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2013-12-05 9:21 AM

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Elite
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Subject: Public Employee Pensions
It appears the day of reckoning has finally started to arrive. I've been saying for quite some time that these aren't sustainable. Now that the courts are allowing modifications, I think we will see a large increase in changes to public employee pensions.



http://www.bloomberg.com/news/2013-12-05/pension-threats-in-illinoi...


2013-12-05 10:55 AM
in reply to: JoshR

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Subject: RE: Public Employee Pensions
Yea, I think public employees are just starting to realize that there pensions are no more secure than the guy working for the big corporation that goes bankrupt. I guess if there is a positive in this, it will hopefully educate younger workers that they need to take charge of securing there own retirement.
2013-12-05 11:28 AM
in reply to: 0

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Subject: RE: Public Employee Pensions
The problem is that in many states like CA got pensions, including teachers, police, fire fighters etc are guaranteed by the state constitution. Even though everyone knows the shortfalls exist today and can never be made up, when that happens those pensions are going to look to the state legislatures to make them whole. Changing contracts is one thing, changing a state constitution is quite another.

If you think the Detroit bankruptcy was bad, just wait until states begin to file. I saw an article about a year ago about pensions liabilities as a percentage of state revenue and how many states are less than a decade away from having those liabilities exceed total revenue. The situation has gotten worse over the last few years because good paying jobs are being replaced by low paying jobs thereby reducing tax revenues (or would confiscation be a more appropriate term).

Here is a good article on the problem: http://www.reuters.com/article/2013/06/27/usa-states-pensions-moody...

And for some highlights: Moodys took a new look at pension. "The rating agency took a new approach to determining the health of public retirement systems by weighing each plan's net pension liability - the difference between the projected benefit payments and the assets set aside to cover those payments - against state revenue."

"..Illinois pension bill was equal to 241 percent of its revenues."

"After Illinois, Connecticut had the highest pension burden in the country, with a pension liability equal to 189.7 percent of revenues. That was followed by Kentucky, at 140.9 percent; New Jersey, 137.2 percent; Hawaii, 132.5 percent; and Louisiana, s 130.2 percent. Colorado's net pension liability was slightly more than revenues at 117.5 percent and Maryland's slightly less at 99.5 percent."

"The states that have the largest relative pension liabilities have at least one thing in common: a history of contributing less to their pension plans than the actuarially required contributions (ARC)," Moody's said in the report, which looked at data for fiscal 2011.

So what do you think is going to happen when those bills come due???



Edited by Stuartap 2013-12-05 11:33 AM
2013-12-05 11:51 AM
in reply to: Stuartap

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Elite
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Subject: RE: Public Employee Pensions
I'm not familiar with how the legal details work, but aren't some cities in CA already declaring bankruptcy and trying to restructure pension benefits? How does that square with the CA constitution?

2013-12-05 11:58 AM
in reply to: 0

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Subject: RE: Public Employee Pensions
Originally posted by JoshR

I'm not familiar with how the legal details work, but aren't some cities in CA already declaring bankruptcy and trying to restructure pension benefits? How does that square with the CA constitution?




Not all public employees are part of the state system. Some chose to self fund because it has been obvious for years that insufficient funds were being reserved.

The largest state benefits provider CalPers was funding its own long term care plan rather than using an insurance company. Their return on investments has not been anywhere near what their rosy projections had hoped. They gave their policy holders two choices; take a one time 79% premium increase or a two year increase totaling 85%.

You can read about it here: http://www.sacbee.com/2013/02/28/5223864/the-state-worker-did-calpe...

Since it can be assumed that their returns on all their investments are roughly the same and it wasn't just these assets that underperformed, just imagine how many billions they are short in their pension funds!


