Is it possible to sue pension plans to force them to assume a more realistic rate of return? To do otherwise is to allow a fraud to continue (overinflated return estimates, causing even further insolvency in the future when those returns don't materialize).
Most of them have adjusted the expectations for returns for any new participants.
Reducing expectations for existing participants is the same as defaulting on a loan, and I see no reason for why pensioners should be getting haircuts, while lenders get every penny they are owed.
1) Pensioner debt in Illinois is about $250 billion, versus $65 billion for other kinds of debt. Any debt restructuring will necessarily have to see pensioners carry most of the water.
2) Defaulting on loans makes it very difficult to access the capital markets for things current and future residents need. (Long term bonds to pay for transit projects, etc.) Cutting pension obligations doesn’t have that problem.
> 1) Pensioner debt in Illinois is about $250 billion, versus $65 billion for other kinds of debt. Any debt restructuring will necessarily have to see pensioners carry most of the water.
So make both pensioners, and lenders share the pain. Don't just dump all the problems onto one or the other. It was the lender's fault for not taking into account the possibility of default of a creditor with large outstanding financial obligations.
His point is if you make the lenders take a haircut you end up having to pay much higher interest rates when you borrow. Just like how if I default on my credit card, my next one will have a much higher interest rate.
I'm not suggesting pensioners take a haircut, but that pension plans need to be forced to shore up their funds sooner rather than later, with taxes instead of borrowing (kicking the can even further down the road). It's the uncertainty that is the issue IMHO.
