Fibonacci

U.S. Pension Insurer Sees Growing Risk in Auto-Parts Suppliers
2005-06-06 03:06 (New York)


By Jay Newton-Small
June 6 (Bloomberg) -- Monte Scott, who retired in 2001 from
Delphi Corp., the largest North American auto-parts manufacturer,
says the future of his $3,000-a-month pension has become an
almost daily concern.
Scott's anxiety is shared by analysts who track the private-
pension system and by officials at the Pension Benefit Guaranty
Corp., the quasi-government agency that insures such benefit
plans. They say the beleaguered auto-parts industry may be the
next big sector to dump its pension obligations on the agency, as
several major steel companies and airlines have already done.
Scott, 53, who worked at General Motors Corp. for 27 years
and at Delphi after it was spun off from GM in 1999, said the
uncertainty reflects the passage of a way of life in his hometown
of Centerville, Ohio. ``Most people thought the goal was, you
work at Delphi or GM and you get the pension and health care,''
he said. ``Now that seems to be going away, and no one seems to
care.''
Auto-parts companies underfunded their pension plans by $22
billion last year, according to PBGC, which backs the defined-
benefit pensions offered to 34.6 million U.S. workers. The agency
reported a $23.3 billion deficit last year, spurring Congress to
consider legislation to tighten corporate pension rules.
``The auto-parts sector is very clearly at risk,'' said
Michael Peskin, managing director of global capital markets at
Morgan Stanley. ``The PBGC's right to focus on them as the next
most likely industry to fall.''

Bankruptcies

Troy, Michigan-based Delphi and Van Buren, Michigan-based
Visteon Corp., the second-biggest U.S. maker of auto parts, are
posting lower earnings or losses as a result of vehicle
production cuts by GM and Ford Motor Co. Ten of the 150 U.S. auto-
parts suppliers with pension plans have sought bankruptcy
protection in the last year.
The potential for cascading bankruptcies ``drives home the
point to policy makers in Washington that the defined-benefit
system on the whole is under stress, and the pension insurance
program is facing extraordinary financial pressures,'' said
Bradley Belt, head of the Washington-based PBGC.
``Our highest level of overall exposure in any one sector is
in the automotive sector, and that includes even airlines,'' Belt
said in an interview. The agency is closely watching the auto-
parts industry because of recent bankruptcies, he said.

Steel, Airlines

Belt's agency assumed responsibility for the pension plans
of five of the largest U.S. steel companies between August 2001
and May 2003. So far this year, the agency has taken on almost
$10 billion in pension liabilities from the bankruptcies of U.S.
Airways Group Inc. and UAL Corp.'s United Airlines.
``The PBGC and others in the administration are quite
worried that auto-parts will be the next industry to cause some
problems,'' said Douglas Elliott, head of the Washington-based
Center on Federal Financial Institutions, a non-partisan research
group. ``It has substantial pension underfunding and it's a
troubled sector.''
The auto-parts suppliers are closely linked to the auto
manufacturers, ``so when they get a cold we get pneumonia,'' said
John Anderson, a lobbyist for Delphi in Washington. ``But keep in
mind, Delphi is diversified, so when things are down here in
North America, things may be up in China or South America, which
they are.''
While Detroit-based GM and Ford, which have the largest U.S.
defined-benefit pension plans, aren't seeking bankruptcy
protection, their credit ratings were recently downgraded to junk
status. And last month Dearborn, Michigan-based Ford announced a
$1.15 billion bailout of Visteon, which has lost 95 percent of
its net worth since it was spun off from Ford in 1999.
``GM and Ford have managed to cut costs to some extent by
forcing the auto-parts suppliers to take on a lot of pain,''
Elliott said.

Oxford, Harvard

There are 10 auto-parts suppliers in bankruptcy with pension
plans backed by the PBGC. The agency has agreed to assume
responsibility for three: Oxford Automotive Inc., Harvard
Industries Inc. and, this week, Amcast Industrial Corp. The three
companies totaled $215.8 million in underfunding. The PBGC
doesn't automatically pick up companies' pension plans when they
file for bankruptcy; a bankruptcy judge decides whether companies
can afford to pay for their plans.
President George W. Bush and some members of Congress back a
move to require employers to increase premiums paid to the PBGC
by $6.6 billion. Bush also has proposed forcing companies to
revalue their pension liabilities and to fully fund their defined-
benefit retirement programs. The U.S. Labor Department says that
employee pensions were underfunded by $450 billion last year.

Premiums

The PBGC is funded through premiums it charges member
companies and by investing the assets it takes over from
companies in bankruptcy. It has no direct access to taxpayer
dollars. Still, as the agency takes over more underfunded plans,
``somebody's got to pay for that,'' Belt said.
Ohio Republican Mike DeWine, the chairman of a Senate
subcommittee on retirement security, and Barbara Mikulski of
Maryland, the panel's top-ranking Democrat, have warned that if
companies don't fully fund their plans, taxpayers could be forced
to pay for a bailout costing billions of dollars.
Delphi will make a $600 million pension contribution this
quarter to cover its obligations for 2005. Next year the
contribution is expected to nearly double to $1.1 billion, John
Sheehan, Delphi's acting chief financial officer, told analysts
in May. The company's pension was underfunded by $4.3 billion at
the end of 2004, Sheehan said.
The company has reported annual losses in three out of the
four past years and had a first-quarter loss of $409 million. A
spokesman for Visteon didn't return calls seeking comment.

Pay Bills

Scott uses his $3,000-a-month pension to support two sons
studying law enforcement in college, pay monthly bills and buy
the seven prescription drugs he takes because of a heart
condition.
``Any manufacturing seems to be a dying breed,'' said Scott,
who discouraged his sons from following in his footsteps. ``You
got Delphi in financial trouble, the White House working on
Social Security and most retirees with underfunded pensions,'' he
said. ``The whole thing doesn't look good.''



Why is this a big deal to consumers like you and I ????

Because pension liabilities from Public Entities - Federal, State and Local governments makes the unfunded private pension system seem like peanuts in comparison. Very tasty!

iTimmy

I am amazed how shocked these retiree's are about there pensions drying up before they can collect them(as they were promised). I was always brought up to believe that if its too good to be true, it is. These factory workers want to live like kings, when there jobs can be out sourced to China for $0.10 to the dollar, with no loss in quality. These same factory workers who are getting paid far more then they are worth(cough- union- cough) are there own worst enemies. They are typically the price contitious consumer, shopping at places like walmart, costco, etc.... Well how many products sold at these discount prices were made by there fellow american's paid a premium wage? The reason this is all happening is so obvious, yet everyone acts like they don't see what's happening.

Further, they don't save ANYTHING on there own, they rely on the Government and the company they work for to supply for them; because as they learned over the years there company and the government clearly know what's best for them. Also there company and the Government has had a great record of accountablity when mistakes are made, so really its best to leave it to the pro's.

To sum up, you are doing the same job a 7 year old boy in China would kill to have(and could live well on what he would make), but your making 10 fold(at least) what he would. You demand more sick time, vacation time, personal time, paid holidays, over time, pension, 401k and health insurance every year, because lets face it your worth it. Most everything you buy is made in countries with little to no labor laws because its cheaper and you don't see how this will ever possibly effect you. You've been working the same job for the last 27 years and are STILL living pay check to pay check- but damn the neighbor's are jealous of all my cool crap. But the problem is you wake up one morning at the age of 53(keep in mind he retired in 2001, which means he retired before he was 50- anyone else find that odd?) and for the first time in your life realize that you may have made a bad choice.....

