From Racine Exposed:
"The Government Wide Financial Analysis revealed that difference
between the the net assets and net liabilities fell by $49,153,636 from
2009 until 2012. That’s a NEGATIVE. In 2009 net assets exceeded
liabilities by $271,291,402 and in 2012 that number was $222,137,766. On
average, that is a loss of $16,384,545 per year.
"Even more alarming is the City’s growing Other Post Employment
Benefits obligation, which grew from $55,005,102 in 2009 to a staggering
$115,787,911 in 2012. That’s an increase of $60,782,809 in ONLY 3
years. Further compounding the problem is that in 2009 those promised
OPEB were UNDERFUNDED by $15.4 Million, which grew to $18.5 Million in
2012.
"Then in 2012, the City experienced a shortfall of $2.5 Million in the
budget for it’s self-funded Health Insurance fund, in spite of having
budgeted a whopping $18.7 Million for this expense.
"In the meantime spending at all levels increased with no realistic
plan from City Hall being formulated to control those costs. The
financial crunch time grows closer."
Read more: http://racineexposed.wordpress.com/2014/04/20/racine-a-city-under-financial-siege/
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4 comments:
Some would say that money is the Root of all Evil.
Root River Council Evil.....
Is underfunding Government Employee Pension plans in Wisconsin even legal?
Apparently - YES! It is.
Further, it appears that while The State has created the PERCEPTION that Wisconsin is fully funded and one of the best systems around, others disagree and The State just ignores the facts
Some Analysis:
According to a 2012 analysis by the Pew Center for the States, most state pension plans assume an 8 percent rate of return on investments.[15] Critics assert that this assumption is unrealistic, citing changing market conditions and significantly lower investment returns across the board over the past several years.[16] When states lower the rate of return in an effort to accurately predict investment earnings, it increases the current plan liabilities, thereby lowering the percent funded ratio and causing the ARC to increase. This is because future plan liabilities are discounted based on the rate of return, so smaller expected investment returns result in larger actuarially accrued liabilities.[17] For example, on September 21, 2012, the Illinois Teachers Retirement System voted to lower its rate of return from 8.5 percent to 8.0 percent. This change increased the state's fiscal year 2014 ARC from $3.07 billion to $3.36 billion.[18] Similarly, when California's CalPERS reduced its projected annual rate of return from 7.75 percent to 7.5 percent in March 2012, it cost the state an additional $303 million for fiscal year 2013.[19]
Ah yes, 8 percent per year. That's an EXPONENTIAL FUNCTION, and requires a doubling every 10 years. That IS NOT realistic.
Here is how it works: 1, then 2, then 4, then 8, then 16, then 32, then 64, then 128, then 256, then 512....
You get the point. Ain't going to happen. It means that at some point - cuts will need to be made. Drastic cuts.
Review the Exponential Function and why it doesn't work in the real world with Professor Al Bartlett:
Dr Albert Bartlett: Arithmetic, Population and Energy
Arithmetic, Population and Energy -- a talk by Dr. Albert Bartlett on the impossibility of exponential growth on a finite planet.
Professor Al Bartlett begins his one-hour talk with the statement, "The greatest shortcoming of the human race is our inability to understand the exponential function."
He proceeds to examine oddly reassuring statements from "experts", the media and political leaders - statements that are dramatically inconsistent with the facts. He discusses the widespread worship of economic growth and population growth in western society. Professor Bartlett explains "sustainability" in the context of the First Law of Sustainability:
"You cannot sustain population growth and / or growth in the rates of consumption of resources.
Lauded pension system not so strong under market test
But the state fund still assumes a 7.2 percent rate of return on its investments, known in the business as the discount rate.
If you think that’s reasonable investment planning, talk to one of Wall Street’s neighbors, New York City Mayor Michael Bloomberg.
“If somebody offers you a guaranteed 7 percent on your money for the rest of your life, you take it and just make sure the guy’s name is not Madoff,” Bloomberg recently told the New York Times, referring to convicted investment scammer Bernie Madoff.
The Pew study notes that it used Wisconsin’s own numbers to conclude the pension system is holding or will easily earn the $80.75 billion it needs to fund retiree pensions.
But use standard market valuations — change the expected rate of return from a sky-high 7.2 percent to a more conservative Treasury bill rate — and suddenly Wisconsin’s pension system is underfunded by $70 billion.
Using that assumption, the state pension plan is just 60 percent funded.
Things like that end in tears! Just ask Detroiters!
Detroit pension cuts hit civilian workers hardest
If the new proposals are approved, these retirees will suffer 4.5% cuts in pension benefits and lose cost of living increases going forward. In other words, pension checks will get smaller and then lose purchasing power in future years because of inflation.
Retired police and firefighters received average payments of $30,607 in 2012, and general city workers got $19,213.
Under the proposed cuts, the general workers' average payments would be reduced by almost $1,000.
"I didn't think it's fair that [police and fire] are going to get a better deal," said Donald Smith, 69, who receives an annual pension of less than $11,000 a year for the 29 years he served as a civilian detention officer and in other city jobs. "The fact was, they were working for the city just like we were working for the city."
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