To understand why Fort Worth's pension system is such a financial disaster, look at one month's list of recent retirements.This is what it always comes down to: corrupt politicians pandering to public unions to win votes for reelection. Moreover, the result is always the same, greedy public unions wanting to raise taxes to pay for their exorbitant wages and benefits.
In January, a 53-year-old policeman retired with an annual benefit of $90,312 for life, plus $256,000 in a lump sum payment. Another policeman, 57, got almost $74,000 annually, plus $313,000 in a lump sum. A 54-year-old firefighter got an annual pension of $90,130, plus $178,000 in cash.
With an average age of 50 for the police and 54 for the firemen in this group, they're likely to spend more years in retirement than they worked. An analysis for the City Council, presented in July, projected that the retiring policemen would collect $3.1 million in pension pay.
You don't have to be an actuary to know that this pension plan will end badly. The technical phrase is "trending toward insolvency."
Except that the city is on the hook for all the promised benefits. Taxpayers will have to pony up hefty contributions for years, even generations, and the city may have to cut services to afford it. The pension for city employees is currently projected to pay out $432 million more than it brings in over the next 30 years.
And that's the optimistic scenario. If investment returns average 7 percent, rather than the dreamy 8.5 percent in the assumptions, the unfunded liability could approach $1 billion.
The pension will require $60 million in city funds next year, and it's already a drag on a strapped city budget that has to close swimming pools and libraries and impose furloughs. Every year, the pension hole grows, because the benefits keep piling up.
"This is the elephant in the room," Mayor Mike Moncrief told the council in late July. "Not only for this budget, but for all the budgets to come."
The city manager appointed an ad hoc committee to look at the pension problem. It had a few businessmen, but most were employees -- a mix of police, fire and general workers. Imagine they had a little conflict?
They recommended that the city contribute an additional 6 percent of employee pay into the plan.
Fort Worth is now bankrupt. The only solution is to fire the city manager, declare bankruptcy, and resolve the issue of benefits in court.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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