Stein: Millennials Given Responsibility to Pay for Retirement Programs Investment Deficiencies

At the start of 2020, CalPRS had an unfunded liability north of one trillion dollars.  California cities and counties have cut back on libraries, law enforcement and other basic services.  Many have tried to raise sales tax—not to expand services or keep them, but to pay CalPRS so they can keep the doors open.  In mid-March in a matter of three weeks, CalPRS LOST $69 billion in the stock market.

That means next year they will have to raise payments from cities—and cities will have to try to raise taxes back services.  It is a mess.  The key reason is the way the State pension system operates. 

The Unions have no guilt feelings about DEFINED benefits, regardless of available funds to pay for those benefits, as the responsibility to pay them will be on the backs of the younger generations that had no vote on their future financial responsibilities.

It’s amazing that “entitlement” to those promised DEFINED benefits, will drive the so called “entitled” parents and grandparents to put the costs of those entitlements onto their kids!

State and local workers are promised generous DEFINED BENEFIT PENSION PROGRAMS that few private sector companies offer any longer because they are unaffordable and unsustainable. The private sector offers defined “contribution” programs, i.e., 401k plans or something similar, which NEVER impact current or future taxpayers.”

The children and grandchildren of the union members of today will be pushed into poverty due to the greed of the unions of today.  Only the members can stop this generational push to create poverty for the future.

SACRAMENTO, CA – JULY 21: A sign stands in front of California Public Employees’ Retirement System building July 21, 2009 in Sacramento, California. CalPERS, the state’s public employees retirement fund, reported a loss of 23.4%, its largest annual loss. (Photo by Max Whittaker/Getty Images)

Millennials Given Responsibility to Pay for Retirement Programs Investment Deficiencies

By Ronald Stein,  3/29/20   

Founder and Ambassador for Energy & Infrastructure of PTS Advance, headquartered in Irvine, California

In these trying times coping with the Coronavirus, and its huge impact on businesses and employment, the younger generations have been set up to pick up some the costs of the lucrative defined benefits that their parents and grandparents voted in for themselves.

For the government union employees, it’s enticing for them to retire early and receive lucrative guaranteed retirement checks and in many cases, enjoy more retirement years than the working years they put in to qualify for those “guaranteed defined” benefits. As we all know, over time, defined pensions have become more generous and the time of service required to retire reduced.

We’re constantly reading about those “unfunded” pension liabilities, as the monies set aside to pay for that endless commitment are apparently not earning enough annual returns to pay for that commitment, thus “unfunded” is appropriate and scary for the younger generations.

Government pension systems are generally funded by four revenue sources that vary in each jurisdiction: deductions from an employee’s paycheck; contributions from the employer; investment earnings from the pension fund; and taxpayers. In the case of taxpayers, it’s going to be the youth that had no vote on these financial obligations.

Unless pension funds around the nation continue to earn 7% or more per year on their investments, it’s likely that taxpayers will be on the hook for trillions of dollars of promises to government unions. These promises have been made by politician’s past and present, resulting in pressure to increase taxes and cut government services.

Our kids had no say in the implementation of those programs, but as upcoming taxpayers, they are the safety shield for the Unions efforts to maximize lush guaranteed retirement packages for their union members.  Our kids will have the financial responsibility to make up for any deficiencies from the pension fund investments.

The Unions have no guilt feelings about DEFINED benefits, regardless of available funds to pay for those benefits, as the responsibility to pay them will be on the backs of the younger generations that had no vote on their future financial responsibilities.

It’s amazing that “entitlement” to those promised DEFINED benefits, will drive the so called “entitled” parents and grandparents to put the costs of those entitlements onto their kids!

State and local workers are promised generous DEFINED BENEFIT PENSION PROGRAMS that few private sector companies offer any longer because they are unaffordable and unsustainable. The private sector offers defined “contribution” programs, i.e., 401k plans or something similar, which NEVER impact current or future taxpayers.

Making matters worse, thanks to complicit politicians, the state and local governments have failed to adequately fund these overly generous DEFINED benefit pensions. The huge unfunded pension liability debt crisis is the inevitable result that younger generations, unable to vote today, that will bear the costs.

Fully funding these pensions is unfair to current hard working taxpayers, so the “consensus” of the courts and current taxpayers is to defer the responsibilities for paying for these overly-generous “defined retirement benefit” pension programs to younger generations, for them to pay higher taxes and work later into their lives to pay for the promises of previous generations, to subsidize older Americans.

This matters for taxpayers in California—and other states—because pension obligations, once made, are virtually impossible to renegotiate or discharge. Since states are sovereign entities with unlimited ability to tax, and because they cannot declare bankruptcy, any government pension shortfall must eventually be paid by the taxpayer.

It’s frustrating and appalling that the “courts” are saying that future generations will continue to be legally responsible for DEFINED BENEFIT PENSION PROGRAMS established by previous generations! Are the courts really supporting taxation on younger generations without representation?

About Stephen Frank

Stephen Frank is the publisher and editor of California Political News and Views. He speaks all over California and appears as a guest on several radio shows each week. He has also served as a guest host on radio talk shows. He is a fulltime political consultant.

Comments

  1. Wow, a few of us have known about the public sector unions and this problem for some years. We believe that most people are very unaware of this coming problem, or this problem that is already here. The Democrats will not help with this. That’s what we believe.

  2. Just as CA’s 1978 Proposition 13, started a movement that swept across the country, what is now needed as an initiative proposition amending the CA Constitution to make government Defined Benefit plans illegal prohibiting contribution of taxpayer funds to government Defined Benefits plans while allowing contributions to Defined Contributions plans. Of course this is going to run up against contract law but if the proposition passed it would pit contract law against constitutional law.

  3. James E. Horn says

    Why are states like CA burred in pension problems? The answer: They are STOOPID!

    in 1983 the Congress, groaning under the pension obligations for millions of Civil Service employees did away with Civil Service retirement for all new employees. They put in 401(k) types of tax deductible and tax free retirement plans funded partially by the employees with matching funds from the government.

    Now, about 45-years later, the Civil Service burden is diminishing as elderly pensioners pass away. Employees under the new plan are retiring as multi-millionaires.

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