Of course this is a little blown out of proportion, but probably less then you imagine. I know enough employees of these large production companies who are exactly as I described. The real problem now, is what do we do about it? The world is forever changing, and so must investing, diversity and always trying to stay one step ahead are the name of the game. The age old saying is, never put all your eggs in one basket, it seems painfully true in this case. Just imagine what this guy would be saying right now had he gone in 3 different directions instead of taking the most profitable and easy way out.

Silver™

Fearing that airlines and other struggling industries could present the country with its next S&L crisis, Congress and the White House are pushing an overhaul of pension-funding rules that has been overshadowed by Social Security.

The heads of three major airlines were called to appear Tuesday before the Senate Finance Committee. Its leaders are alarmed that the Pension Benefit Guaranty Corp. — the federal agency that insures private pension plans — already has a $23.3 billion deficit because of defaults.

More than half of the 100 largest plans had less than their promised benefits on deposit, which the committee’s chairman blames on lax rules that are supposed to guarantee full endowment.

About 34 million people — roughly 20 percent of the nation’s workforce — expect to receive payments from their employers through defined benefit plans.

The risk those workers face was highlighted last month when a federal judge allowed United Airlines to default on $9 billion in pension obligations as it attempts to emerge from bankruptcy. The ruling shifted responsibility for paying benefits for 120,000 current and former workers to the PBGC, but the agency will pay only about two-thirds of promised benefits.

“In addition to allowing plans to book phantom investment gains, United was able to use stale, non-market interest rates to value pension liabilities, thereby further disguising funding deficits. In other words, our pension laws tell companies, 'Take off the green eye shades and put on rose-colored glasses,”’ Sen. Charles Grassley, R-Iowa, said in an opening statement prepared for the hearing.

The chairman said current law allows corporate deception similar to criminal activity alleged at Enron Corp., adding: “The same blinders that United put on are used by companies everywhere.”

The pension funding problem recalls the savings and loan crisis of the 1980s, when hundreds of thrifts became insolvent and were taken over by the government. A congressional study in 1996 put the price tag for the S&L bailout at $480.9 billion.

In January, the Bush administration proposed an overhaul of regulations dating to the 1974 establishment of the Employee Retirement Income Security Act and the PBGC.

Among the changes favored by the White House are a boost in the PBGC premiums paid by employers, as well as a rewrite of rules that have allowed companies to use favorable stock trends and interest rates to conceal underfunding in their plans.

Similar legislation is being drafted in the House by Rep. John Boehner, R-Ohio, who serves as chairman of the House Committee on Education and the Workforce.

Airline pilots in particular are concerned that other airlines may follow United’s lead if they perceive the carrier gaining a competitive advantage by dumping its pension obligation. Among those invited to testify were United Chairman Glenn Tilton, Northwest Airlines Chairman Douglas Steenland and Gerald Grinstein, chief executive of Delta Air Lines.

“Under current law, the only way an airline can avoid burdensome pension costs is by entering bankruptcy and terminating the plans,” said Duane Woerth, president of the Air Line Pilots Association, in remarks prepared for the hearing.

“But if more and more airlines choose to shed their pension liabilities in bankruptcy, it sets up the potential for the ’domino effect,’ in which all the other legacy carriers are incentivized, or even forced, to file bankruptcy, in order to achieve the same cost savings and level the playing field,” Woerth said.

Rep. George Miller of California, the top Democrat on the Workforce Committee, urged Boehner to also include language in his bill requiring companies to release more of the data about their plans that they provide to the PBGC. The congressman argued it frequently does not jibe with more general information released to the public.

“The differences are dramatic,” Miller wrote in a letter dated Monday. “Some companies report financial results for the pension plan assets and liabilities in their 10-Ks that are hundreds of millions of dollars — and in some cases, billions of dollars — more optimistic than their secret 2010 filings.”

http://www.msnbc.msn.com/id/8130676/

Fibonacci

San Diego Pension Gap Brings Bankruptcy Talk to Race (Update2)
2005-07-26 14:19 (New York)


(Adds Shea's standing in polls in the sixth paragraph.)

By William Selway
July 26 (Bloomberg) -- San Diego's $2 billion pension
shortfall may decide the outcome of today's mayoral election,
with one candidate saying bankruptcy is the best solution and two
leading candidates saying they would consider it.
The seventh-biggest U.S. city has about two-thirds of the
money its fund will need to pay for employees retiring in coming
decades. The shortfall, which threatens to force the city to cut
services or raise taxes, is about twice as large as the $817
million annual budget.
``It's driving everything,'' Republican candidate Steve
Francis, the chairman of AMN Healthcare Services Inc., said in an
interview. ``It's the 1,600 pound gorilla.''
San Diego hasn't filed financial statements for the last
three years. The lack of documents left San Diego unable to sell
bonds to fix its sewer system.
Former mayor Dick Murphy, a Republican, triggered the
election by quitting seven months into his second term, saying he
lacked the political will to fix the city's problems. Six city
and union officials have been indicted in connection with the
pension fund, and the U.S. Securities and Exchange Commission and
Federal Bureau of Investigation are investigating.
``The whole thing has basically caused the financial
structure of San Diego to grind to a complete halt,'' said
Patrick Shea, a 55-year-old Republican candidate who advocates
bankruptcy and is lagging the three leading candidates in the
race, according to opinion polls. Shea is married to former
pension-board member Diann Shipione, who in 2002 was the first to
say San Diego's finances were vulnerable because the city was
raising benefits without setting enough aside to pay for them.

Bankruptcy Candidate

San Diego's inability to pay into the pension fund on
schedule makes it a candidate for bankruptcy, said Shea, who
holds a law degree and an MBA from Harvard University.
Defaulting on debts would be a speedy resolution to the
city's troubles, he says, noting that the Orange County
bankruptcy lasted 18 months. San Diego's current plight has
already lasted longer.
``There is only one issue in this race: Do we go into
Chapter 9 now,'' he said, referring to the law covering municipal
bankruptcies. ``Or do we try something else?''
Two of the leading candidates in the mayor's race, Democrat
City Councilwoman Donna Frye, 53, and Republican contender Jerry
Sanders, the city's former police chief, say they'd rather fix
the pension fund than declare bankruptcy, though they refuse to
rule it out. Frye wants a court-appointed receiver placed in
charge of the pension fund, while Sanders says he will seek to
roll back some benefits by wresting concessions from workers.

Campaigning Against Bankruptcy

``People don't want to see bankruptcy as the first option,
nor do they want to see it as the second, third or fourth
options,'' Sanders, 55, said in an interview at his headquarters.
`I think it should be used if it's the only option.''
Republican businessman Francis, 50, has spent $1.7 million
of his own money in the race campaigning against a bankruptcy
filing.
``How do you deal with the problem?'' Francis said. Do you
do it by downsizing government, or do you throw in the towel by
declaring Chapter 9 bankruptcy?''
Frye, who owns a surf shop with her husband, Skip Frye,
leads the race. Polls show she doesn't have enough support to
avoid a run-off against the second-place finisher. Frye, as a
write-in candidate, would have won the election in November had
thousands of votes in her favor not been tossed out because
voters failed to darken an oval next to where they wrote her
name.

Favored

Frye was favored by 45 percent of respondents to a SurveyUSA
weekend poll conducted for local television station KGTV. Sanders
garnered 24 percent and Francis trailed with 23 percent. The poll
had a margin of error pf plus or minus 3.5 percentage points.
A runoff will be held Nov. 8 between the two top finishers
if none of the 11 candidates gets a majority of votes. The winner
of the election will take office as the city hands more of the
responsibility to the mayor that had been delegated to the city
manager, a shift that is a result of a proposition that was
passed last November.
The prospect that San Diego could end up in bankruptcy court
has weighed on the city's credit standing. Fitch Ratings in May
lowered its rating on $1.95 billion of San Diego bonds, cutting
its general obligation debt two steps to BBB+, three levels above
so-called junk status.

