Quotes are from Locke09

“First, trustees cannot make promises to the retirees that result in new obligations to the City. Unions and Management negotiate pensions….The trustees are not making up new benefits to give to retirees without City approval.”

I see your point here. While I technically said “trustees” I was actually referring to the process of how promises are “negotiated” with all the parties; City, Unions, Management, Trustees, et.al. In the past the “negotiators” promised more and increasing benefits to the retirees regardless if they knew how to pay for them. They were just told to “make it work out” and get: [[1) more contributions from the taxpayers of the City or [[2) invest in riskier assets to earn more investment income – or both.

“Second, the number of current workers vs. the number of retirees is irrelevant. As I have already noted, pension funds are supposed to be 100% funded to meet all existing future obligations. Meaning, if not another penny is placed into the fund, it should be able to meet its obligations.”

No. The number of current workers is relevant. These pension funds were designed much as Social Security and a ponzi scheme – you need more contributions from current workers flowing in to the Fund to pay benefits to the retirees. I recognize you noted the 100% funding comment twice before, but that does not make it so.

The Fund has NOT earned enough investment income to be 100% funded. They need more money from both the taxpayers of the City AND from current employees.

From 2010 Audit:
Income
Net Investment Income: $205,398,053
Employee Contribute: $ 10,764,969
Employer Contribute: $ 32,808,485

Benefits Paid Out
Total Benefits: $278,924,572

[[DECREASE) in Assets: [[$ 34,211,383)

By the way Total Benefits paid out in 2010 was UP 14.8% more than in 2009

Also the yield on investment income was 16.9% that is VERY GOOD. Compared to -14.8% in 2009 and -6.3% in 2008 when they lost a combined $1.23 Billion in assets – yes, with a B, billion. Even with very good results the fund lost $34.2 million in assets. What will happen when the returns are more normal, say 7% to 8%?

“I would say Wall Street is the bigger impact”

I agree with you. That is why everyone must understand the larger picture of supporting the economy. Meanwhile the SEC investigation of the mismanagement of the pension funds continues and that should stop the corruption inside the fund.

“But this is a problem only because the City guarantees a certain rate of return. Objectively speaking, the City should not be guaranteeing 7.9% annual returns, then they wouldn't have so much to make up when the market is down. They probably should cut that in half to something like 4%.”

You are correct the City [[as the voice of the taxpayers) should NOT be guaranteeing a certain rate of return. The negotiators for the City did a lousy job representing the taxpayers.

Meanwhile, you suggest a 4% guaranteed yield on investment and I would suggest no guarantee is necessary.

Why should the taxpayers guarantee something that is not available to them in the marketplace. Does “Wall Street” offer a guaranteed rate of return? Of course not.

So why look to the taxpayers to do something as big and powerful as Wall Street won’t do?