Edited by Stuartap 2013-12-05 12:01 PM
2013-12-05 1:21 PM
in reply to: Stuartap

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Elite
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Subject: RE: Public Employee Pensions
Originally posted by Stuartap

Originally posted by JoshR

I'm not familiar with how the legal details work, but aren't some cities in CA already declaring bankruptcy and trying to restructure pension benefits? How does that square with the CA constitution?




Not all public employees are part of the state system. Some chose to self fund because it has been obvious for years that insufficient funds were being reserved.

The largest state benefits provider CalPers was funding its own long term care plan rather than using an insurance company. Their return on investments has not been anywhere near what their rosy projections had hoped. They gave their policy holders two choices; take a one time 79% premium increase or a two year increase totaling 85%.

You can read about it here: http://www.sacbee.com/2013/02/28/5223864/the-state-worker-did-calpe...

Since it can be assumed that their returns on all their investments are roughly the same and it wasn't just these assets that underperformed, just imagine how many billions they are short in their pension funds!



I'm trying to recall which city it was, but I think it's Stockton. CalPers is fighting the bankruptcy saying they should be paid before everyone else. So I wonder then if Stockton is part of the CA state pension system and trying to default on that. Is that legal?


2013-12-05 4:17 PM
in reply to: JoshR

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Subject: RE: Public Employee Pensions
Originally posted by JoshR

Originally posted by Stuartap

Originally posted by JoshR

I'm not familiar with how the legal details work, but aren't some cities in CA already declaring bankruptcy and trying to restructure pension benefits? How does that square with the CA constitution?




Not all public employees are part of the state system. Some chose to self fund because it has been obvious for years that insufficient funds were being reserved.

The largest state benefits provider CalPers was funding its own long term care plan rather than using an insurance company. Their return on investments has not been anywhere near what their rosy projections had hoped. They gave their policy holders two choices; take a one time 79% premium increase or a two year increase totaling 85%.

You can read about it here: http://www.sacbee.com/2013/02/28/5223864/the-state-worker-did-calpe...

Since it can be assumed that their returns on all their investments are roughly the same and it wasn't just these assets that underperformed, just imagine how many billions they are short in their pension funds!



I'm trying to recall which city it was, but I think it's Stockton. CalPers is fighting the bankruptcy saying they should be paid before everyone else. So I wonder then if Stockton is part of the CA state pension system and trying to default on that. Is that legal?


You have the location correct. I think (but don't quote me) the issue is the city has not made all their contributions to the pension plan. The city has no obligation to make the pension payments to pensioners, that is the responsibility of CalPers. CalPers wants to make sure they get their money from the city now. If they are insufficient in funds come time to pay benefits, they can look to the citizens of CA to make them whole.

2013-12-05 7:44 PM
in reply to: Stuartap

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Master
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Subject: RE: Public Employee Pensions

I will never, never, ever understand how people could look at a defined benefit plan (of any stripe, including social security) and say "Oh, yeah, we can make that work."

 

It will be a great day when the last defined benefit plan is replaced by a defined contribution plan and we can all go on our merry way. 

2013-12-06 5:48 AM
in reply to: moondawg14

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Deep in the Heart of Texas
Subject: RE: Public Employee Pensions

Here is a pretty good discussion about some of the problems with funding public pensions:  http://www.cato.org/multimedia/daily-podcast/getting-grip-public-pensions

2013-12-06 10:12 AM
in reply to: moondawg14

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Subject: RE: Public Employee Pensions

It's nothing more than a sanctioned Ponzi scheme.  Most people who create illegal Ponzi schemes think they can either out live it, or keep it going by getting enough new people to throw money in.

Unfortunately there's this thing called reality that will ultimately crush every one of these.  I chalk it up to the generational theft mindset that our politicians at every level have been living by the last 30-40 years.  From top to bottom it's give me more now, and we'll let somebody later figure out how to pay for it.  Well, later is here.

2013-12-06 12:41 PM
in reply to: buck1400

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Subject: RE: Public Employee Pensions

Except that at least in Illinois, unlike the private sector worker, these public sector workers are excluded from Social Security.  So without the pension, they got nothing coming.

