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Public Pension Crisis: "But You Promised!"
The world's greatest credit collapse has barely started

By Bob Stokes
Mon, 05 Aug 2013 17:15:00 ET
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Make a promise to a child and then break it, and what are you likely to hear? "But you promised!" We carry that same emotional response to a broken promise into adulthood. 

No one wants to hear all the reasons why a promise will go unfulfilled, especially when it affects their financial future. But thousands of government retirees who are not eligible for Social Security and who count on a pension instead are hearing about proposals to renegotiate and cut their pension payouts.
In a July 19 CNNMoney article, a 65-year old retired Detroit firefighter says, "My pension is what I was promised." An August 5 CNBC piece quotes the head of Chicago's firefighters' union, "Our members were promised certain things ... We expect that the city holds up their end of the bargain when we signed on to be firefighters and paramedics for the city of Chicago.” But as the CNBC article explains, Illinois is one of the worst-off when it comes to public pension systems.
Nine states — Hawaii, Alaska, Kansas, Rhode Island, New Hampshire, Louisiana, Connecticut, Kentucky and Illinois — have now set aside less than 60 percent of what they need [to pay public retirees]. Illinois has saved just 43 cents to cover every dollar of what it needs to pay 350,000 retirees and 500,000 current plan participants who are counting on a pension check.
In Detroit, city officials argue that pension payments to retirees simply have to be cut because the money just isn't there to pay them.
CNBC, August 5
Other states and cities also face substantial shortfalls in their public pension systems. Many have not recovered from the 2007-2009 financial crisis, despite a rising stock market and an economic recovery.
Robert Prechter saw the economic handwriting on the wall when his financial best seller, Conquer the Crash, published in 2002.
Don’t rely incautiously on government’s obligations to you if you are a retired government worker. In Argentina… the government suspended state pension payments to 1.4 million retired state employees. It had no money to pay because times got tough, and it had never saved when times were good. The same thing could happen to many governments around the world, whether national, state or local, which pay billions of dollars annually in pensions.
Conquer the Crash, second edition, pp. 254-255
If there's a public pension crisis now, imagine what it would be like if the economy were to tank again.
The just-published August Elliott Wave Financial Forecast addresses this kind of future in a special section titled, "Up Next: The World's Greatest Credit Collapse."
In this thought-provoking special section, you will gain deeper insight into the pension liabilities of municipalities -- and much more.

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