@gysgt213 > Just how generous are Detroit's pensions?
It's not the amount that's at issue (except in the minds of right-wingers); Pension benefits overall are middle-of-the-road, income-wise. Pensions - deferred compensation, really - are not the issue. Mismanagement of the funds is an issue. Corporate welfare is an issue. Not paying into the funds is an issue. Bad investments are an issue.
Yet, somehow, it's the retired librarian's fault.
What's making this all legit in the eyes of the news media? Manipulation of numbers. By one actuarial interpretation, Detroit's pension funds are funded at levels consistent with public plans nationwide:
"Among the top 100 that Pensions & Investments tracks, the average funding ratio dropped slightly during the fiscal year, to 73.64% from 74.29%. The median funding ratio, while higher than the average at 74.59%, also slid 204 basis points from fiscal 2010."
The Detroit pension plans' independent assessment shows:
"The funded status of the General Retirement System was 83%, while that of the police and fire fund was 100%, according to June 30, 2011, independent valuations."
while another method of accounting has:
"Recalculations based on “more reasonable assumptions” substantially lowered the funded status of the General Retirement System to 65%, and the police and fire system to 78%, according to Mr. Orr's creditor plan."
So there's not even agreement on how to correctly value the pensions' funding and liability. I would argue that the numbers Orr is working with are more short-term in nature, placing greater weight in the fiscal years affected by the Great Recession. If you assume a 10-year window starting from 2011,
"The median 10-year annualized return was 5.6% among plans that disclosed investment performance over the period. "
over 30 years,
"...funds have been able to achieve returns in excess of a 7% to 8% expected rate of return.
The Wilshire Trust Universe Comparison Service reveals that public pension funds with a total market value greater than $5 billion in assets had a median total return of 10.29% in the 30-year period ended June 30, 2012."
I'm not saying there is no crisis...only that the causes of the crisis is not what's getting play in the news media.