They paid their part into the pension system.  The state fell behind on paying it's share and now wants to walk away.

Two groups whose pensions are not affected?  Lawmakers who caused the state shortfall, and judges.  The last group is excluded from the pension cuts because of the coming legal challenges.  Yes, we are that cynical here.  



2013-12-06 12:51 PM
in reply to: coredump

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Elite
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Subject: RE: Public Employee Pensions
Originally posted by coredump

Except that at least in Illinois, unlike the private sector worker, these public sector workers are excluded from Social Security.  So without the pension, they got nothing coming.

They paid their part into the pension system.  The state fell behind on paying it's share and now wants to walk away.

Two groups whose pensions are not affected?  Lawmakers who caused the state shortfall, and judges.  The last group is excluded from the pension cuts because of the coming legal challenges.  Yes, we are that cynical here.  




That is crappy. My mom is an RN and she had a pension through her work and I kept telling her not to count on it and that she needed to save on her won too. She just found out a few months ago that they are suspending pension accruals on 1/1/14. Thankfully she had been saving a bit and now gets a very generous 401k match to help catch up.
2013-12-06 4:56 PM
in reply to: coredump

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Subject: RE: Public Employee Pensions
Originally posted by coredump

Except that at least in Illinois, unlike the private sector worker, these public sector workers are excluded from Social Security.  So without the pension, they got nothing coming.

They paid their part into the pension system.  The state fell behind on paying it's share and now wants to walk away.

Two groups whose pensions are not affected?  Lawmakers who caused the state shortfall, and judges.  The last group is excluded from the pension cuts because of the coming legal challenges.  Yes, we are that cynical here.  




Help me out here. Not saying it is right but I thought the employees were still going to get some pension, just not as much. The problem with guaranteed disbursements is that no one has figured out how to make investments that always go up. The whole defined benefit concept is flawed by design based on that one issue alone.

I don't think most entities intended to have these programs fall apart, they just weren't prepared for extended periods of investment loses or even short periods of steep loses.

I am in my mid 50s and I don't think I will ever get back what the govt has confiscated in Social Security, if I get anything at all. Sadly I don't think public sector pensioners are the only ones being impacted. The same laws of economics are at work and they play no favorites.

2013-12-06 7:50 PM
in reply to: Stuartap

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Subject: RE: Public Employee Pensions

Originally posted by Stuartap
Originally posted by coredump

Except that at least in Illinois, unlike the private sector worker, these public sector workers are excluded from Social Security.  So without the pension, they got nothing coming.

They paid their part into the pension system.  The state fell behind on paying it's share and now wants to walk away.

Two groups whose pensions are not affected?  Lawmakers who caused the state shortfall, and judges.  The last group is excluded from the pension cuts because of the coming legal challenges.  Yes, we are that cynical here.  

Help me out here. Not saying it is right but I thought the employees were still going to get some pension, just not as much. The problem with guaranteed disbursements is that no one has figured out how to make investments that always go up. The whole defined benefit concept is flawed by design based on that one issue alone. I don't think most entities intended to have these programs fall apart, they just weren't prepared for extended periods of investment loses or even short periods of steep loses. I am in my mid 50s and I don't think I will ever get back what the govt has confiscated in Social Security, if I get anything at all. Sadly I don't think public sector pensioners are the only ones being impacted. The same laws of economics are at work and they play no favorites.

Didn't you get the memo?  Everything is supposed to be fair.  

2013-12-06 10:55 PM
in reply to: 0

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Elite
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Subject: RE: Public Employee Pensions

Hello there... poor planner public employee leach chiming in. I happen to live in a city that I do not want to move from. I suppose if I had to, I would.. but I don't. For what I do, the only game in this city is municipal. My utility is cheaper that it's competitors in the state the largest being Exel.... we maintain a rough 10% savings. We happen to have one of the highest customer satisfactions of utilities our size and out competitors in our state, and our reliability beats them too. Cheaper, better, and more reliable... not bad.

