Major pension problems for South Dakota Posted by RipRyness

Posted 09/29/10 Last updated 09/29/10

Bob Mercer, in April, wrote the following about the South Dakota Retirement System:

The system is built on an average annual return assumption of 7.75 percent growth in market value. Assuming the portfolio can hit the 25 percent growth mark this year, the fund would still need to grow by more than the 7.75 percent average. In fact, To get back to fully-funded status, the average annual return will need to average 8.6 percent for the next five years; 8.2 percent for the next 10 years; 8.0 percent for the next 20 years; or 7.9 percent for the next 30 years. So there remains a challenge.

Bill Gross in his October Investment Outlook offers the following observation regarding the "New Normal".

• The New Normal has a new set of rules. What once pumped asset prices and favored the production of paper, as opposed to things, is now in retrograde.
• The hard cold reality from Stan Druckenmiller's "old normal" is that prosperity and overconsumption was driven by asset inflation that in turn was leverage and interest rate correlated.
• Investors are faced with 2.5% yielding bonds and stocks staring straight into new normal real growth rates of 2% or less. There is no 8% there for pension funds. There are no stocks for the long run at 12% returns.

The days of easy credit (leverage) are over.  The hyperinflation of the housing market has collapsed and will not return.  These were the main drivers of the all GDP growth over the last 20 years. 

The Fed is only making matters worse, destroying all chances at capital formation by keeping interest rates extremely low.  And destroying the value of our dollars by printing money.

NPR reported that it would take our entire state budget 6 times over for our public sector pension system to catch up with the promises it has made.

There are no good choices here for South Dakota.  One choice we absolutely need to fight is increased taxes.  You and I both know there will be pressure by the unions to increase our taxes to pay for their demands.

Albany Police Officers Union President Chris Mesley stated the attitude of all union officials when he said:

"I'm not running a popularity contest here," Mesley said. "If I'm the bad guy to the average citizen . . . and their taxes have go up to cover my raise, I'm very sorry about that, but I have to look out for myself and my membership."

Mesley added: "As the president of the local, I will not accept 'zeroes.' If that means . . . ticking off some taxpayers, then so be it."

This is an issue that will require a sustained effort on the part of South Dakota Campaign for Liberty and all of our members.  I hope you will join us in this fight.  Our liberty depends on it.

Please donate $100, $50 or even $25 today to our state chapter of Campaign for Liberty.

Help us get the message out on this important issue.

The unions, through back door deals with statist politicians, are planning to steal our money to pay for the promises they snuck through years ago when times were good.

South Dakota Campaign for Liberty will not stand for it and I hope you will stand with us.

To get this message to the people we will need resources.  Your donation today for $100, $50 or $25 will help us do just that.

If you have never heard about this issue before it is because the mainstream media is ignoring it.  This makes our efforts ever more important. 

The people of South Dakota need to know that we are not in good shape financially despite what the media has been saying.

Please help us today by donating whatever you can.  Every donation is important and needed.