August 30, 2013
Just about all numbers you see reported on public pensions come from actuarial consultants hired by the government, whose work accords with “industry convention.” That’s very comforting to most taxpayers and reporters, lawmakers learned long ago. John Bury, an actuary and critic of his industry, says “industry convention” for public plan actuaries consists of five rules:
1. Keep contributions low.
2. Make valuation reports difficult to understand.
3. Keep contributions low.
4. Get paid as much as possible.
5. Keep contributions low.
Elegantly simple, no?
Keeping contributions low is similarly the primary task of “reform” underway in Illinois. In the end, “reform” will be about getting the monkey of required contributions off the back of the current pols and pushing it off for somebody else to deal with. Expect their actuarial consultants to help.
P.S.: Some actuarial consultants are honest, no doubt. In 2009, according to the Securities Exchange Commission, one of them told the that state that it would likely never be able to afford the level of contributions required to fix its underfunded pensions. The SEC cited Illinois’ failure to disclose that report when it entered its cease and desist order against the state earlier this year. True to form, the state has still not made that report readily available — at least I’ve never been able to find it or see it referenced.
Expect no retraction or apology. This what they do.
The state’s existing buyout program for its own pensions is the precedent for Chicago, which should be a warning: Look out for similar exaggerated claims and shoddy analysis.
Love the fire on this site and in posts like this. Keep it burning. The whole pension system is insane and will kill us.
Public Pensions are a bigger ponzie scheme than Social Security.
They are prostitutes. Mortality tables outdated. Many other inputs pure guesswork. JIJO.