Default Insurance

Standard & Poor's has withdrawn its rating of the city's
bonds, saying San Diego's failure to produce a financial
statement made it impossible to assess its creditworthiness.
All the San Diego bonds that were traded July 22 are insured
against default, according to prices posted on the Bond Market
Association's Web site. A San Diego bond paid by revenue from its
sewer system maturing in 2029 sold for $1.03 on the dollar,
yielding 4.44 percent.
``One of the reasons for our last downgrade was because
there was talk of bankruptcy among the candidates,'' said Amy
Doppelt, an analyst for Fitch who follows San Diego. ``We would
hope that once they explore the issue further that they decide
that it doesn't make sense.''

Sadly, this will probably be the first of many blow-ups to come...

Silver™

The Senate Finance Committee approved legislation yesterday that would require companies to fully fund their traditional pension plans and give some airlines 14 years to pay off their obligations.

"The fragile state of our nation's pension plans has caught the attention of Americans everywhere," said the finance committee's chairman, Charles E. Grassley, Republican of Iowa. The Congressional Budget Office estimates that companies underfunded their pensions last year by as much as $600 billion.

Rewriting the laws governing traditional, or defined-benefit, pension plans covering 34.6 million Americans has become a priority for Congress this year. A temporary solution passed two years ago will expire at the end of the year. Recent bankruptcies by airline and steel companies have left the government agency that insures the plans, the Pension Benefit Guaranty Corporation, with a deficit of $23.3 billion.

The legislation now goes to the full Senate for a vote. The Senate Committee on Health, Education, Labor and Pensions has also held hearings and is working on a parallel pension measure. A similar pensions proposal is under consideration by the House Ways and Means Committee.

An amendment added to the legislation yesterday gives some airlines 14 years to pay overdue pension obligations. Delta Air Lines and Northwest Airlines had asked for 25 years. The rest of the 29,651 companies that offer defined-benefit pensions would have seven years to catch up on any backlog.

The proposal does not aid American Airlines, owned by the AMR Corporation and the world's largest carrier, because it requires airlines to freeze defined-benefit pension plans and switch to a new plan based on employee contributions to get the 14-year benefit.

American Airlines is seeking legislation that would give it about 12 years to pay pension obligations while maintaining its current defined-benefit plan.

http://www.nytimes.com/2005/07/27/bu...27pension.html

Fibonacci

Sinkhole!
How public pension promises are draining state and city budgets


Interactive Map >>The public schools in Jenison, Mich., are real gems: Test scores are well above the national average, its autism and special-education program is recognized around the country, and the music program has been honored by the group that hands out the Grammy Awards. The 4,800-student district averages close to 100% attendance at parent-teacher conferences, and on Friday nights in the fall families crowd the high school stadium's bleachers to watch football. Parents have moved to this idyll on the west side of the state from as far away as Kentucky, Texas, and New Jersey just to get their kids enrolled. Over 500 students from nearby districts attend Jenison by choice. Advertisement

But underneath all that success is a looming fiscal crisis. In the past three years, Superintendent Thomas M. TenBrink has surgically cut $4.2 million out of his $39 million budget in a quest to keep Jenison the fiscally responsible district it has long been. He has instituted fees for participating in after-school sports and field trips. He eliminated 30 teaching spots, leaving the district with 287. He hasn't bought a new textbook in three years. He saved $550,000 by turning an elementary school into a self-financing preschool and day-care center. But TenBrink is running out of options. "It's getting to the point where it will start affecting the children," says Lauralee Ryan, the parent of a first-grader and an active supporter of the schools.

Jenison is caught in a financial vise. School funds from the state are capped by law at $6,700 per student, a figure that has been frozen for the past three years, but costs are zooming. The fastest-growing outlay of all: contributions to pensions and retiree health care. This year the bill is $1 million. Next year it will jump to $1.5 million. An expense that for years hovered at 12.99% of payroll is now eating up 14.87% of it, and state finance experts predict it will hit 20% within three years. "That is just draining our budgets," TenBrink says.

TenBrink's daily struggle to provide vital community services while meeting retirement promises mirrors the battle playing out across Michigan and the entire country. It's not just school districts that are being squeezed. State and local governments, hard hit by the economic downturn of 2001, find themselves in a financial bind. While sharp anti-tax sentiment constrains revenue and governments face new outlays for everything from homeland security to No Child Left Behind, there's a growing feeling that the retirement promises made to everyone from office workers and state patrols to firefighters and legislators may simply be unbearable. For some of the worst-off states, like Illinois, there is a long history of failure to fund pensions, which have snowballed into multibillion-dollar shortfall. For others, the depth of the problem is new, the result of poor investment returns and overly generous promises made when funds were flush in the late '90s.

The result: Essential services like education are being squeezed. States have only slowly recovered from the economic recession and revenue drops of as much as 40% in 2001 and 2002. Nicholas W. Jenny, a senior policy analyst at the Nelson A. Rockefeller Institute of Government, says that while taxes have begun to rise slightly, hikes have been more modest than they were in previous downturns, including the early 1990s, something he attributes to a political climate that's "very tax-increase averse." Recent anecdotal evidence shows that many towns and cities have bumped up taxes over the past few years as state and federal governments have pushed unfunded requirements like No Child Left Behind and other costs down the ladder.

How long that can continue without voter backlash is unclear, however. Meanwhile the cost of retirement has continued its steady climb. According to the U.S. Census Bureau, major public pension plans paid out $78.5 billion in the 12 months ended Sept. 30, 2000. By the comparable period in 2004, that had grown to $117.8 billion, a 50% climb in five years. Beyond hiking taxes and cutting costs, governments have few ways to meet this bill. One option that many fiscal conservatives find troubling is pension obligation bonds. They are, essentially, an arbitrage bet in which governments borrow at relatively low municipal rates, invest the money, and hope they make enough to cover pension payments and earn a bit on the top. But they can lose money if the market goes south, a situation that New Jersey, which issued $2.7 billion in bonds in 1997, now finds itself in. Over the past decade state and local governments have borrowed approximately $30 billion this way.

Don't expect that flood of debt to slow, because there's little relief in sight. Excluding federal workers, more than 14 million public servants and 6 million retirees are owed $2.37 trillion by more than 2,000 different states, cities, and agencies, according to recent studies. In 2003 alone, states and municipalities poured some $46.2 billion into these plans, according to the National Association of State Retirement Administrators, a 19% jump from the year before. Excluding federally funded programs, pensions went from 2.15% of all state and local spending in 2002 to approximately 2.44% in 2003. But the largest state and city funds were still short $278 billion in 2003 -- approximately 20% of state and municipal revenue excluding federal funds. That's twice the $123 billion pension hole Wilshire Associates found at the companies in the Standard & Poor's (MHP ) 500-stock index that year.

As much as states are throwing into pensions, they may owe even more. Despite a 2004 stock market rise that should narrow some of the gap, pension experts at Barclays Global Investors (BCS ) say that if public plans calculated their obligations using the more conservative math that private funds do, they would not be $278 billion under, but more than $700 billion in the red. "It's just ruining the financial picture for states and municipalities," says Matthew H. Scanlan, managing director of Barclays, one of the largest managers of pension-fund investments. "You're looking at a taxpayer bailout of this pension crisis at some point."

There's more bad news. One major category of cost isn't disclosed at all: how much retiree health care has been promised to public retirees. No one can estimate how much these promises will add up to, but they're sure to be in the tens of billions, and only some states seem to have put aside reserves for them, according to bond analysts. That's chilling, given how quickly medical costs are rising. After a pitched battle, the Governmental Accounting Standards Board (GASB), the independent accounting standards-setter for state and local governments, has finally begun to require states to disclose these liabilities. Numerous unions and state government representatives objected to the change, says GASB member Cynthia B. Green, "not because [unions and states] didn't think these were important, but because they thought once the governments did their studies and found what the price tag was, they would be concerned or, if not concerned, staggered." The requirement will be phased in beginning in late 2006.

