150 city retirees not getting checks…
I just wrote about municipal bankruptcies last night and then today this story comes to me via Pension Tsunami:
It’s a basic math problem. Historically during contract negotiations with employees, municipalities, in order to save money in the current year budget, would negotiate more generous retirement benefits in order to keep current salaries a bit lower (except in California where stories of pay raises even during a time when many are losing jobs amazes me). In the past, this has helped current budgets, but it created a looming expense problem in the future. Second, return on investment assumptions were (and are) way too high and with investment grade bonds currently yielding horribly low amounts (because Uncle Ben Bernanke has gotta bail out those banks and AIG!), and stocks performing poorly, expected returns targeted by pension managers have recently been and will continue to be much higher than ACTUAL returns. And now in 2008-2009, it’s coming home to roost.
Therefore, towns like Prichard, outlined in the article linked above, will declare bankruptcy in increasing numbers in order to avoid going bust on pension payments and forcing a double in your property tax bill (you hope).