Paying Off Unfunded Pension Liabilities Will Be A Low Priority After COVID-19 (#GotBitcoin?)
Our most recent update of state and local pension plans showed that — even after nearly a decade of stock market gains — plans were only about 70% funded in fiscal year 2020. Paying Off Unfunded Pension Liabilities Will Be A Low Priority After COVID-19 (#GotBitcoin?)
That funded ratio discounts future benefits by the plan’s assumed rate of return (7.2%); the ratio would be lower with a lower discount rate (see figure 1).
At the same time, experts from the Center on Budget and Policy Priorities (CBPP) predict that state budget shortfalls from the economic impact of COVID-19 will total a cumulative $555 billion over the period 2020-22. This figure is for states only and does not reflect revenue shortfalls at the local level. The CBPP reports that the projected gap for fiscal year 2021 alone (which started July 1 for most jurisdictions) is much larger than for any year during the Great Recession (see figure 2). The impact on governments has already been dramatic. In the last four months, states and localities have furloughed or laid off 1.5 million workers — double the number during the entire Great Recession.
In the next couple of years, states — which must balance their budgets every year — will face the tradeoff of deep cuts in education and health care and further layoffs, on the one hand, and funding their pensions on the other. Most observers would probably agree that pension funding could be postponed.
More fundamentally, the standard recommendation that sponsors need to eliminate all their unfunded liability over 30 years is increasingly being called into question.
For years, we have argued that liabilities created before plans started to pre-fund their pension benefits should be taken off the backs of today’s workers and financed by outside sources as they come due (and coupled with more conservative funding methods — such as a lower discount rate and shorter amortization period — for liabilities created afterward). More recently, other researchers have made the case for stabilizing the ratio of unfunded liability to state GDP. Such a goal would also stabilize the ratio of debt service to output, requiring no further increases in taxes or cuts in outlays to maintain pensions.
These more moderate funding approaches seem sensible in the best of times. But they seem particularly helpful given the history of the 21st century, where the plans have been swamped with the retirement of baby boomers (a phenomenon that should end by 2030), two major market corrections in 2000-01 and 2007-09, and three recessions that depleted the revenues of state and local governments. In this context, blindly accumulating assets equal to 100% of the present value of promised benefits really doesn’t seem like a sensible goal.
Paying Off Unfunded Pension,Paying Off Unfunded Pension,Paying Off Unfunded Pension,Paying Off Unfunded Pension,Paying Off Unfunded Pension,Paying Off Unfunded Pension,
To Some Investors, 10-Year Treasury Note Isn’t What It Was (#GotBitcoin?)
Goldman Sachs Forecloses On Over 10,000 Homes To Satisfy ‘Consumer Relief’ Program Requirements
Trump Speaks With Jonathan Swan Of Axios On The Publication’s HBO Program
Trump Urges Microsoft To Pay “Key Money” To Treasury Using Illegal Real-Estate Practice
Mail Delays Fuel Concern Trump Is Undercutting Postal System Ahead of Voting
Trump Campaign Pauses Ads As He Trails In The Polls And Searches
Juice The Stock Market And Destroy The Dollar!! (#GotBitcoin?)
The Fed Treats Investors Like ‘Foolish Children’ By Propping Up Stocks Despite ‘Dreadful Fundamentals,’ #GotBitcoin?
These Businesses Were Denied PPP Loans Through Their Banks So They Went To Fin-Tech Firms
US Printed More Money In One Month Than In Two Centuries (#GotBitcoin?)
Don’t Let The Stock Market Rally Mask Reality (#GotBitcoin?)
Trump To Pull Winning Lotto Ticket Out Of His Arse Before Congress Changes Election Date
US Economy Contracted At Record 32.9%; Jobless Claims Rise 1.43 Million (#GotBitcoin?)
Fed Maintains Stimulus Commitment As Economic Outlook Dims (#GotBitcoin?)
Dollar On Course For Worst Month In Almost A Decade (#GotBitcoin?)
The Lure of Fed. Money-Printing And Artificially-Low Interest Rates (#GotBitcoin?)
Biden, Obama Release Campaign Video Applauding Their Achievements
Small Businesses Brace For Prolonged Crisis, Short On Cash And Customers (#GotBitcoin?)
Ultimate Resource For Violations of The U.S. Constitution Including “Money” And Coronavirus
Trump Campaign Forced To Use Tele-Rallies As Coronavirus Cases Surge
Roger Stone Uses Racial Slur In Live Radio Interview With Black Host
The Fed Is Setting The Stage For Hyper-Inflation Of The Dollar (#GotBitcoin?)
The Next Phase Of The Retail Apocalypse: Stores Reborn As E-Commerce Warehouses
Famous Economist Mohamed El-Erian Warns Investors To Stay Away From Zombie Companies And Zombie Markets
Republicans Alarmed By Democratic Senate Hopefuls’ Fundraising Haul
American Airlines Plans To Furlough Up To 25,000 Workers This Fall (#GotBitcoin?)
Consumer Appetite For Cars, Homes Bolsters U.S. Economy
Banks Get Ready For Wave of Recession-Led Loan Defaults (#GotBitcoin?)
32% of U.S. Households Missed Their July Housing Payments
What You Need To Know About The New Small-Business Bankruptcy Laws
Police Wrestle With Surge In Crime In U.S. Cities Amid Defunding Efforts
Here’s An Investment That Perfectly Tracks The Economy
Fed, Treasury Disagreements Slowed Start of Main Street Lending Program
When A Texas Oil Boom Goes Busts
Trump Takes Cognitive Test And Can Identify A Rhino vs A Camel
Don’t Know How Much Stimulus Is Needed? Put It On Autopilot, Some Say
Colorado Police Chief Fires Three Officers Over Reenacted Chokehold Placed On Elijah Mcclain
Republicans Give Trump Labor Day Deadline To Turn Things Around. After That, He’s On His Own
Chapter 11 Business Bankruptcies Rose 26% In First Half of 2020
Chaotic Trump Administration Plus Russian Bounty Intelligence Equals Loss Of American Lives
Supreme Court Orders Restructuring of Consumer-Finance Watchdog
Reddit, Acting Against Hate Speech, Bans ‘The_Donald’ Subreddit
Class Action Lawsuit Alleges Visa Subsidiary Violated Privacy And Data Protections Of Venmo, Stripe, Square’s Cash App, Robinhood & More
Private Equity’s Trillion-Dollar Piggy Bank Holds Little For Struggling Companies (#GotBitcoin?)
TikTok Teens Overload Trump’s Online Store With Orders Only To Abandon Shopping Cart
Bill Gates Says Trump’s Lack Of Leadership Is Making Pandemic Picture ‘More Bleak Than I Would Have Expected’
Fed Stress Test Finds U.S. Banks Not Healthy Enough To Withstand “Few Quarters” Economic Downturn
Elizabeth Warren Was Right About Whacky Stockmarket Fundamentals (#GotBitcoin?)
Two Of The Latest High-Profile Trump Resignations
US Banks Have Seen A Record $2 Trillion Surge Of Deposits Since The Coronavirus Crisis Began
Trump Gets KPOP’d And Tic Toc’d As Teens Mobilized To Derail Trump’s Tulsa Rally
Our Facebook Page
Your Questions And Comments Are Greatly Appreciated.