If these costs aren't brought under control, rising taxes could prove unavoidable -- and a competitive problem for the states in the worst shape as well as for the country. Stephen D'Arcy, a professor at the University of Illinois at Urbana-Champaign's College of Business who has studied public pensions, worries that if states like Illinois have to sharply hike taxes to pay for benefits earned decades ago, companies -- and even citizens -- could end up moving to states in better fiscal shape. "You could see it turning into an economic desert in certain states," he warns. Combined with the national retirement issues surrounding Social Security, these plans contribute to a depressing outlook for U.S. competitiveness overall.

RUDE AWAKENING
Even states with well-funded plans are struggling to meet their current obligations. For years, New York State enjoyed low pension payments, thanks to strong investment returns and fully funded plans, but in 2004 cities and counties across the state got a rude awakening. Pension contributions jumped as much as 248% in one year. "It was the equivalent of what I call a fiscal atom bomb," says Richard A. Bucci, mayor of Binghamton, a city in the center of the state, with a metro-area population of 250,000. In 2004, Bucci's pension bill jumped from $1.6 million to $4.2 million, forcing him to both cut back services and raise taxes. Homeowners saw property taxes jump 7% last year, half of which went to pensions, and another 7% hike is coming this year for the same reason.

Just a few years ago funds across the country were in much better shape. "Five years ago we were starting to feel pretty good about pension funds not being a credit issue," says Parry Young, a pension expert at S&P, "but now they're back on the plate." In 2000, Wilshire Associates found the largest state funds were overfunded -- boasting assets equal to 109% of liabilities. By last year that had dropped to 83%

One reason for the drop was unavoidable: The impact of the bear market of 2000-2002 on the value of these fund investments was severe. The other reason was just foolishness: a lathering on of billions of dollars worth of new promises to workers in flush days. It was a familiar mistake: Public-pension provisions are determined by elected officials, and civil servants vote. Legislators have a long history of making such expensive upgrades to already generous plans.

Some of these giveaways are truly spectacular. In 1998 the city of Houston instituted a deferred-retirement option plan, or DROP, that would allow workers to in effect take their retirement when they became eligible for it but continue to work at their salary. The retirement income was put in a side account where it earned an attractive rate of return, and the employee could later have his pension adjusted upward to a higher level. The DROP, along with other pension improvements, drove the city's pension plan down from 91%-funded in 2000 to just 60% two years later. Houston had gone from contributing 9.5% of payroll toward pensions to more than 32%. Joseph Esuchanko, a Michigan actuary brought in to study the problem, discovered that things would only get worse. According to his calculations, it was possible for employees to become millionaires thanks to the system. Under one scenario, a lifelong city employee retiring with a salary of $92,000 could get $420,000 a year in pension benefits. The citizens of Houston agreed with Esuchanko's conclusion that the system was a "win-win for the employee and a lose-lose for the employer." Last May they voted to end the benefits.

Little wonder, since even bare-bones guaranteed retirements are increasingly rare in the rest of the economy. According to the Census Bureau, 90% of state and local workers have a defined-benefit pension with a guaranteed payout. But only 24% of people employed in the private sector have such plans. (Most public-sector employees contribute along with employers to their pensions, unlike private-sector workers.) And more of the companies that once offered these benefits -- places like Motorola (MOT ), IBM (IBM ), and Delta Air Lines (DAL ) -- are dropping them for new workers in favor of 401(k)s. Health-care coverage for retirees, a costly perk that companies have been shedding at lightning speed, also remains common in the public realm.

It has long been accepted as truth that government workers get good benefits and job security in lieu of high salaries, but over the years the gap between public and private employee paychecks seems to have narrowed. It's hard to come by perfect comparisons, since government numbers for the private sector include lower-wage industries like retailing, which pull down the averages, but overall, public-sector workers look to be getting a pretty good deal. In 2004 average salary for a public worker was $49,275 compared with $34,461 for everyone else, according to the Employee Benefit Research Institute (EBRI).

Even white-collar workers are better off in the public sphere. According to the U.S. Labor Dept., state and local government managers and professional staff earned $42.87 an hour last year, while their private-sector counterparts earned $41.52. One big reason: government workers get $2.62 an hour in retirement benefits; everyone else gets $1.63.

States pay more for public retirees too. According to the EBRI, the average public-plan retiree got $16,188 a year in 2003, far more than the $7,200 their private company counterparts could expect. One reason for that big split is that some public retirees do not get Social Security. But that too is changing. Since 1983 most public workers have been part of that system too, so in the future the disparity could well widen. All in all, EBRI concludes, state and local government wage and salary costs are 40% higher than the private sector's; its employee benefit costs are 60% higher.

Workers naturally fight any changes hard, and they can be a very sympathetic group. In California, Governor Arnold Schwarzenegger came up against the political challenges of taking on public pensions this spring after he declared his support for a radical solution: ending the state's traditional pensions for new hires instituting a 401(k)-style system instead. (The norm in the private sector, such defined-contribution plans are rare in government.) Schwarzenegger spent February and March campaigning for a resolution to be put on the ballot possibly this coming fall. He collected signatures personally. He raised money for a series of radio ads. But by Apr. 8, the "Governator" had been felled by public campaigns arguing his plan would cut survivor benefits for police and firefighters. "What we really need is a discussion about what kind of society we want to be," says J.J. Jelincic, president of the 140,000-member California State Employees Assn. "What does it take to get there and how do we fund it."

EXTREME BENEFITS
To Jelincic, the answer is to raise taxes, but though Schwarzenegger lost the first round he hasn't warmed to that idea and has vowed he won't give up. The state's pensions hit the news last year with revelations of a crippling $1.4 billion deficit in San Diego's municipal pension fund. The city's mayor, Richard Murphy, announced on Apr. 25 he would resign on July 15 after facing a continuing debate over how to solve the problem and probes by the Securities & Exchange Commission, FBI, and the U.S. Attorney for the Southern District of California's office into securities fraud and public corruption in connection with the fund.

But San Diego is only the beginning. Citizens of Salinas, Calif., where pension costs are up and revenue is down, are facing the possibility that their public libraries will close this year. Orange County, Los Angeles County, and many other California counties have significant pension deficits. The state itself will pay $3.5 billion into pension and health benefits for retirees this year, almost triple what it paid just three years ago. And California's Legislative Analyst's Office (LAO) expects that to climb another $1.1 billion over the next five years.

Moving all new California employees to a 401(k)-style plan wouldn't eliminate the bill already due, but it would slow the pace at which the pension deficit grows. Although there would still be a cost to this plan, it would be more predictable and lower than what the state is currently paying. Over many decades, California's pension costs would shrink as high-cost employees are replaced.

California's pension benefits are extreme. In 1999 and again in 2001, a time when the pension plans were flush with strong investment gains and state contributions were low, the state legislature upped the benefits to levels far beyond even the most generous public plans. A recent analysis by the LAO notes that for longer-term and some local employees, it's quite possible to receive more annual income in retirement than when a worker was employed.

This tendency to dole out goodies in fat times is the core moral hazard of public-pension plans. Politicians like to reward voters when they can, and public workers vote. It wasn't only in California that benefits crept up during the end of the bull market. Public employees saw benefit enhancements in New York, Colorado, Illinois, New Jersey, and many other states. "That was the mirage of cost-free benefits," says S&P's Young. "Nobody pays, nobody gets hurt." Not all of California's sudden pension bill is due to this; much comes from falling stock prices. But the LAO calculates that $600 million, or almost 25%, of the $2.6 billion contributed to state pensions in 2004-2005 resulted from these benefit increases. And unlike the investment performance, there is no hope for relief from this new, more expensive set of pension promises.

