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Returns are not going to return to high enough levels to cover the $500B gap.
The state of California's real unfunded pension debt clocks in at more than $500 billion, nearly eight times greater than officially reported.
That's the finding from a study released Monday by Stanford University's public policy program, confirming a recent report with similar, stunning findings from Northwestern University and the University of Chicago....
How did we get here? The answer is simple: For decades -- and without voter consent -- state leaders have been issuing billions of dollars of debt in the form of unfunded pension and healthcare promises, then gaming accounting rules in order to understate the size of those promises. ...
California's $500-billion pension time bomb - Los Angeles Times
Where are their corporate HQ located?
last I checked corp hq don't manufacture .
Most semiconductor manufacturing isn't done in this country. Most fabs are now located in Asia. But the design is done in America, primarily in California.
which will last far beyond when you and I have passed.
http://www.usmessageboard.com/economy/143594-california-economy-4.html#post3016999
last I checked corp hq don't manufacture .
Most semiconductor manufacturing isn't done in this country. Most fabs are now located in Asia. But the design is done in America, primarily in California.
Uhm to whom are you referring?
Intel closed its last manufacturing clean space in Cali in dec. 08 ( in santa clara). Of the Intel Semi-conducts 70% are manufactured in Arizona and New Mexico ( they just decided to inject 5 bill. in upgrading to the next gen there btw). The Dalian China plant is second gen. tech. and accounts for approx. 5% or so, the rest is in Israel and Ireland.
Nat. Semi-cond. will be closing their cali cleanspace in 3 years btw. where they will go is a question, I think Texas or yes overseas.
the off shore foundrys are indys. ala TSMC, (Taiwan Semiconductor Manufacturing Company [Limited]), UMC, and some in Germany (seimans etc.) ( amd, which they are selling). There are I am sure some American co's. offshore boutique processors etc. and then there's the graphics chip markers which yes are primarily made in those foundries, BUT not entirely off shore.
You are really clueless about how bad this pension situation is.
In California's case, past pension underfunding means reduced funding of current programs. This explains why pension costs rose 2,000% from 1999 to 2009, while state funding for higher education declined over the same period.
California's $500-billion pension time bomb - Los Angeles Times
Gray Davis bought votes from state workers by grossly increasing pension benefits. It has snowballed to the point where real services have been cut to cover this abuse.
which will last far beyond when you and I have passed.
http://www.usmessageboard.com/economy/143594-california-economy-4.html#post3016999
on their own? I don't think so.....
uhm toro, I said this 2 pages ago bro. and one must add that they ALL knew it was smoke, it was good for the unions, calpers and the pols. and it sux a mo[p for everyone else, the forecasts were always ahead of what any reasonable fin. guy would have told them to expect, that was MY point.You are really clueless about how bad this pension situation is.
In California's case, past pension underfunding means reduced funding of current programs. This explains why pension costs rose 2,000% from 1999 to 2009, while state funding for higher education declined over the same period.
California's $500-billion pension time bomb - Los Angeles Times
Gray Davis bought votes from state workers by grossly increasing pension benefits. It has snowballed to the point where real services have been cut to cover this abuse.
I've worked for years in the pension business, and CalPERS is NOT underfunded by $500 billion. The study was done by four Stanford students. Pension fund consultants - firms that do this for a living - do not come to this same conclusion. So why do you believe the inexperienced students who use an absurdly low discount rate and not the professionals who have spent their careers advising on these matters?
I believe the main reason why CalPERS contributions have risen so much is for the same reason why so many states have seen contributions increased - during the latter years of the 1990s, returns were so strong, politicians reduced contributions because they assumed that the strong returns would continue, making themselves popular with voters because they were seen as giving voters a "tax cut" when in fact they should have been retaining contributions. Now, because returns have been low, the folly of political decisions have come back to haunt the states.
I have no doubt that politicians - particularly Democrat politicians - have overpromised retirement benefits in an effort to get re-elected, and there has to be pension reform. But hysteria without contextual understanding is no way to approach an issue.
*shrugs shoulders*..I for one am not hysterical so much as pissed...I am also stuck in a state of what(?)...schizophrenic miasma?...I am part of the problem so to speak, but, I have to make a living.
What conclusion do the pros come to? $400B? $300B? $200B $100B?
Are any of those less cause for concern?
