Tuesday, December 14, 2010

Pension returns

Public pensions are guaranteed a rate of return in excess of the historic return on prudent pension investments. When such unreasonable returns are not achieved, the municipality in question is required to make up the difference. Not being able to just print more dollars (the Federal answer), states, towns and villages get to raise taxes. This benefit is made even more unsound since these guys get to pad their pension pay out in the final working years with unused vacation and sick time and extra overtime. So the unrealistic funding assumption that is supposed to pay for their retirement benefits are made completely impossible since their actual retirement benefits are calculated on an inflated salaries that were never part of the funding process in the first place. This is not a sustainable system.

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