t paying down your principal,” Mr. Gold said. “You’re not even keeping up with the interest. You are actually increasing your debt every year.”
Once again what we see is our politicians lying to us in order to protect unions. They want to protect unions because unions give them billions in campaign donations. And unions continue to give them billions so that the politicians will lie to us to protect them.
Public employee unions should be illegal like they were before 1958 as they are antithetical to good government.
Warner Todd Huston
Warner Todd Huston is a Chicago-based freelance writer, has been writing opinion editorials and social criticism since early 2001 and is featured on many websites such as Andrew Breitbart's BigGovernment.com, BigJournalsim.com and all Breitbart News' other sites, RightWingNews.com, CanadaFreePress.com, and many, many others. Additionally, he has been a frequent guest on talk-radio programs across the country to discuss his opinion editorials and current events as well as appearing on TV networks such as CNN, Fox News, Fox Business Network, and various Chicago-based news programs. He has also written for several history magazines and appears in the book "Americans on Politics, Policy and Pop Culture" which can be purchased on amazon.com. He is also the owner and operator of PubliusForum.com. Feel free to contact him with any comments or questions : EMAIL Warner Todd Huston and follow him on Twitter, on Google Plus , and Facebook.