Tag Archives: Pensions

News

Democrats join Republicans in demanding probe into Delphi pension scandal

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From the Daily Caller.

Excerpt:

Twelve lawmakers wrote to House oversight committee Chairman Rep. Darrell Issa and Senate Homeland Security and Governmental Affairs Committee Chairman Sen. Joe Lieberman asking that they expand current probes into a Department of Treasury scandal that left 20,000 non-union Delphi retirees without their pensions after the 2009 General Motors bailout.

The members — Sens. Rob Portman of Ohio, Thad Cochran of Mississippi and Roger Wicker of Mississippi, and Reps. Pat Tiberi of Ohio, Steve Stivers of Ohio, Mike Kelly of Pennsylvania, Dan Burton of Indiana, Bill Johnson of Ohio, Paul Gosar of Arizona, Marcy Kaptur of Ohio and Gregg Harper of Mississippi — are led by Ohio Republican Rep. Mike Turner.

“We are writing to request that the committees which you chair submit additional requests for documents from the Department of the Treasury and the Pension Benefit Guaranty Corporation (PBGC) on matters pertaining to the unjust termination of Delphi salaried retiree pensions in the federal government’s bailout of General Motors,” the lawmakers wrote. “As you may know, the pensions of Delphi salaried retirees were significantly reduced in the aftermath of the bailout, while their union counterparts were made whole. These retirees, regardless of labor affiliation or not, spent their careers working alongside one another and should not be treated differently in their retirement. This decision of the Auto Task Force, Treasury, and the PBGC continues to affect roughly 20,000 current and future retirees across the nation.”

The bipartisan support for this renewed investigation call — Kaptur is a Democrat — undercuts the Obama campaign’s accusations that his GOP rival, Mitt Romney, and Turner are trying to “politicize” this scandal.

Portman, who’s widely considered to be on Romney’s short list of potential vice presidential candidates, said in a statement that he has “met with these hard-working Ohioans who lost a significant portion of their pension benefits while other retirees from the same company received far better treatment.”

“The idea that the administration played politics with their pensions is beyond disappointing, and it deserves answers,” Portman said. “The administration’s decisions have caused pain and loss to thousands of workers and their families as a result of their reduced benefits. This matter deserves continued scrutiny from Congress, and the administration must be called upon to account for its decisions.”

Remember way back in 2009 about how the auto bailouts favored the unions over the private sector creditors who would normally be paid more of whatever could be saved? This isn’t the first time that the private sector – which funds the government –  was screwed by the government. But “the private sector is fine”.

Commentary

How well did Obama-style tax hikes on the rich work for Illinois?

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Central United States
Central United States

From the Wall Street Journal.

Excerpt:

Run up spending and debt, raise taxes in the naming of balancing the budget, but then watch as deficits rise and your credit-rating falls anyway. That’s been the sad pattern in Europe, and now it’s hitting that mecca of tax-and-spend government known as Illinois.

Though too few noticed, this month Moody’s downgraded Illinois state debt to A2 from A1, the lowest among the 50 states. That’s worse even than California. The state’s cost of borrowing for $800 million of new 10-year general obligation bonds rose to 3.1%—which is 110 basis points higher than the 2% on top-rated 10-year bonds of more financially secure states.

This wasn’t supposed to happen. Only a year ago, Governor Pat Quinn and his fellow Democrats raised individual income taxes by 67% and the corporate tax rate by 46%. They did it to raise $7 billion in revenue, as the Governor put it, to “get Illinois back on fiscal sound footing” and improve the state’s credit rating.

So much for that. In its downgrade statement, Moody’s panned Illinois lawmakers for “a legislative session in which the state took no steps to implement lasting solutions to its severe pension underfunding or to its chronic bill payment delays.” An analysis by Bloomberg finds that the assets in the pension fund will only cover “45% of projected liabilities, the least of any state.” And—no surprise—in part because the tax increases have caused companies to leave Illinois, the state budget office confesses that as of this month the state still has $6.8 billion in unpaid bills and unaddressed obligations.

It’s worth contrasting this grim picture with that of Wisconsin north of the border. Last winter Madison was occupied by thousands of union protesters trying to bully legislators to defeat Republican Governor Scott Walker’s plan to require government workers to pay a larger share of their health-plan costs, and to shore up the pension system by trimming future retirement liabilities. The reforms passed anyway.