*shrugs shoulders*..I for one am not hysterical so much as pissed...I am also stuck in a state of what(?)...schizophrenic miasma?...I am part of the problem so to speak, but, I have to make a living.
Don't get me wrong, I'm not planning to move to California any time soon. Washington or Oregon, maybe.
we'd be glad to have you....from animal house.."sure we need the dues"...
What conclusion do the pros come to? $400B? $300B? $200B $100B?
Are any of those less cause for concern?
I settled at 200 billion. considering there is a 50 Billion shortfall that HAS to be made uo in the next year, well, I think that tells the tale...we are screwed.
You are really clueless about how bad this pension situation is.
In California's case, past pension underfunding means reduced funding of current programs. This explains why pension costs rose 2,000% from 1999 to 2009, while state funding for higher education declined over the same period.
California's $500-billion pension time bomb - Los Angeles Times
Gray Davis bought votes from state workers by grossly increasing pension benefits. It has snowballed to the point where real services have been cut to cover this abuse.
I've worked for years in the pension business, and CalPERS is NOT underfunded by $500 billion. The study was done by four Stanford students. Pension fund consultants - firms that do this for a living - do not come to this same conclusion. ....
I have no doubt that politicians - particularly Democrat politicians - have overpromised retirement benefits in an effort to get re-elected, and there has to be pension reform. But hysteria without contextual understanding is no way to approach an issue.
The state of California's real unfunded pension debt clocks in at more than $500 billion, nearly eight times greater than officially reported. ....
the finding from a study released Monday by Stanford University's public policy program, confirming a recent report with similar, stunning findings from Northwestern University and the University of Chicago.
which will last far beyond when you and I have passed.
http://www.usmessageboard.com/economy/143594-california-economy-4.html#post3016999
on their own? I don't think so.....
Why not? For this not to be true, then the population of California has to permanently start declining, or the global economy has to enter into perpetual contraction.
I would be curious to know the opinions of pension fund consultants, and how they vary with those of the Stanford U, Northwestern U, and U of Chicago reports, but you have not provided evidence that it exists.
You are really clueless about how bad this pension situation is.
In California's case, past pension underfunding means reduced funding of current programs. This explains why pension costs rose 2,000% from 1999 to 2009, while state funding for higher education declined over the same period.
California's $500-billion pension time bomb - Los Angeles Times
Gray Davis bought votes from state workers by grossly increasing pension benefits. It has snowballed to the point where real services have been cut to cover this abuse.
I've worked for years in the pension business, and CalPERS is NOT underfunded by $500 billion. The study was done by four Stanford students. Pension fund consultants - firms that do this for a living - do not come to this same conclusion. So why do you believe the inexperienced students who use an absurdly low discount rate and not the professionals who have spent their careers advising on these matters?
I believe the main reason why CalPERS contributions have risen so much is for the same reason why so many states have seen contributions increased - during the latter years of the 1990s, returns were so strong, politicians reduced contributions because they assumed that the strong returns would continue, making themselves popular with voters because they were seen as giving voters a "tax cut" when in fact they should have been maintaining contributions. Now, because returns have been low since then, the folly of these political decisions have come back to haunt the states. This happened repeatedly throughout the country, not just in California.
I have no doubt that politicians - particularly Democrat politicians - have overpromised retirement benefits in an effort to get re-elected, and there has to be pension reform. But hysteria without contextual understanding is no way to approach an issue.
You are really clueless about how bad this pension situation is.
In California's case, past pension underfunding means reduced funding of current programs. This explains why pension costs rose 2,000% from 1999 to 2009, while state funding for higher education declined over the same period.
California's $500-billion pension time bomb - Los Angeles Times
Gray Davis bought votes from state workers by grossly increasing pension benefits. It has snowballed to the point where real services have been cut to cover this abuse.
I've worked for years in the pension business, and CalPERS is NOT underfunded by $500 billion. The study was done by four Stanford students. Pension fund consultants - firms that do this for a living - do not come to this same conclusion. So why do you believe the inexperienced students who use an absurdly low discount rate and not the professionals who have spent their careers advising on these matters?
I believe the main reason why CalPERS contributions have risen so much is for the same reason why so many states have seen contributions increased - during the latter years of the 1990s, returns were so strong, politicians reduced contributions because they assumed that the strong returns would continue, making themselves popular with voters because they were seen as giving voters a "tax cut" when in fact they should have been maintaining contributions. Now, because returns have been low since then, the folly of these political decisions have come back to haunt the states. This happened repeatedly throughout the country, not just in California.
