Alabama Town’s Failed Pension Is a Warning!

Discussion in 'Economy' started by dvinman, Dec 25, 2010.

  1. dvinman
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    dvinman VIP Member

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    PRICHARD, Ala. — This struggling small city on the outskirts of Mobile was warned for years that if it did nothing, its pension fund would run out of money by 2009. Right on schedule, its fund ran dry.

    Then Prichard did something that pension experts say they have never seen before: it stopped sending monthly pension checks to its 150 retired workers, breaking a state law requiring it to pay More..its promised retirement benefits in full.

    Since then, Nettie Banks, 68, a retired Prichard police and fire dispatcher, has filed for bankruptcy. Alfred Arnold, a 66-year-old retired fire captain, has gone back to work as a shopping mall security guard to try to keep his house. Eddie Ragland, 59, a retired police captain, accepted help from colleagues, bake sales and collection jars after he was shot by a robber, leaving him badly wounded and unable to get to his new job as a police officer at the regional airport.

    Far worse was the retired fire marshal who died in June. Like many of the others, he was too young to collect Social Security. “When they found him, he had no electricity and no running water in his house,” said David Anders, 58, a retired district fire chief. “He was a proud enough man that he wouldn’t accept help.”

    The situation in Prichard is extremely unusual — the city has sought bankruptcy protection twice — but it proves that the unthinkable can, in fact, sometimes happen. And it stands as a warning to cities like Philadelphia and states like Illinois, whose pension funds are under great strain: if nothing changes, the money eventually does run out, and when that happens, misery and turmoil follow.

    It is not just the pensioners who suffer when a pension fund runs dry. If a city tried to follow the law and pay its pensioners with money from its annual operating budget, it would probably have to adopt large tax increases, or make huge service cuts, to come up with the money.

    Current city workers could find themselves paying into a pension plan that will not be there for their own retirements. In Prichard, some older workers have delayed retiring, since they cannot afford to give up their paychecks if no pension checks will follow.

    So the declining, little-known city of Prichard is now attracting the attention of bankruptcy lawyers, labor leaders, municipal credit analysts and local officials from across the country. They want to see if the situation in Prichard, like the continuing bankruptcy of Vallejo, Calif., ultimately creates a legal precedent on whether distressed cities can legally cut or reduce their pensions, and if so, how.

    “Prichard is the future,” said Michael Aguirre, the former San Diego city attorney, who has called for San Diego to declare bankruptcy and restructure its own outsize pension obligations. “We’re all on the same conveyor belt. Prichard is just a little further down the road.”

    Many cities and states are struggling to keep their pension plans adequately funded, with varying success. New York City plans to put $8.3 billion into its pension fund next year, twice what it paid five years ago. Maryland is considering a proposal to raise the retirement age to 62 for all public workers with fewer than five years of service.

    Illinois keeps borrowing money to invest in its pension funds, gambling that the funds’ investments will earn enough to pay back the debt with interest. New Jersey simply decided not to pay the $3.1 billion that was due its pension plan this year.

    Colorado, Minnesota and South Dakota have all taken the unusual step of reducing the benefits they pay their current retirees by cutting cost-of-living increases; retirees in all three states are suing.

    More.......LiveLeak.com - Alabama Town?s Failed Pension Is a Warning
     
  2. Mr. Sauerkraut
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    Mr. Sauerkraut Active Member

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    things like these are impossible here. that´s all i have to say. call me socialistc. Here has somebody to go to prison.
     
  3. Mad Scientist
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    Mad Scientist Deplorable Gold Supporting Member Supporting Member

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    This is what happens when cities, states and federal governments run pension plans.
     
  4. Mr. Sauerkraut
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    Mr. Sauerkraut Active Member

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    the federal pension system in germany works since 50 years without major problems.
     
  5. Madeline
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    Madeline BANNED

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    This will happen again, if nothing is done.
     
  6. Mr. Sauerkraut
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    Mr. Sauerkraut Active Member

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    In Germany, the civil servant´s pensions are paid with taxes. If you decide for a career as a civil servant, your absolutely sure that you will get your pension.

    But if you work with funds, i like to ask you: Do the civil servants have to pay into these funds or is it allowed to them, to save the rates and putting them into an own retirement plan?
     
  7. chanel
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    chanel Silver Member

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    Here in NJ, civil servants contribute 3-8.5 percent depending on their job. We've got a big, big problem here that few people outside of the government truly understand.
    Read more: N.J.'s unfunded pension liability grew 18 percent in a year | Philadelphia Inquirer | 12/24/2010
     
  8. editec
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    editec Mr. Forgot-it-All

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    Most pensions are based on the theory of a GOING CONCERN.

    As municipalities cease being going concerns (because the people in them are going down) those pensions become increasingly less likely to get paid.

    STILL ANOTHER example of why FREE TRADE was bad policy
     
    Last edited: Dec 26, 2010
  9. B. Kidd
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    B. Kidd Gold Member

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    States have a combined estimated $3.3 TRILLION in unfunded pension liabilities. We are no longer whistling as we pass the graveyard, as we are now whistling having already entered it.
     
  10. loosecannon
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    loosecannon Senior Member

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    This will happen at the private, municipal and federal levels if nothing is done. There will be a pension collapse effecting 100 million Americans as they reach the climax of their lives.

    And yet there is really nothing that can be done about it.

    The reason being that only a certain% of the population can live on investment income, and that number must include all of the commercial players who are trying to eek profits from the same cash cows that pensions rely on.

    We are near the point wherein 50% of all "wealth" is generated in the financial sector. But it is fragile wealth that is subject to massive devaluations in short spans.

    IOW the entire concept of a nation of people all able to retire based on income generated by stocks, bonds etc was a false promise, mathematically impossible.

    The same rules apply to SS and Medicare. Inherently unsustainable if the ratio of premium payers to dividend recipients crosses some magic threshold.

    Capitalists are by definition a small % of any population who glean the surplus of society's productivity by virtue of having provided startup capital for ventures.

    That is the same role that pension funds try to assume, and obviously only a certain % of the population can earn a living on a tightly contested surplus.
     

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