Future remains cloudy for public pensions and those who depend on them
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Last spring, the St. Paul Teachers' Retirement Fund Association and the Duluth Teachers' Retirement Fund Association went to the Legislature to ask for help.
At the time, the St. Paul fund could only provide two-thirds of what it had promised to those paying into the system, and the Duluth fund had more retired members than working members.
The Minnesota Legislature passed a billthat will give aid to the funds, change early retirement calculations and authorize a study on the merger of the two funds. But are these changes enough?
Pension woes are being felt across the country. Detroit, Chicago and Los Angeles are all dealing with unsustainable public pensions.
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LEARN MORE ABOUT PENSIONS:
• A Plan to Avert the Pension Crisis
America's state and municipal pensions concede that they are underfunded by more than $1 trillion. If a more realistic expectation of returns on investment is pegged at 5 percent, then that collective liability climbs to $2.7 trillion. (Former Republican Mayor of Los Angeles Richard Riordan in The New York Times)
• Editorial: How Detroit came to betray its retirees
The city has struggled to meet its pension obligations since the 1950s. Post-war Detroit invested heavily in infrastructure, shortchanging the pension funds to pay for those improvements. Then came the auto industry recession of the late 1950s, leaving city finances in a tailspin, and leading to the first city income tax imposition. (The Detroit Free Press)
• Public Pension Shortfalls Are Everyone's Problem
First, governments need to stop lying to themselves. Money that's slated to cover annual pension and health-care fund contributions but is instead siphoned away to cover other costs won't magically reappear in later budgets. In the future, states and cities should agree only to benefit packages that are based on reasonable rates of return and annual contributions they can actually make — and then make them. (Bloomberg)
• Minnesota public pension funds boosted by unexpectedly high investment returns
The big question is whether this is the start of a lasting upturn in the market — which would be a substantial boost to the pensions' financial standing — or just a temporary rise. (The Pioneer Press)
