Visduh

City's pension liability zooms up by $937 million

There is nothing inherently wrong with defined benefit plans. But when they are established, they have to be on sound actuarial footing, and then they cannot be "messed with." Unfortunately, when making growth estimates, the managers err on the high side especially when returns have an abnormal spike, which happens from time to time in a bull market. In the public sector, keeping the plans fully financed requires discipline, putting large sums of money into the trusts when it seems it isn't needed. It is needed; just wait until the next downturn. Across the state and nation we have all levels of government making promises of lovely retirement incomes that cannot be paid for at the current levels of funding and current levels of contribution. If the real cost of the plans were honestly faced and paid in each year, there would be little to pay for current operations. The streets would be worse than they already are, cops would be stretched thin as would fire and emergency medical care personnel. The list of shortfalls goes on. With the public DB plans always subject to weak-willed political consensus they will never be properly funded. So, the only real answer is to go to a defined contribution plan. As to the sort of things that will have to occur, they are already happening. The State Teachers Retirement System is now collecting more from both the teachers and from the school districts, for newer hires, than previously. The formula was 8% from the teacher and 8% from the district, supplemented by some state funds every year. For that, a teacher could look forward to a comfortable retirement after thirty years of service. Now the teacher contributes 10%, and the district even more, just to provide the same schedule of benefits as before. And even that formula is criticized as inadequate. School districts are screaming bloody murder because they have to find more money each year to pay the share of STRS for each teacher. The bottom line will be fewer teachers. It's happening already, here and there, in public employment.
— December 24, 2016 9:11 a.m.

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