Wednesday, March 04, 2009

Pensions may need a $1 Trillion bailout...

Building on the theme that I started yesterday looking at the NYS Teachers Retirement System, Bloomberg noted there are some huge gaps at the nations largest pensions.

"Public pensions in the U.S. had total liabilities of $2.9 trillion as of Dec. 16, according to the Center for Retirement Research at Boston College. Their total assets are about 30 percent less than that, at $2 trillion.

With stock market losses this year, public pensions in the U.S. are now underfunded by more than $1 trillion."

"The Teacher Retirement System of Texas, the seventh-largest public pension fund in the U.S., reports each year that its expected rate of return is 8 percent. Public records show the fund has had an average return of 2.6 percent during the past 10 years.

The nation’s largest public pension fund, California Public Employees’ Retirement System, has been reporting an expected rate of return of 7.75 percent for the past eight years, and 8 percent before that, according to Calpers spokesman Clark McKinley.

Its annual return during the decade from Dec. 31, 1998, to Dec. 31, 2008, has been 3.32 percent, and last year, when markets tanked, it lost 27 percent."

The problem with this sort of accounting game is that while it defers making hard choices, the pensions eventually have to be made whole by ........ you guessed it, the taxpayers. Not a bad time to consider relocating to a low-tax, small population state (It can't be any colder in North Dakota, can it?).

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