A plan's downturn can be tough to predict. Just five years ago, the city of New York was expecting its fiscal 2004 pension bill to total $650 million. Instead, it came in at four times that much, $2.46 billion, or 8% of the city's $29.7 billion budget. Half of that $1.8 billion surprise came from benefit improvements, including $251 million in cost-of-living adjustments. By fiscal 2007, the Independent Budget Office of the City of New York projects pension contributions to hit $4.9 billion, 12% of the $40.5 billion budget.

REVERSE COMPOUNDING
But states have also voluntarily heightened their own exposure to this risk. Rosalind M. Hewsenian, managing director of Wilshire Associates, says the biggest cause of the sharp drop in funding levels at public plans over the past few years was a drop in employer funding and a reliance instead on investment gains to make up the difference.

Take Illinois. The fifth-wealthiest state in total income, Illinois nevertheless has a 30-year history of shirking its pension promises. According to an analysis by the Civic Federation, a Chicago research group sponsored by the business community, since 1970 Illinois has not once paid its annual pension bill in full. Over the next 40 years the state will have to contribute $275.1 billion if it is to reach its goal of 90% funding -- and that's presuming no benefit changes are made. Through bull markets, bear markets, and sideways markets, the state has consistently lagged, and over time those delays have become more and more expensive. The culprit: reverse compounding. A pension plan's obligations are determined in part by the expected investment return on its assets. In the case of Illinois, that is 8%. So for every dollar not added to assets in time, the state is effectively borrowing from the pension plan at 8% interest. That's a high price in today's market, where municipal bonds typically pay closer to 6%. Illinois Governor Rod R. Blagojevich says that if the state follows its current spending plan, it will have paid $220 billion in interest before it fills the hole.

After 30 years of the state's procrastination, the pension burden has grown backbreaking. Illinois' five pension funds are $35 billion in the red, a serious shortfall for a state with a general operating budget of $43 billion this year. Illinois owes $2.6 billion this year, and within five years that will reach $4 billion annually. By comparison the state will spend $5.9 billion total on kindergarten through 12th-grade education next year. "If we were a business we wouldn't be in Chapter 11, we'd be in Chapter 13," says Ralph M. Martire, executive director of the Center for Tax & Budget Accountability, a Chicago-based nonprofit think tank. "We'd have to liquidate." Illinois is not a fast-growing state that can hope that future population and tax growth will bail it out. D'Arcy of the University of Illinois calculates that Illinois should be 97%-funded based on the rate of its income growth. Instead, retirement funds are 62%-funded.

The challenge to fixing the state's pension mess is, again, politics. Right now the halls of the state legislature in Springfield are a lobbying battleground between proponents of a plan proposed by the governor to cut benefits for new workers and union-led forces opposed to such a two-tier system. In many ways, the union argument is quite persuasive: State workers in Illinois have perks that are generally in line with or even a bit below those of other state's civil servants. Workers have consistently made their contributions to the pensions -- it's the state that has failed to pay its share. And Illinois has an antiquated tax system that probably is holding revenue down.

Over the years, even as the state failed to pay for existing pension promises, the Springfield politicians have added more. In the past 10 years benefit sweeteners have added $5.8 billion in new benefits, largely through early retirement inducements. And there has been a general creep up in the level of promises made. Today, one-third of Illinois state employees get hazard rates of pension payments originally intended only for state police, according to the governor.

Elected officials are hesitant to ask the rest of their voters to pay for these promises through higher taxes. One primary reason: Outside of government workers, very few employees have these kinds of deals anymore. "Our people at 55 years of age can get 75% to 80% of their salary [as pension], and it's a pretty nice salary," says Illinois State Representative Robert S. Molaro, a member of a commission convened by the governor to make recommendations for fixing the pension system. "It will be hard for us to go to the taxpayers and ask them to pay for our pensions with benefits you in the private sector couldn't even dream of."

FREE FROM SCRUTINY
Given this divide, it's reasonable to wonder why there hasn't been more debate about these plans already. They've been protected from scrutiny for a number of reasons. The public-pension systems lack the regulatory system governing corporate pension plans. Corporations have to disclose timely, detailed information about their pensions to investors and the SEC. Rating agencies focus on them, too. In combination, these groups can pressure companies to be more conservative in their fund management. Devereaux A. Clifford, managing director of pension consultants Greenwich Associates, says it was pressure from these watchdogs that forced corporations to lower unrealistic investment return assumptions, from 8.9% in 2002 to 8.3% in 2004.

The public world has far less scrutiny. Nor do these plans have an equivalent to the Pension Benefit Guaranty Corp., the government-sponsored insurer of corporate plans. They have to conform to the funding requirements or accounting demands of the Employee Retirement Income Security Act, the federal law passed in 1974 to monitor private pensions. And public fund reporting lags corporate reporting by at least six months. Important factors like the performance and cost of bonds issued to cover pension obligations are even harder to suss out.

That's bad news. Understanding the depth of these retiree problems seems especially important for state and local governments because of their limited financial options. Unlike the federal government, which can always print money, and private companies, which might sell more widgets and make more profits to fund their pensions, and whose pensions are guaranteed by a government-backed insurer, local government basically has only one way of meeting those promises: your taxes. Public-pension experts note that these obligations must be paid. Public-sector retirement benefits are generally guaranteed by state constitution. Even in the throes of New York City's fiscal meltdown in the 1970s, while services were being cut and emergency bonds were being issued to keep the city afloat, cutting existing pensions was never even discussed.

Don't expect much help from the stock market, either. Much of what fueled big gains in state assets in the '80s and '90s was a shift from investing primarily in bonds to higher-returning equities. Meredith Williams, executive director of Colorado's public employee retirement system, says that by 2000, his funds were 90%-invested in equities and real estate investment trusts. The bear market took Colorado's plan from 105%-funded to only 76%. That prompted Williams to cut stocks to something closer to 60% of total holdings. "You live by that sword, you die by that sword," he says. Neither would it be smart for state and local governments to continue borrowing to pay down pension liabilities, a move that not only can backfire if investments are weak but also saddles future generations with debt.

The more likely answer is the most painful: Taxes will keep going up and benefits will be cut for future public employees. Both are unpopular. The debate is just starting to be heard.


By Nanette Byrnes, with Christopher Palmeri in Los Angeles


http://www.businessweek.com/magazine...4/b3937081.htm

Fibonacci

America's pension time bomb
Commentary: Workers, employers, taxpayers, governments. Meet the key players in the coming battle.
By Geoffrey Colvin, FORTUNE senior editor-at-large
January 13, 2006: 11:03 AM EST


NEW YORK (FORTUNE) - Some of the nastiest conflicts in America's future have recently begun to reveal themselves. Let's call them, broadly, the pension wars.

They will be fought on a wide range of battlefields, involving not just workers and their employers but also governments at all levels, regulators, accountants and taxpayers. And these wars will be bitter -- because the combatants will be desperate.

A hint of what's to come could be seen in the New York City transit strike. Most of America didn't notice exactly what sparked the first such strike in 25 years, costing businesses, individuals and the city hundreds of millions of dollars. The answer is pensions. The transit authority and the workers were agreed on virtually everything except how much new employees would contribute toward their pensions--6 percent of wages vs. 2 percent -- and neither side felt it could give an inch on that.

