The following is from an email from the National Review about Detroit’s government pension mess (which is structurally no different from Illinois’). A few more links follow below.
Detroit’s Pension Managers: Somehow Worse than ‘Total Economic Illiteracy’
I’m rarely speechless, but I’m having trouble putting my emotions into words after reading the latest report on the Detroit pension situation. Now, I admit it: I’m kind of naïve. Usually when I see an underfunded pension, I think to myself “poor pensioners — undone by a combination of stupid tax rules, volatile stock markets and mismanagement by trustees who tried to restore depleted fund assets with an investment approach you might call ‘desperate optimism’.” Thus, I was not entirely prepared for the new revelations about the Detroit trustees’ custom of handing out annual holiday “bonuses” to workers, retirees and the City of Detroit. Between 1985 and 2008, they handed out roughly $1 billion this way. Had they been invested, one estimate says those funds would be worth almost $2 billion today — or more than half the current shortfall in the funds.
It’s very hard for me to attribute this to something benign, like total economic illiteracy or gross inattention to their responsibilities as pension trustees. I can’t imagine that anyone who can read and do basic arithmetic ever thought that draining off the “excess earnings” in the good years could result in anything other than exactly what it has wrought: a pension fund so disastrously underfunded that it may not be salvageable. No, wait, that’s too kind: they were also draining off … what should we call them? “excess non-earnings”? in years when the economy was melting down, the Dow Jones was trading for less than a Mickey Mantle rookie card and the region’s chief industry was teetering on the brink of extinction. What could they possibly have been thinking?
It’s hard to overstate how bad this is.
It might be economic illiteracy but it might also be that they could care less about economics and only about getting as much as they can from taxpayers regardless of the consequences or viability.
Also on the topic:
And as always, the best writer on the topic of Illinois’ pension mess is Bill Zettler. His archive can be found here.