So, I pay into Public Employee Retirement Account. PERA does a relatively good job of managing. They have pushed back retirement, increased employee and employer contributions, and cut COLAs. I pay 8%, the city pays 12%.

Now, just down the road, I can do the exact same thing for Exel, and get a pay raise. At least 10-15% for my job. I would pay SS at 6%, and have 12-17% more to put towards a retirement? But that is the trade off, get paid less for a better retirement, or get paid more and do it your self. Just how exactly am I not earning what I have, or not properly planning my future? I planned for the future when I accepted my job that pays less and it's put towards my retirement. Oh, and no we are not union.

 

 



Edited by powerman 2013-12-06 10:57 PM
2013-12-07 8:26 AM
in reply to: #4908778

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Elite
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Subject: RE: Public Employee Pensions
Powerman, it's not that you aren't earning your retirement. The problem is the system you are in is not sustainable. I assume you understand how a pension is system is supposed to work. The problem is the defined benefit is guaranteed. If you were to try and get a guaranteed annuity like your pension I think you would find your contributions aren't going to give you the amount you would get in retirement from your pension. If the pension fund experiences a period of sustained losses it falls behind by quite a bit.

I see all these people saying they were promised these payments. That promise is only as good as the entity making it. Theoretically I get a great retirement by contributing to my 401k, but that is only valid if my account is able to grow properly. That same rule applies to pension funds.


2013-12-07 1:05 PM
in reply to: JoshR

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Elite
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Subject: RE: Public Employee Pensions

I understand that. From what I can see, my pension fund is pretty reasonable and funded. I have seen the worst examples of a much greater benefits and worse funding. In that respect even I do not get how you can expect to get everything by giving nothing. An easy target is UAW... it's just an assembly line job that pays awesome and has killer bennies and retirement... how?

And yes, your retirement is no more guaranteed than mine. When everything is based on sand, and the bottom falls out, we are all done. I don't really have any illusion that I am guaranteed anything if the SHTF. If the fund or State goes broke... then so am I. And no, I do not think the State should go broke over me.

What I think is that the fund should be managed properly. Meaning proper retirement age, proper projections, proper contributions. Even though people are living longer, not everyone retires. People do die. They do leave. There is an attrition.  Even with my fund.. the old timers were guaranteed a 2.5% COLA... well, you earned 2.5% every year over retirement... it did not pay to work... they all retired for the guaranteed 2.5% and just double dipped. That's not right... and the COLA was eliminated for new, and cut for old.

I do not know where the equilibrium is. I do not know where the contract should lie, and where it should be every man for himself. What I do know is that I paid in, and my employer paid in. And my employer didn't pay out of their pocket, they paid out of mine in the form of depressed wages. 20% is coming out of my pocket. I have now SS, and if the fund is improperly managed, then I get squat. Same thing for you if you improperly manage your fund, or if your fund manager does. The only difference is that my fund is managed by the government through regulation. So my government takes on some responsibility for that. You, well, you have to find another fund.

I really am torn on the subject, because you know where I stand when it comes to government. Less is better. There are no guarantees in life. But I also get tired of hearing how unreasonable, selfish, and expect something for nothing I am... not by you guys, but in media in general over the subject. Right now our new Mayor is on a war path to abolish PERA for city workers. And it's all great when we are talking about the UAW, but now this is me... I don't know what to say. All I know is that I'm OK with it... just cash me out and give me what is in my account, and that will have to do... and yes, you will then have to pay me fair market value instead of what I get now.... or I will have to move.... and I will. I;f I am no longer tied to a pension and have a 401.... then I will go where I can make the most money.

2013-12-07 4:18 PM
in reply to: powerman

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Subject: RE: Public Employee Pensions
Originally posted by powerman

I understand that. From what I can see, my pension fund is pretty reasonable and funded. I have seen the worst examples of a much greater benefits and worse funding. In that respect even I do not get how you can expect to get everything by giving nothing. An easy target is UAW... it's just an assembly line job that pays awesome and has killer bennies and retirement... how?

And yes, your retirement is no more guaranteed than mine. When everything is based on sand, and the bottom falls out, we are all done. I don't really have any illusion that I am guaranteed anything if the SHTF. If the fund or State goes broke... then so am I. And no, I do not think the State should go broke over me.

What I think is that the fund should be managed properly. Meaning proper retirement age, proper projections, proper contributions. Even though people are living longer, not everyone retires. People do die. They do leave. There is an attrition.  Even with my fund.. the old timers were guaranteed a 2.5% COLA... well, you earned 2.5% every year over retirement... it did not pay to work... they all retired for the guaranteed 2.5% and just double dipped. That's not right... and the COLA was eliminated for new, and cut for old.

I do not know where the equilibrium is. I do not know where the contract should lie, and where it should be every man for himself. What I do know is that I paid in, and my employer paid in. And my employer didn't pay out of their pocket, they paid out of mine in the form of depressed wages. 20% is coming out of my pocket. I have now SS, and if the fund is improperly managed, then I get squat. Same thing for you if you improperly manage your fund, or if your fund manager does. The only difference is that my fund is managed by the government through regulation. So my government takes on some responsibility for that. You, well, you have to find another fund.

I really am torn on the subject, because you know where I stand when it comes to government. Less is better. There are no guarantees in life. But I also get tired of hearing how unreasonable, selfish, and expect something for nothing I am... not by you guys, but in media in general over the subject. Right now our new Mayor is on a war path to abolish PERA for city workers. And it's all great when we are talking about the UAW, but now this is me... I don't know what to say. All I know is that I'm OK with it... just cash me out and give me what is in my account, and that will have to do... and yes, you will then have to pay me fair market value instead of what I get now.... or I will have to move.... and I will. I;f I am no longer tied to a pension and have a 401.... then I will go where I can make the most money.




Your thinking is correct powerman..nothing wrong with a defined benefit system...public or private...as long as the system is fully funded and the expected rate of return on investments aren't overly optimistic.


.
2013-12-07 8:22 PM
in reply to: #4909781

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Elite
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Subject: RE: Public Employee Pensions
Powerman, initially when pensions were set up they were designed to assist in retirement not replace 100% of the workers salary. If they had continued like that it would have been reasonable. Instead they gamed the system and tried to allow back loading of the last few years to spike the pension payouts, increased the % of salary being replaced and pulled all of the other tricks that are currently bogging down the systems. In Detroit they would take the earnings in excess if the rate if return and refund them to the employes. That's ridiculous.

If your pension fund is well funded and doing just fine then I don't think you have anything to worry about. It's the funds that are severely underfunded that should worry.
2013-12-08 1:37 AM
in reply to: JoshR

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Elite
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Subject: RE: Public Employee Pensions

Originally posted by JoshR Powerman, initially when pensions were set up they were designed to assist in retirement not replace 100% of the workers salary. If they had continued like that it would have been reasonable. Instead they gamed the system and tried to allow back loading of the last few years to spike the pension payouts, increased the % of salary being replaced and pulled all of the other tricks that are currently bogging down the systems. In Detroit they would take the earnings in excess if the rate if return and refund them to the employes. That's ridiculous. If your pension fund is well funded and doing just fine then I don't think you have anything to worry about. It's the funds that are severely underfunded that should worry.

It took a hit in the recession. And yes, some of the same tricks were being pulled where I am at. Padding the last few years of work with overtime to recieve a higher pay. It's BS as far as I'm concerned... theft. They also increased that from 3 to 5 years.