The reasons illustrate the larger problem. The transit authority, like many private and public employers, is watching its pension costs rocket as longer-living retirees increase in number. That burden will become unbearable. On the other side, union members are watching employers nationwide dumping or cutting their pensions just as Social Security starts to look shaky. They figure retirement security is the one thing they cannot sacrifice. Result: war.

New York's transit strike also illustrates an important reason that the pension wars weren't headed off long ago. The truth about pensions has been systematically hidden, with all parties collaborating in the deceit. Public-employee pensions have never been accounted for like those run by private employers. No government is required to tell you its pension liability the way, say, General Motors is, on the theory that governments can always just extract more money from the taxpayers to pay retirees.

But this year the Governmental Accounting Standards Board, which sets the rules for the public sector, is changing its regulations. State and local governments will now have to reveal their pension liabilities, which may be underfunded by $1 trillion or more.

Private employers, while required to account for their pensions, have played sophisticated games with the numbers -- all within the rules. For example, they can assume the pension fund increased in value when it actually declined. They can assume it will continue increasing in value at a rate that is almost certainly way too high. They can even jack up their reported profits based on that assumed, though nonexistent, increase in pension-fund value.

But eventually actual dollars must be paid out, a prospect that has seriously spooked private employers. Just this month IBM (Research) announced that it would join the long list of companies (Verizon, Hewlett-Packard, Motorola) that have frozen their pension plans, instead increasing 401(k) contributions for employees. And the 18-month negotiation between UPS and its pilots has come down to just two points: whether outsourced pilots overseas must be union members, and (you guessed it) pensions.

The pension wars will inevitably include Congress, which is working out a way to increase funding for the federal Pension Benefit Guaranty Corp., now deeply in the red as huge companies like UAL, parent of United Air Lines, dump their pension plans on it. Since the PBGC is an insurer, the logical move is to raise the premiums companies pay, especially for the riskiest plans.

But if Congress mandates a premium hike, as it probably will, then more companies will just dump their plans on the PBGC, redoubling the need for more funds, leading to more premium hikes, and so on. If you can see any way taxpayers will not get billed for a giant bailout, please e-mail Congress immediately.

And then there's the greatest pension crisis of all: Social Security. We've stayed in denial thanks to the so-called trust fund, that magical place where the plan's annual surpluses are sent to be invested until we need them. But since those surpluses must by law be invested in government bonds, they have simply been handed over to the U.S. Treasury and spent by Congress.

The trust fund is in fact meaningless, a bit of marketing hooey cooked up in the '30s. When Social Security's annual surpluses end in just six or seven years, the battle over whose ox to gore in order to cover the plan's obligations will be truly epic.

The hard reality is that for decades we haven't told ourselves the truth about pensions. Now, as the first baby-boomers turn 60, we must finally confront reality -- and absolutely no one will like it. In New York last month, transit workers and management compromised; employees will make small contributions toward health insurance premiums but will keep one of the richest retirement deals around.

Soon those compromises simply won't be affordable. And that's when the pension wars will explode.


http://money.cnn.com/2006/01/13/news...ex.htm?cnn=yes

Fibonacci

Well, seeing as the Gov't is YOU and I the US TAXPAYER, we'd better wake up to the realities which are bubbling up and will soon be directly in our face and no longer shoved under the bed and forgotten...


Pension Bombs Go Boom in Bonds; Treasuries Next?: Mark Gilbert
2006-01-25 19:05 (New York)


(Commentary. Mark Gilbert is a Bloomberg News columnist. The
opinions expressed are his own.)

By Mark Gilbert
Jan. 26 (Bloomberg) -- A faint ticking sound is pulsing
through the U.S. Treasury market, echoing the boom that's
exploded in U.K. government bonds maturing in 30 years and more.
As the rules governing British pension funds have mutated in
recent years, the law of unintended consequences has kicked in.
Demand for long-dated, fixed-income securities has ballooned,
driving prices through the roof and yields through the floor.
The U.S. government is also overhauling its pension system,
as the remorseless logic of population aging erodes the ability
of companies to pay their retirees. The result could be U.S. bond
yields as compressed as their U.K. counterparts, with too much
pension-fund money chasing too few securities.
Traders bidding at this week's U.K. auction of 50-year
inflation-linked gilts drove the real yield down to 0.46 percent,
the lowest at a sale since the bonds were introduced in
September. Plain 50-year gilts yield about 3.6 percent, down 60
basis points in the past six months and about 100 basis points
lower than the yield on 30-year Treasuries.
U.K. yields have been driven lower as pension-fund managers
convinced themselves that bonds are a better match for their
long-term liabilities than equities. Changes in the regulations
that govern how those obligations are calculated have exacerbated
the squeeze.

`Self-Fueling Bubble'

Because lower yields produce wider pension deficits, there's
a vicious circle of bond-buying -- ``a self-fueling bubble at the
long end of the yield curve,'' according to Tim Bond, the head of
global asset allocation at Barclays Capital in London.
Toby Nangle at Baring Asset Management in London estimates
U.K. pension funds have boosted their bond holdings in recent
years to about 22 percent of their total investments from 16
percent. With U.S. pension assets valued at about $13.4 trillion,
a similar shift in appetite among U.S. money managers would
produce an extra $800 billion of demand goosing U.S. government
bonds in coming years.
``The prospective accountancy and legislative changes will
have the effect of increasing the incentives to hold fixed-income
assets,'' Nangle wrote in a research paper this week. ``We expect
asset allocation shifts in the U.S. out of public equities in
favor of long-dated real and conventional bonds.''

$1 Trillion Tab

One of the U.S. changes to be phased in during the next
three years obliges public employers to calculate their total
expected bill for looking after retirees in what's called Other
Post-Employee Retirement Benefits. Stephen McElhaney, an actuary
at pension consulting firm Mercer Human Resources, told the New
York Times last month that the total tally for pension, health-
care and other costs might reach $1 trillion.
The U.S. Congressional Budget Office estimates that so-
called defined-benefit plans, which make a promise on how much
pension they'll pay, were underfunded to the tune of $600 billion
last year. The Pension Benefit Guaranty Corp., a quasi-government
agency that backstops the U.S. pension system, had a $23 billion
shortfall in 2005; it's now responsible for paying 1.3 million
people, 20 percent more than in 2004.
U.S. officials are scanning the same scary pension-deficit
horizon that's dismayed their U.K. colleagues, and are coming to
the same conclusions -- companies must shovel more money into
their pension plans, their accounts must tell the truth about
future pension costs and funding gaps should be filled as quickly
as possible.
They're also likely to come up with the same remedy, relying
on the fixed interest from bonds to plug those gaps more
efficiently than the riskier returns from stocks.

Long Bond Renaissance

The U.S. Treasury plans to raise a record $171 billion this
quarter, a $27 billion increase from a year ago. Even with that
jump in total borrowing in the $4.1 trillion Treasury market,
U.S. bond investors are more starved of long-dated securities
than their U.K. peers.
In October 2001, emboldened by a record budget surplus, the
U.S. government declared 30-year bond sales unnecessary. Four
years of budget deficits later, the long bond is back on the
auction calendar, with its reintroduction scheduled for Feb. 9.
Last week, the Treasury asked its primary dealers to estimate how
much demand the revival will generate.
``The U.S. Treasury could swap shorter-dated Treasury
instruments into longer-dated conventional and index-linked
securities,'' Baring Asset Management's Nangle wrote. ``It could
shift the bulk of new issuance to the long-dated part of the
yield curve.''

