Pension-math ever again
"In the not-too-distant future, there's going to be a default on the ability to pay benefits if nothing severe is done."
"I think that the data was inaccurate. It's quite a bit of a distortion,".
There are two fundamental problems looming for municipal pension plans. The first is obviously that the stock market was whacked and the pension assets of virtually all pension systems are down. In the past a lot of local pension plans were so well funded that they didn't qualify for any aide at all from the state. Thus more was available for the plans that 'needed' outside funding. It's a good bet that a lot of local pension plans will soon be qualifying for state aide for the first time in a long time and for some the first time ever. It's a simple divide-the-pie issue. The more who want a slice, the less each one gets. It bodes ill for any current projections of future state pension aid the city is expecting in coming years. Less aid will require more to be made up by the city one way or the other according to Act 205.
Then there is the recession itself and the impact it is having on tax revenues. The tax revenue that the state dedicates to local pension aid is based on insurance premia. That pot actually had some sizable increases in the years following 9/11 as insurance need and costs grew. So even as the city has been complaining that their state pension aid is down a lot from where it had been in the past, if the total revenue coming in from the foreign insurance tax had not jumped up a lot, the amount the city would be getting currently would be a lot less than it is. An odd ripple effect from 9/11. We would have been having some very different budget discussions in recent years if the total pot of state pension aid had not gone up 65% in the last decade!
In the last year of data the revenues show that revenues from that tax have held their own remarkably, but the growth since 2001 has certainly leveled off. Is it conceivable that ongoing recession is going to actually pull down these revenues. If it does the city is looking at a double whammy as the pot of money allocated to pension aid comes down while the fraction of the total it is allocated decreases as well.
So a graph, with a few numbers... The recent trend looks like this: