[i.e., the kind of thing that led NYC to go bankrupt. But here we're building on the already Alice in Wonderland math of the our state pension scheme -- their solvency is premised on 8% annual returns?]
[If there's a lot more of this around, this state pension crisis is going to be allowed to build up into a quite a thunderhead]
http://www.nytimes.com/2010/06/12/nyregion/12pension.html
The New York Times
June 11, 2010
State Plan Makes Fund Both Borrower and Lender
By DANNY HAKIM
ALBANY -- Gov. David A. Paterson and legislative leaders have
tentatively agreed to allow the state and municipalities to borrow
nearly $6 billion to help them make their required annual payments to
the state pension fund.
And, in classic budgetary sleight-of-hand, they will borrow the money
to make the payments to the pension fund -- from the same pension fund.
As word of the plan spread, some denounced it as a shell game and a
blatant effort by state leaders to avoid making difficult decisions,
like cutting government spending or reducing pension benefits.
"It's a classic Albany example of kicking the can down the road," said
Harry Wilson, the Republican candidate for comptroller, who holds an
M.B.A. from Harvard.
Pension costs for the state and municipalities are soaring, a result of
enhanced retirement benefits for public employees and the decline in
the stock market over the past two years. And, given declines in tax
revenue and larger budget shortfalls, the governments are struggling to
come up with the money to make the contributions.
Under the plan, the state and municipalities would borrow the money to
reduce their pension contributions for the next three years, in
exchange for higher payments over the following decade. They would
begin repaying what they borrowed, with interest, in 2013.
But Mr. Paterson and other state officials hope the stock market will
have rebounded to such a degree by that time that the state's overall
pension contribution burden will have been reduced.
The maneuver would cost the state and local governments about $1.85
billion in interest payments, according to an estimate by the State
Senate, though a number of factors could drive interest payments up or
down.
Another oddity of the plan is that the pension fund, which assumes its
assets will earn 8 percent a year, would accept interest payments from
the state that would probably be 4.5 percent to 5.5 percent.
<end excerpt>
Michael