Predictive Power

One result of the distortions in U.K. bond demand is that
the yield curve has lost its power as a predictor of future
economic conditions. Investors charging less to lend for 30 years
than for two years are typically anticipating a slump in growth
and a deceleration in inflation. The inversion in gilts, where
two-year yields of about 4.3 percent are some 60 basis points
above those at the 30-year maturity, is the exclusive product of
the imbalance between supply and demand.
In July, Federal Reserve Chairman Alan Greenspan said the
yield curve's ``efficacy as a forecasting tool has diminished
very dramatically.'' His debunking of the implications of an
inverted yield curve was widely reported at the time, and has
stoked a debate about whether a U.S. inversion would matter.
What he went on to say, though, attracted less attention.
Asked by U.S. Senator Richard Shelby whether an inversion would
be ``still relevant to your thinking on monetary policy,''
Greenspan replied that it would be. ``Even though its forecasting
or anticipatory capability is greatly diminished, it's not
zero,'' the Fed chairman said.
With Greenspan making way for Ben Bernanke on Jan. 31, the
last thing economy watchers need as they ponder the implications
of a changing of the guard is the added noise from a distorted
bond market. To avoid the debacle seen in the U.K. market, the
U.S. Treasury should anticipate a renewed surge in appetite for
the securities with the longest lives, and start adjusting its
auction calendar accordingly.

source: bloomberg.com

Fibonacci

So goodbye, an end to an era...in my view not necessarily a bad thing. Why have all your eggs tied up in one basket *your employer.

Fibonacci

This is a problem that just won't get swept under the rug...

Fibonacci

By Joe Mysak July 13 (Bloomberg)

MR1

As your above quoted articles show, we have a hell of a mess nationwide.
I have been aware of if for the past few years because I stumbled across an article or two.

There can't possibly be a good solution because the people that we elected to do our bidding are spineless and greedy. We have been sold down the river and continue to be pushed. They continue to bow to special interest and union pressure, individual taxpayer be dammed and pay the bills we tell you about.

Politicans don't get reelected by providing bad news and they love their jobs. I have been saying for years that I just want the same things we provid for our public servants. Members of Congress don't have to be concerned about their retirement or health insurance because we let them provide themselves princely deals for the rest of their lives. They deserve it because they toil so hard for us on a daily basis and give up the great jobs they could have in the private sector - right.

To keep getting elected, they kiss the behinds of the public unions by granting them darn near anything they ask for, same with special interest groups (business). That's why here in CA, state employees including teachers frequently retire @ 75-110% of their highest salary from when they were supposedly working. Don't forget they lots of them also have lifetime free medical for themselves and family. Finally, we also pay them to retire early by giving them a fat check to leave. But wait, one more tidbit, we rehire them as consultants at a salary higher the they receive fulltime. Sure we can and should pay them more, they have valuable skills and look how much we save by not having to pay them additional health benefits. Oh, and they only take the assignments that they want for usually short periods of time.

The beauty of this system is that nobody is to blame, the other guys did it and we didn't know. By th way, if you don't love me anymore, I'll just retire, collect my pension and take a job with one the private companies that thought so much of my great public service.

The whole system stinks and is on life support. We don't want to hear about it, news is to depressing. Did you see what Paris and her friends did last night??

With our heads buried in the sand, where are our behinds? What's been done to them?

MR1

Of course the following 'business as usual' actions below are totally unrelated to anything above.

I can't figure how they expect us to increase or consumpion, pay into our 401K's and reduce the deficit all on our $5.00 salary?


Southwest's retiring executives to stay on payroll
Posted 1d 8h ago | Comments 4 | Recommend 2 E-mail | Save | Print |



NEW YORK (Reuters) — Southwest Airlines (LUV), which is offering buyouts to more than 25% of its workforce in order to lower wage costs, will pay hundreds of thousands of dollars to two officials after they retire from top jobs.
Herb Kelleher, founder of Southwest, will get an annual salary of $400,000 for the next six years, even though he will step down as executive chairman next May, according to a filing with the Securities and Exchange Commission on Friday.

Colleen Barrett, who will step down as president next July, will be paid $368,752 a year until July 2013, according to the filing.

Kelleher, 76, will be paid less than his 2006 base salary of $450,000, according to Southwest's latest proxy.

Barrett, 62, known as "company mom" at Southwest, will get a raise from her 2006 salary of $362,487, according to the filings.

FIND MORE STORIES IN: Southwest | Southwest Airlines | IPTC
Kelleher and Barrett have both been with Southwest since 1978 and were instrumental in the growth of the airline, which pioneered the low-cost carrier model.

Kelleher has served as Southwest's chairman since 1978 and was chief executive from 1981 to 2001. Barrett joined as corporate secretary in 1978 and filled a number of positions before being promoted to president in 2001.

Their departures come with Southwest in transition as it seeks to adapt to tougher competition and higher fuel prices. The company has slowed its expansion and offered buyout packages to senior employees, who it plans to replace with entry-level workers.

Southwest also plans to start new business initiatives — which may include premium seating and offering in-flight Internet — by the end of the year. It hopes these efforts will generate over $1 billion in annual revenue by 2010.

Chief Executive Gary Kelly, whose contract was extended to February 2011, will get a modest raise. His annual base salary will rise to $424,065 from $416,860, according to the filings.

Copyright 2007 Reuters Limited. Click for Restrictions.

iTimmy

What I never understood is why/how the government can offer significantly greater benefits then the private sector and think that it would work. I sure hope to be living in another country by the time I hit 40, shits going to get ugly when the money starts running short.

Fibonacci

Hey, I know a country which has balanced budgets...

https://acurazine.com/forums/showthr...=props+canucks

MR1

Yea but they are probably building a fence to keep out illegals as I type.

Fibonacci

Fibonacci

By Joe Mysak Aug. 14 (Bloomberg)

http://www.bloomberg.com/apps/news?p...d=ajIQY_vaI6NQ

Fibonacci

By Michael B. Marois and William Selway Feb. 27 (Bloomberg) --

http://www.bloomberg.com/apps/news?p...d=ajxCNoS2DEzE

Fibonacci

http://www.bloomberg.com/apps/news?p...d=arYeVtZeBd4s

Fibonacci

Accounting Tactics Conceal a Crisis For Public Workers

http://www.washingtonpost.com/wp-dyn...print/asection

Fibonacci

http://www.bloomberg.com/apps/news?p...d=aw9HrY21Ynno

California alone has a $42 billion deficit -- some numbers are missing!

MR1

It looks like we are well on our way to HELL!
The public is stupid.

I hope Obama can talk us into fixing some things financially.

Moog-Type-S

Unions + Pensions = Dinosaurs

Let's hope in the aftermath of this economic mess, they end up extinct.

special-ed

Unless he's ready to grow a pair and take on the Federal Reserve to getting the USD backed by something of actual worth, all this extra money being printed and the USD losing it's position as the world's reserve currency will cause the dollar to............

amisconception

Collapse.

And I'd be shocked if Obama got the dollar back on a real standard (gold or commodity).

Moog-Type-S

Obama is gonna put the dollar on the "Hope" standard.

amisconception

Will Y.

Isn't that what the stock market and financial markets were based on?

special-ed

I wonder who would last longer before they send for "The Professional"......
BHO or JFK.

Time to stock up on more sunshine bars and Benelli shotguns just in case. Hope for the best, plan for the worst.

Silver™

The Chicago Transit Authority retirement plan had a $1.5 billion hole in its stash of assets in 2007. At the height of a four-year bull market, it didn’t have enough cash on hand to pay its retirees through 2013, meaning it was underfunded to the tune of 62 percent.

The CTA, which manages the second-largest public transit system in the U.S., had to hope for a huge contribution from the Illinois state legislature. That wasn’t going to happen.

Then the authority found an answer.

“We’ve identified the problem and a solution,” said CTA Chairman Carole Brown on April 16, 2007. The agency decided to raise money from a bond sale.

A year later, it asked Illinois Auditor General William Holland to research its plan. The state hired an actuary, did a study and, on July 17, concluded that the sale of bonds would most likely result in a loss of taxpayers’ money.