I have no doubt that politicians - particularly Democrat politicians - have overpromised retirement benefits in an effort to get re-elected, and there has to be pension reform. But hysteria without contextual understanding is no way to approach an issue.
Scuze moi, but I am not going to accept your opinion over Stanford's study and the University of Chicago. They studied the data; you haven't.
CalPERS Response to Stanford Policy Brief on Public Pension Funds
April 6, 2010
Stanford’s Institute for Economic Policy Research released a policy brief “Going For Broke: Reforming California’s Public Employee Pension Systems” that relies on outdated data and methodologies out of sync with governmental accounting rules and actuarial standards of practice. The report fails to take the following into account:
Investments
* Over the past 20 years, we have earned an average annual investment return of 7.9 percent – which includes the past two years when we suffered significant investment losses due to the Great Recession. Thus, our assumptions, from actual experience, have proven valid, relative to the 7.75 percent discount rate.
* The study appears to use the yield of the 10-year Treasury bond as the risk-free discount rate to estimate the present value of liabilities. The duration of the 10-year bond is around 8 years and well below the estimated duration of the CalPERS liability in the study. It would be more appropriate to use the yield of the 30-year Treasury bond as the risk-free discount rate for purposes of such a comparison.
* CalPERS does not believe that using a risk-free rate as suggested in the study is appropriate since the fund can earn a premium over the risk-free rate with high certainty by investing in a diversified portfolio with an acceptable level of risk.
* The study relies on data when the system had $45 billion less in assets than it has today. CalPERS assets are valued at $206 billion – a gain of more than $45 billion since the market downturn.
* Additionally, its findings are based on a mathematical model that uses current interest rates, which are very low and make liabilities appear to be much higher. That method is inconsistent with the Governmental Accounting Standards Board and current actuarial standards.
* The study recommendations are based on bond returns over the past 25 years of 7.25 percent for investment grade corporate bonds, which are only 0.66 percent lower than CalPERS total return of 7.91 percent but with much lower volatility. CalPERS experts believe that this reasoning is flawed. Prospective returns on bonds are much lower today since yields are at an historic low and the return to bonds will equal the current yield to maturity which is around 4 percent for most broad band indices. Also bonds could be more volatile than the past if economic conditions are more uncertain as in the recent period.
* CalPERS is taking steps to modify its asset allocation approach and better allocate assets according to their macro risks and fundamental characteristics. This could result in addressing inflation and interest rates as macro risks.
* It ignores our diversified investment portfolio that has been time-tested during our 78 year history. If CalPERS had followed the recommended approach in the study, we would have given up billions of investment earnings, that have helped finance pensions rather than tax dollars.
Actuarial/Benefit Formula Related
* The study misstated some of the benefit formulas in Table 3 and seems to suggest that CalPERS violate the California Constitution by using surpluses to "reduce state debt." Pension raids were determined to be unlawful during the Wilson Administration.
* To adhere to some of the changes suggested in the report, CalPERS would be violating actuarial standards of practice and undo 50 years of governmental accounting rules in favor of an approach that would be "zero" risk.
* Funded status should not be viewed as a long-term irreversible trend. A pension fund’s funded status – whether a liability or surplus – is constantly changing, depending on current economic circumstances. It is a snapshot in time that can change dramatically over a fairly short period of time due to the health of the overall economy. Funded status snapshots are useful in showing how far or how near one is to full funding. Experts agree that a funded status of 80 percent is the mark of a very healthy plan. CalPERS notes that the Stanford Report acknowledges that using the data selected, CalPERS was more than 80 percent funded.
* Benefit formulas are not set by CalPERS. They are determined through the collective bargaining process, between the employer and the employee representatives. CalPERS recently held the California Retirement Dialogue, and information on the various viewpoints on benefit formulas is available here.
Future Steps
* CalPERS regularly evaluates its assumed rate of return every three years. At our May investment committee meeting, the Board will hold a workshop on capital market assumptions, finalize those assumptions in September, hold an asset-liability workshop in November, and take final action on an asset mix in December. In February, the Board will take the final step in the process by setting the actuarial assumed rate of return/discount rate. These meetings are open to the public and CalPERS is committed to obtaining all viewpoints on these issues. We invite the authors of the study to participate in the discussions.
