Tuesday, December 3, 2013

Unions in Grand Rapids looking for a contract, still don't get the pension problem

I wrote nearly four years ago that the city of Grand Rapids has a serious pension problem. While I plan a more in-depth post soon, I wanted to quickly check the numbers and see how they were doing since that last post. Well, it's worse than I thought. Please go back and review my previous post, and then come back here.

The city's general pension fund released its latest annual actuarial valuation report in June of this year. You can read the whole document here. Pay special attention to the graphs on page A-12. I've reproduced them below:

You'll note in my 2010 blog post that the number of active employees was still higher than the number of retirees who are drawing on the city's pension system. Now you can see that the number of retirees outnumbers active employees. According to the report, there are now 0.7 active employees for each retiree.

Even more shocking is that "benefits as a percent of payroll" chart. In 2010 it cost the city about 40% of payrolls to provide benefits... now that number has skyrocketed to over 60% and is approaching 70%. That's absolutely, incredibly, shockingly high.

And now the unions are complaining that they deserve a fair contract. Sorry folks, the city is sitting on a ticking time bomb of unsustainable benefits, and it has to stop eventually.

Not to worry though, the city's pension system expects 7.5% annual investment gains for eternity. Nothing can go wrong, right?

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