KeNo's Housing and Economic Portal: Saturday January 1 Housing and Economic stories

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New Jersey Pension Gap Hits $54 Billion - (blogs.wsj.com) New Jersey’s pension gap grew to $53.9 billion in the last fiscal year, up from $45.8 billion, thanks to market losses and a lack of state funding, according to figures released Thursday. Gov. Chris Christie’s administration said the gap, which reflected the state’s investment positions as of June 30, highlighted the need for proposed cuts to current public workers’ pensions. The $53.9 billion figure reflects the difference between the retirement benefits the state has promised to roughly 780,000 state and local workers over the next few decades and the amount on hand to pay those benefits. In addition, an accounting practice called “smoothing” allows the state to factor market gains and losses over several years — meaning pension funds, on paper, are still feeling the effect of the 2008 market crash. Christie, a Republican, wants to reverse a 9% pension bump workers received in 2001 under a Republican administration. Unions argue their members have an irrevocable right to benefits they have earned. The governor has challenged the unions to meet him in court.

Board votes to outsource parking operations at Grand Rapids airport - (www.mlive.com) Airport leaders unanimously selected a private firm to take over parking operations at Gerald R. Ford International Airport today, despite impassioned pleas by employees who will now have to reapply for their jobs and likely face pay and benefit cuts. The vote to select Chicago-based Standard Parking to manage parking came after several parking employees that are now employed by Kent County spoke during the public comment period. The group questioned the fairness of the process and asked the board to delay the vote and give them more time to negotiate to keep their current jobs. Finance Director Brian Picardat and airport leaders said the decision was difficult and based on a projected savings of $1.5 million over five years, even after a wage concession offered by current parking employees was factored in. In an article just prior to the decision, the Grand Rapids Press noted ... Parking agents who do maintenance and assist customers can make between $14 to $19 an hour, not including tips. Those jobs also come with nearly a 33 percent medical and fringe benefit package.

Crisis in Public Sector Pension Plans - (www.mercatus.org) Pension plans operated by state governments on behalf of their employees are underfunded by an estimated $452 billion according to official reports, with total liabilities of $2.8 trillion and total assets of $2.3 trillion in 2008. However, many economists argue that even these daunting liabilities are understated. Current public sector accounting methods allow plans to assume they can earn high investment returns without any risk. Using methods that are required for private sector pensions, which value pension liabilities according to likelihood of payment rather than the return expected on pension assets, total liabilities amount to $5.2 trillion and the unfunded liability rises to $3 trillion. The ability of governments to pay for the retirement benefits promised to public sector workers runs up against the reality of limited resources. The state reports that its pension systems are underfunded by $44.7 billion, when liabilities are discounted at the 8.25 percent annual return that New Jersey predicts it can achieve on funds' investment portfolios.

Alabama Town’s Failed Pension Is a Warning - (www.nytimes.com) This struggling small city on the outskirts of Mobile was warned for years that if it did nothing, its pension fund would run out of money by 2009. Right on schedule, its fund ran dry. Then Prichard did something that pension experts say they have never seen before: it stopped sending monthly pension checks to its 150 retired workers, breaking a state law requiring it to pay its promised retirement benefits in full. Prichard stands as a warning to cities like Philadelphia and states like Illinois, whose pension funds are under great strain: if nothing changes, the money eventually does run out, and when that happens, misery and turmoil follow. The declining, little-known city of Prichard is now attracting the attention of bankruptcy lawyers, labor leaders, municipal credit analysts and local officials from across the country. They want to see if the situation in Prichard, like the continuing bankruptcy of Vallejo, Calif., ultimately creates a legal precedent on whether distressed cities can legally cut or reduce their pensions, and if so, how. “Prichard is the future,” said Michael Aguirre, the former San Diego city attorney, who has called for San Diego to declare bankruptcy and restructure its own outsize pension obligations. “We’re all on the same conveyor belt. Prichard is just a little further down the road.”

Still no money for Prichard pensioners - (www.fox10tv.com) From March 2010.... A bankruptcy court judge has given the City of Prichard two more months to figure out how they will pay retired city workers. Prichard pensioners have gone six months without a pension check. Prichard is operating under the protection of Title IX Bankruptcy, and for many people, that means no promised pension payments. After six months with no pay, Prichard pensioners put their faith into the courts. They hoped a judge would force the city to pay some, if not all, of the pension money it owes. However, the bankruptcy court judge said the city is not obligated to pay the retired workers just yet. The judge gave the city two more months to restructure the budget and present it to the courts. The city got more time, but unfortunately reality has already set in for Bobby Holifield and his family. "You can't begin to know the stress of this. My daughter is in college right now, my son just graduated from high school, he wanted to go to college. My daughter had to miss last semester in college and she will have to miss this semester. I can't afford to pay it. My son wants to go to technical school; I can't afford to pay for it. It makes me feel like a failure more than anything, when I did my part. I worked 32 years to get my pension. They owe it to me, it's not something I'm asking them to give me," Holifield said.