(H/T – Ace)
This New York Times story is chock full of spin of how the workers for bankrupt Detroit deserved the decades’ worth of infamous “13th checks” issued by the two pension funds that an outside actuary estimates cost the general employees’ plan $2 billion between 1985 and 2011, so I’ll rely on Bloomberg’s Megan McArdle’s righteous outrage over the belated discovery of this (where Ace got his info) to help sift out the relevant points.
Between 1985, the first year the outside actuary could get records for the general workers’ pension fund, and 2008, the general workers’ pension fund handed out $1 billion in “bonuses” to current workers, retirees, and the city of Detroit. Notably, only 14% of that went to the retirees. 32% went to “reduce” the city’s committment to the trust funds, even though had this program not been in place, it is likely that the city’s contributions would have been lower as there were years that this program doubled the required city contribution. 54% went to the active employees for some reason.
The outside actuary, who made his report to the Detroit Common Council in November 2011, estimated that had the “13th checks” instead remained in the general pension fund between 1985 and 2008, the fund would have been nearly $2 billion larger than it was in 2011. He was not able to calculate the effects of the “13th check” on the police/fire pension fund, which had a similar program that apparently ended a bit before the Council finally pulled the plug on the general employees following that report.
That $2 billion is more than half of the $3.5 billion underfunding of the two pension funds. Something tells me that, if this were calculated for the police/fire pension funds, and had the 2009 and 2010 “13th checks” were also included in the calculation, almost the entirety of the current underfunding would have been covered.
Of course, that didn’t matter to the (mis)managers of the pension funds – like the architechts of the Milwaukee County pension raid of 2000 and especially the unionistas that benefited from it, they got “theirs”. Moreover, they thought that the Michigan constitution would require that the last drop of blood from the turnip go to them. They didn’t count on the last drop being drained before they died.
One more thing – in 2009, when the Detroit pension funds lost nearly a quarter of their value, the retirees were credited with a 7.5% return on their investment.
