Establishment Tries To
Suppress "Dissident Actuaries" Explosive Report On Public Pensions by Tyler Durden, 8/6/16, Submitted by Walter Russell Mead via The American Interest,
America’s slow-motion public pension train-wreck (by some
estimates, the shortfall currently exceeds $3 trillion) has been kept in motion for years by
deeply dishonest accounting practices employed by state and local governments,
which presume unrealistically that pension funds can consistently earn
white-hot annual returns approaching eight percent. So it’s disappointing, but not
particularly surprising, that the actuarial establishment moved to suppress a
report pointing this out.
Pensions and Investments reports: The American Academy of Actuaries and the Society of Actuaries Monday abruptly disbanded its longtime joint Pension
Finance Task Force, objecting to a task force paper challenging the standard
actuarial practice of valuing public pension plan liabilities.
“This paper (is) being censored by the AAA”
and SOA, said Edward Bartholomew, who was a member of the former task force, in
an interview. “They didn’t want it to
get out.”
Others who were members of the task force also said in interviews the
two actuarial groups are trying to suppress publication of the paper.
There
are powerful interests that don’t want public pensions to be governed
by the same kinds of accounting principles used in the private sector because…
well, because if they were, public
pensions would go from seriously underfunded to catastrophically underfunded.
Union officials and state legislators (in both parties) seem to believe
that it makes more sense to allow public pension funds to play “let’s pretend”
with public money. To be sure, the sudden imposition of a tougher standards would cripple
business as usual in many state and local governments, so there can and
should be some reasonable accommodations made to allow the adjustment to take
place in a less disruptive fashion. Governing by catastrophe is almost never a
good idea, and a series of small and incremental changes is
usually (though not always) a better way to manage public
affairs.
In the long
run, shifting to a more portable system of public pensions—defined
contribution, rather than defined-benefit—wouldn’t just help save states and
municipalities from fiscal ruin. It would also do much to improve the
performance of the civil service. The
current system creates a jobs-for-life mentality in public
employment because workers need to stay at their positions for
decades to collect the full value of their pensions. Somebody who
was a good teacher at 30 but wants to leave and should leave at 40 is currently
trapped. Also, one of the reasons the unions fight quality evaluations so
fiercely is that the loss of job and pension is so much more draconian
than simply losing a job.
The report from
dissident actuaries might have helped push state and local pension systems down
a more sustainable path. And the conduct of American actuarial
leaders—disbanding a reputable task force that had prepared a report that the
bureaucracies didn’t like, and then hinting at legal action if the report
is published—is irresponsible at best and corrupt at worst. Is it any wonder
that Americans are fed up with experts and the institutions they
manage?
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