Any retirement account should be basically the same. You need so much to put towards retirement, you grow it, and you get so much as you draw out. Any perks guaranteed by the government or favors given just don't pay. If a pool of employees can get together and weather a ups and downs better then great, but it will not turn lead into gold.

I hate waste and fraud as much as anyone... because what it does is steal from those that it should go to. In the case of the retirement pensions... the ones already retied drawing more than they ever put in during good times are now stealing from those paying in... which will never get it because it will go broke. Greed does not only happen from rich people.

2013-12-08 10:26 AM
in reply to: tuwood


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Subject: RE: Public Employee Pensions
Originally posted by tuwood

It's nothing more than a sanctioned Ponzi scheme.  Most people who create illegal Ponzi schemes think they can either out live it, or keep it going by getting enough new people to throw money in.

Unfortunately there's this thing called reality that will ultimately crush every one of these.  I chalk it up to the generational theft mindset that our politicians at every level have been living by the last 30-40 years.  From top to bottom it's give me more now, and we'll let somebody later figure out how to pay for it.  Well, later is here.




Don't be so quick to generalize. I am a public employee. I contribute out of my check to my pension. The amount I contribute is about 2.5X what my SS contribution would be. (I don't pay SS). My employer contributes to a smaller extent.

My pension is NOT administered by my employer. Therefore, my employer (a municpal government) can't use the money for other things or offset budget items with pension funds. (Think Social Security) We have our own pension system so it is our own interest to responibly administer it, which we do. A pension is generally considered fully funded at 80%. we are close to 90%.

The state I live in has a pension system it oversees that state and municipal employees can buy into through their employers. They have issues that are closer to being unsolved than resolved....as most government administered pension systems do.



2013-12-09 5:09 PM
in reply to: SeeVee

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Subject: RE: Public Employee Pensions

Originally posted by SeeVee
Originally posted by tuwood

It's nothing more than a sanctioned Ponzi scheme.  Most people who create illegal Ponzi schemes think they can either out live it, or keep it going by getting enough new people to throw money in.

Unfortunately there's this thing called reality that will ultimately crush every one of these.  I chalk it up to the generational theft mindset that our politicians at every level have been living by the last 30-40 years.  From top to bottom it's give me more now, and we'll let somebody later figure out how to pay for it.  Well, later is here.

Don't be so quick to generalize. I am a public employee. I contribute out of my check to my pension. The amount I contribute is about 2.5X what my SS contribution would be. (I don't pay SS). My employer contributes to a smaller extent. My pension is NOT administered by my employer. Therefore, my employer (a municpal government) can't use the money for other things or offset budget items with pension funds. (Think Social Security) We have our own pension system so it is our own interest to responibly administer it, which we do. A pension is generally considered fully funded at 80%. we are close to 90%. The state I live in has a pension system it oversees that state and municipal employees can buy into through their employers. They have issues that are closer to being unsolved than resolved....as most government administered pension systems do.

You're right, I guess I was being a little broad in my statement.

When I refer to the Ponzi scheme's I'm talking about the Government entities that push for benefits so largess that there's no way they can be paid for down the road.

I don't remember the specifics, but here in Omaha it was so crazy that 20 year retired police officers could work things to make upwards of 6 figures in retirement which was more than they made while fully employed.  They're still trying to fix it. 

2013-12-30 2:22 PM
in reply to: JoshR

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Subject: RE: Public Employee Pensions

Originally posted by JoshR It appears the day of reckoning has finally started to arrive. I've been saying for quite some time that these aren't sustainable. Now that the courts are allowing modifications, I think we will see a large increase in changes to public employee pensions. http://www.bloomberg.com/news/2013-12-05/pension-threats-in-illinoi...

 

I'll be surprised if they do end up reducing them. 

I read the title just above this one about what song represents your Political beliefs and thought of this song when I read your thread title. Won't happen!

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author : CLLinIA
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What you can do to clean up your local swimming hole and keep it clean!