The Spark

“The emancipation of the working class will only be achieved by the working class itself.” — Karl Marx

Defrauding State Workers of Their Pensions

Apr 26, 2010

The pension funds in the 50 states are short nearly a trillion dollars – needing that much money to meet the pension obligations the states owe their workers and retirees. This is the finding of a recent study by the Pew Center.

Illinois alone had a 54 billion dollar gap in its state pension funds. But Illinois is hardly alone. In the supposedly financially promising years, most states did not fully fund their pensions. New Jersey, for example, hadn’t put a penny into its pension fund in more than 10 years.

Instead, state pension managers rushed to throw state money to hedge funds and other exotic Wall Street inventions. They counted on what these financiers told them were “sure” bets. Such investments would supposedly keep returning enormous amounts of money.

Reality caught up with pension funds in 2008, when CalPERS, the largest pension fund in California, had to admit it had lost millions of dollars on real estate investments.

The Government Accountability Office says that from the end of 2007 to the end of 2008, state and local pension funds lost 900 billion dollars of their value. They lost, not only because they put funds into risky investments, like CalPERS did, but also because of all the money paid in management fees. The ten largest public pension funds paid 17 billion dollars in fees since 2000. And that was only ten large pension funds.

Hedge funds and other financial schemes get their fees whether they make money or lose money. Meanwhile state employees who retire have to worry about state funding cuts as well as these huge Ponzi schemes that drain money from their funds.