In contrast to the Illinois downgrade, Moody’s has praised Mr. Walker’s budget as “credit positive for Wisconsin,” adding that the money-saving reforms bring “the state’s finances closer to a structural budgetary balance.” As a result, Wisconsin jumped in Chief Executive magazine’s 2011 ranking of each state’s business climate—moving to 17th from 41st. Illinois dropped to 48th from 45th as ranked by the nation’s top CEOs.

And in Ohio, Republican Governor John Kasich also saw success.

Excerpt:

Ohio’s new fiscal responsibility is getting noticed and rewarded.

Standard & Poor’s upgraded the state’s credit forecast from “negative” to “stable,” in time for a $417 million bond sale last week to refinance at a lower interest rate and restructure debt.

Ohio’s lean budget will pay off with lower costs for borrowing, saving taxpayers as much as $1 million or more over the course of a year, according to the state’s Office of Budget and Management. It’s like having a credit-card company lower its annual percentage rate: The borrower can either accelerate the payoff or spend the savings elsewhere.

So essentially, cutting state programs spared money for state programs.

This is vindication for the Kasich administration. When Gov. John Kasich took office this year, the state was $8 billion in the hole and its rainy-day fund totaled $1.78. That’s not a typo; Ohio barely had enough in the bank to buy itself a cup of coffee. A small one.

[…]Investors pay attention to these ratings, especially since Ohio stands out as other states continue to struggle. “There are a lot of jitters in the credit market; I can’t imagine it won’t be helpful,” said Robin Prunty, primary credit analyst with Standard & Poor’s.

[…]Most states still are struggling with the economic recovery and phasing out one-time money from the federal stimulus program that Kasich’s predecessor used to paper over the deficit. S&P’s revised outlook reflects its view that Ohio’s economy “is steadily recovering.”

“The outlook revision reflects the state’s progress in moving toward structural budget balance through fiscal 2013 and the modest economic recovery under way,” its report says.

Republican tax policies work, and Democrat policies don’t. Taxing the rich sounds good, but it doesn’t help the poor. To help the poor, we need to encourage people with capital to risk it by engaging in enterprises for profit. That is what causes workers to be hired and wealth to be created – forming valuable products and services through ingenuity and labor.  Workers who build skills and experience while working have more confidence and can be more productive, making them more free because they can succeed independently of government handouts.

News

Veronique de Rugy debunks myths about public sector pension liabilities

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From Reason magazine. (H/T Hyscience)

Bullet point summary:

Myth 1: Unfunded state pensions do not represent an immediate threat and are therefore not in crisis.
Fact 1: In the best case scenario, some state pension funds will run out as soon as 2017. And the longer the states wait to fully fund their pensions, the more drastic the financial consequences will be.

Myth 2: State debt accurately reflects state liabilities. And state default is not a concern because the federal government will bail the states out before they reach that point.
Fact 2: Many government pension liabilities are kept off the books, so most states and cities underestimate their actual debt.

Myth 3: State and local workers are not overpaid. And even if they are, changing their compensation won’t make a difference.
Fact 3: While this is a complex issue, the total compensation package for state workers does tend to exceed that of their private-sector counterparts.

Myth 4: The financial crisis, which caused a depreciation of pension assets, is the real culprit behind pension underfunding.
Fact 4: While the recession dealt a severe blow to state pensions, the problem of pension underfunding dates back to the early 2000s. Many states had already failed to cover the cost of promised benefits even before they felt the full weight of the Great Recession.

And conclusion:

Here’s the bottom line: We can argue endlessly over when the pension plans will run out of cash, or what the true value of the unfunded liabilities is. We can even debate what the true meaning of being broke. But there is one issue where there is no room for debate. Once the pension plans run out of money, the payments will have to come out of general funds, meaning out of the pockets of taxpayers. If the states want to avoid this, they must push through reforms as soon as possible. A good first step would be to switch to accounting methods that show the true market value of their liabilities. Once those methods are in place, lawmakers should consider moving away from defined benefit pensions.

What states like Wisconsin and Ohio are doing is completely necessary. This is a real crisis, and we need to act now to make sure that taxpayers are not squeezed when the money runs out.