The public pension fund system is
approaching apocalypse. Earlier
this week teachers who are part of the Colorado public pension system
(PERA) staged a walk-out protest over proposed changes to the plan, including
raising the percentage contribution to the fund by current payees and raising
the retirement age. PERA backed off but ignoring the obvious
problem will not make it go away.
Every public pension fund in the country is
catastrophically underfunded, especially if strict mark-to-market of the
illiquid assets were applied. Illinois
has been playing funding games for a few years to keep its pension fund
solvent. In Kentucky, where the public pension fund is on the verge of
collapse, teachers are demanding a State bailout.
If the stock market were sustain a extended
decline of more than 10% – “extended” meaning several months in which the stock
market falls more than 10% – every public pension in the U.S. would
collapse. This is based on an
in-depth study conducted by a good friend of mine who works at a public pension
fund. He has access to better data than “outsiders” and I know his work
to be meticulous. Please note that the three big market declines
since August 2015 were stopped at a 10% draw-down followed by big moves
higher. The current draw-down was stopped at 10% but subsequent outcome
is to be determined. My friend and I are not the only ones who understand this:
The next phase of
public pension reform will likely be touched off by a stock market
decline that creates the real possibility of at least one state fund
running out of cash within a couple of years. – Bloomberg
I know a teacher in Denver who left her job
that was connected to PERA in order to take a lump-sum payout rather than risk
waiting until she retired to bankrupt pension plan. She took a job in the
Denver school system, which is not part of the PERA system. She’s actually
thinking about teaching in Central America, where there’s high demand for
English-speaking teachers and the pay relative to the cost-of-living is much
higher:
“Teaching sucks right now. Teachers are
underpaid for the work we’re doing. After all of these years, I’m
making about $60,000. That’s BS! I have a masters. Truthfully, the classroom is
burning me out right now. The f#cked up world is spilling into kids’ lives.
They’re largely defiant and off-track. I don’t have the energy to try to
streamline whole classrooms.”
In
reference to the pension system: “When the mother f#cking-f#ck is any of
this going to be corrected?!?! I am beyond mad. Ecuador has become an
option, because this country is beyond f#cked up.”
Unfortunately, I was compelled to answer
with the truth – a truth she already knows:
“It won’t be corrected. The system will
have to collapse and then who knows what will happen. Criminals run everything
now and the people who are supposed to enforce Rule of Law are well paid to
look the other way. This has been building for at least 2 decades. It
doesn’t help when the President is caught shoving a cigar up a staff interns
vagina and then a joke is made of it in Congress. “Is oral sex, sex?” Answer:
“it depends on what the meaning of the word ‘is,’ is.”
Now the corruption and fraud is out in the
open and there’s nothing that can be done about it. The system will
have collapse – its the final solution.