Thirteen days after that, the CTA ignored the warning and issued $1.9 billion in bonds. Before the year ended, the pension fund was paying out more to bondholders than it was earning on its new influx of money. Instead of closing its funding gap, the CTA was falling further behind.

Public pension funds across the U.S. are hiding the size of a crisis that’s been looming for years. Retirement plans play accounting games with numbers, giving the illusion that the funds are healthy.

The paper alchemy gives governors and legislators the easy choice to contribute too little or nothing to the funds, year after year.

The misleading numbers posted by retirement fund administrators help mask this reality: 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.

http://www.bloomberg.com/apps/news?p...1EA&refer=home

Moog-Type-S

Silly Chicago....you need to learn from California....when you run out of money for your fat bloated union worker benefits, you just need to have the union lean on the state house to raise the people's taxes to pay for it.

Silver™

Den Black, a retired General Motors Corp. engineering executive, says he’s worried and angry. The government-supported automaker is going bankrupt, he says, and he’s sure some of his retirement pay will go down with it.

“This is going to wreck us,” said Black, 62, speaking of GM retirees. “These pledges from our companies are now garbage.”

As the biggest U.S. automaker teeters near bankruptcy, workers and retirees like Black are bracing for what may be $16 billion in pension losses if the Pension Benefit Guaranty Corp. has to take over the plans, according to the agency. As many as half of GM’s 670,000 pension-plan participants might see their benefits trimmed if that happened, an actuary familiar with the company’s retirement programs estimates.

The possibility that GM might dump its pension obligations is likely to intensify debate over the treatment of executives of companies that receive U.S. aid. GM Chief Executive Officer Rick Wagoner, ousted by the Obama administration last month, may receive $20.2 million in pensions, according to a regulatory filing.

“The core issue is fairness,” said Harley Shaiken, a labor professor at the University of California at Berkeley. “To have workers lose a significant amount of their pension after giving a lifetime to building a company is devastating under any circumstance. It’s made all the more worse by the symbolism of a $20 million payoff at the top.”

Measured by participants, GM’s pension plan would be the largest taken over by the PBGC, a quasi-government corporation created by Congress in 1974 to protect pension programs of bankrupt companies.

Dealing with pensions may be one of the thorniest issues facing President Barack Obama in a GM bankruptcy. Unions including the United Auto Workers rallied behind his candidacy, spending $52 million to help elect him last year, according to Washington-based OpenSecrets.org, which tracks campaign spending.

In an election-night poll conducted by Peter D. Hart Research Associates, union members identified protecting pensions and Social Security and reducing health-care costs as their top goals for the new administration.

“It’s going to be a very political decision,” said John Casesa, who follows the auto industry as managing partner of Casesa Shapiro Group, a New York consulting firm. “I’m not really sure how this will go.”

GM’s pension system had a $20 billion shortfall as of Nov. 30, 2008, based on numbers the company provided the PBGC, said Jeffrey Speicher, a PBGC spokesman. By law, the agency would be able to make up only $4 billion of that, he said.

http://www.bloomberg.com/apps/news?p...KWo&refer=home

Silver™

The deficit at the federal agency that guarantees pensions for 44 million Americans more than doubled in the last six months to a record high, reaching $33.5 billion, largely as a result of the surging number of bankruptcies among companies whose pensions it must now take over.

The Pension Benefit Guaranty Corporation, as of October, had faced a shortfall of $11 billion. But the combined effect of lower interest rates, losses on its investment portfolio and the increase in the number of companies filing for bankruptcy protection resulted in a deepening of its estimated deficit, officials said Wednesday.

Because the agency has $56 billion in assets — most of which is invested in Treasury bonds — it is not facing any prospect of default in the short term, officials said.

“The P.B.G.C. has sufficient funds to meet its benefit obligations for many years because benefits are paid monthly over the lifetimes of beneficiaries, not as lump sums,” the agency’s acting director, Vince Snowbarger, said in a statementWednesday. “Nevertheless, over the long term, the deficit must be addressed.”

The agency, created by Congress in 1974, is now paying benefits of about $4.3 billion a year to about 640,000 people. Employers nationwide with so-called defined-benefit pension programs pay insurance premiums to the agency in return for a promise that it will take over their pension plan if a company fails.

On Tuesday, for example, the agency announced that it had assumed the pension plan once run by the Lenox Group, a bankrupt maker of tableware, giftware and collectibles based in Eden Prairie, Minn. Assuming control of pensions for this company’s 4,300 workers will cost the agency an estimated $128 million — the difference between what Lenox had in its pension fund and what the total estimated obligations are.

With the bankruptcy of Chrysler and a possible similar move by General Motors, the agency is facing a record surge in demand. The new deficit estimate takes into account both pensions it has taken over in the last six months, and others it believes it will have to assume control of soon.

http://www.nytimes.com/2009/05/21/bu...21pension.html

Fibonacci

http://www.bloomberg.com/apps/news?p...d=aFJd7ViPkXQg

Moog-Type-S

The Unions ate the American Auto Industry alive.....they are doing the same to the states.

Fibonacci

As workers in the private sector are losing their final-salary pensions, public employees are being shielded from the true cost of provision for old age

http://www.economist.com/displayStor...fsrc=nwlgafree

Fibonacci

Two Bad Choices for Funds: Cut Benefits Or Take Greater Risks to Rebuild Assets

http://www.washingtonpost.com/wp-dyn...101002360.html

Fibonacci

http://www.bloomberg.com/apps/news?p...d=aKQk6SUcSr3A


TARP bailout = peanuts. Who do taxpayer's "tax" to get our money back?

Silver™

U.S. states face a total shortfall of at least $1 trillion in their funds for employees' pensions and retirement benefits, and their financial problems are quickly mounting, according to a report released by the Pew Center on the States on Thursday.

Illinois is in the worst shape, with only 54 percent of its pension obligations funded, according to the report, which looked at fiscal year 2008.

Because the analysis did not encompass the final six months of calendar year 2008 -- most states' fiscal year's end during the summer -- it does not include the market downturn that devastated many funds' investment portfolios.

"The funding gap will likely increase when the more than 25 percent loss states took in calendar year 2008 is factored in," the report said.

Regardless of stock market fluctuations, pension funds were destined to fall down a budget hole, the non-profit research center found.

"Over the last 10 years, many states have shortchanged pension plans in good times and bad," said Susan Urahn, the center's managing director, who called the beginning of the century a "decade of irresponsibility."

States did not save for the future and manage costs well, said Urahn. She also cautioned that the 8 percent return on investments most states typically expect may need to be lowered.

Still, the dwindling value of the funds' investments from stock market problems has forced states to deposit more money into their accounts.

In 2000, they were only required to pay $27 billion total into their funds. By fiscal 2008 that amount had more than doubled to a $64 billion deposit. This comes at a time when a long and deep economic recession has devastated states' revenues and made it nearly impossible for many to pay for basic costs such as salaries.

Describing state pension funds as operating similarly to credit card holders who make minimal monthly payments on their debt but continue to charge, Urahn said the funds were making their problems worse by not preparing for impending retirements.

"The growing bill coming due to states could have significant consequences for taxpayers -- higher taxes, less money for public services and lower state bond ratings," she said.

A pension fund is considered healthy if it has a funding level equal to at least 80 percent of its liability. In fiscal 2008, 21 states were below that mark, compared to only 19 states in fiscal 2006.

The rate of decline has been rapid, the center said. In fiscal 2000 half of the 50 states had fully funded their pension systems but by fiscal 2008 only four -- Florida, New York, Washington and Wisconsin -- could boast being able to cover their costs.

http://www.reuters.com/article/idUSTRE61H13X20100218