Tuesday, April 26, 2011

Indiana's Unfunded Public Pensions Getting Worse

Indiana will have to raise taxes, cut benefits or default on its pension obligations. It's the big elephant in the room no one wants to talk about. The Star's Maureen Groppe reports on the latest study of the issue:

A majority of states -- including Indiana -- are not putting away enough money to pay for their public employee retirement costs, a new report concludes.

Indiana was among the 31 states whose pension programs were less than 80 percent funded in 2009, according to a report to be released today by the nonpartisan Pew Center on the States.

Indiana funded 67 percent of its pension liability, down from 72 percent in 2008 . . .

Pensions are one of the remaining issues before the Indiana General Assembly as it works to complete a new state budget this week. The Senate wants to send extra money to the state's teacher pension plan if reserves hit 12 percent of operating funds at the end of the biennium. Gov. Mitch Daniels and the House want the state to give an automatic tax refund to individual income tax filers if reserves hit 10 percent.

The state and the City of Indianapolis have long short-changed pension contributions as a way of tricking taxpayers into believing they are balancing the budget. An earlier study suggested Indiana's pension system will go bankrupt by 2019 if it continues on its current course of funding and spending.


Cato said...

It doesn't matter. The dollar is falling to its proper value, and we're monetizing the debt, so we'll be able to pay off 2000 benefits with very cheap 2030 dollars. The pensioners' standard of living will be crushed because of inflation, but we'll be able to make the nominal payments.

Without a COLA built into the pension plans, the money managers don't have to worry too much. It gets cheaper to repay a 1991 benefit dollar, every year.

If a COLA is built in, default is inevitable, because the benefits were over-promised, and the economy of the state will never be so robust to deliver on those promises. Further, the state's economy will not support being confiscated to the extent required to pay off bloated police pensions.

The way out, right now, is to cancel all police pensions and put the cops on 401k plans.

The FOP will say "Promises were made, and the state has an obligation to keep its promises." The General Assembly needs to have the courage to say "Things change."

Bob said...

It's way past time to put much of the blame for the public pension problem on the elected officials who have underfunded it for years rather than the public employees (you know... the "union thug" teachers.)

It's been amazing how effective the the legislature has been at blaming the victim and keeping the attention off of them.

SW Lane said...

It figures that Cato would focus in on the cops and not anyone else who is on a state pension...and there are a Hell of a lot more of them than cops.

What happened Cato? Did you once apply to the local PD and get rejected for some reason?

Substitute the words "Blacks" or "Gays" and your prejudice would be as disgusting. There's no difference really..you judge the acts of all based on a few.

Had Enough Indy? said...

The State needs to spend their extra cash to fully fund these pensions and not cut taxes, as Governor Daniels prefers.

Cato said...

"What happened Cato? Did you once apply to the local PD and get rejected for some reason?"

Do you think so poorly of me that you conjure that I'd make such an application? What a shallow brain you possess.

No, Had Enough, the pensions are excessive. Cut taxes, and default on any portion of the pension that is not a salary set-aside. Return to the people what they paid, perhaps with a nominal amount of interest, but no more.

M Theory said...

Cato is right once again.

SW Lane said...

" Do you think so poorly of me that you conjure that I'd make such an application? What a shallow brain you possess. "

What an enormous ego you possess. I don't think so much about you at all, except for when I see these rants about the police all the time. While all cops should be accountable, not all possess the negatives you constantly apply to all of them. Sad on your part. I'll be embarrassed for you.

TMLutas said...

Cato - It's not that things change, but rather did the negotiators ever work out a sustainable way to pay for the pensions that were promised and was the public ever informed?

If it makes it clearer, the ousted mayor of Bell, CA set up the clearest case of improper pensions I've ever seen: http://www.google.com/hostednews/ap/article/ALeqM5i_5jhSE4-DW_MU3RsKKcoCAVrwlA?docId=5ae774f9c7f4440bb0630eb3a73c3558

Nobody else knew about it and the new government is looking to claw back the funds. If labor reps and politicians in Indiana conspired to enrich the former and secure re-election for the latter by the same sort of underhanded tactics they deserve no less than the pirates in Bell, California.