Thursday, December 23, 2010

Pension Checks Stopped in Alabama City

The pension fund of Prichard, Alabama has run dry. It only impacts a small number of retired town workers, but it provides a hint at what might happen on a larger scale when some biggies run out of dollars.

NYT provides a blow-by-blow of what's going down in Prichard:

This struggling small city on the outskirts of Mobile was warned for years that if it did nothing, its pension fund would run out of money by 2009. Right on schedule, its fund ran dry.

Then Prichard did something that pension experts say they have never seen before: it stopped sending monthly pension checks to its 150 retired workers, breaking a state law requiring it to pay its promised retirement benefits in full.
Since then, Nettie Banks, 68, a retired Prichard police and fire dispatcher, has filed for bankruptcy. Alfred Arnold, a 66-year-old retired fire captain, has gone back to work as a shopping mall security guard to try to keep his house...

Far worse was the retired fire marshal who died in June. Like many of the others, he was too young to collect Social Security. “When they found him, he had no electricity and no running water in his house,” said David Anders, 58, a retired district fire chief. “He was a proud enough man that he wouldn’t accept help.”

The situation in Prichard is extremely unusual — the city has sought bankruptcy protection twice — but it proves that the unthinkable can, in fact, sometimes happen. And it stands as a warning to cities like Philadelphia and states like Illinois, whose pension funds are under great strain: if nothing changes, the money eventually does run out, and when that happens, misery and turmoil follow...
“Prichard is the future,” said Michael Aguirre, the former San Diego city attorney, who has called for San Diego to declare bankruptcy and restructure its own outsize pension obligations. “We’re all on the same conveyor belt. Prichard is just a little further down the road.”...Last week several dozen retirees — one using a wheelchair, some with canes — attended the weekly City Council meeting, asking for something before Christmas. Mary Berg, 61, a former assistant city clerk whose mother was once the city’s zookeeper, read them the names of 11 retirees who had died since the checks stopped coming.

“I hope that on Christmas morning, when you are with your families around your Christmas trees, that you remember that most of the retirees will not be opening presents with their families,” she told them.

The budget did not move forward. Mayor Davis was out of town.

“Merry Christmas!” shouted a man from the back row of the folding chairs. The retirees filed out. One woman could not hold back her tears.
When the crisis gets to the biggies, they will probably print money, which of course will result in price inflation, and result in pensioners across the country with less buying power than they ever could have imagined. In other words, it will eventually impact us all.


  1. Had these employees been given 401ks like the rest of us have, they would have at least had control of the money. While they no doubt would have suffered losses like the rest of us, they would at least have something left. I know several public safety folks that are counting on retiring in the next 5 years at the ripe ol age of 50 with their multi-million dollar pension and health plans. I have advised several, to no avail, to take the payout and run. Its hard for them to consider trading $1.8m for a promised payout that could easily exceed $5m. No doubt it will be ugly when the public service sector pension bubble explodes.

  2. Except that, the Obama Administration has already put out feelers to confiscate all the 401ks, folding them into Social Security. Unless you have possession of something, it's not yours.

  3. California has a retirement system that has a combined liabilities of about five and a half times that of the state's annual tax revenue by fiscal 2012. Fewer than half of the pension plans had assets to cover 80 percent of the promised benefits for fiscal 2009.
    There's no way California can guarantee these public pension payments unless they reform the pension system. One thing for sure, the taxpayers SHOULD NOT get suckered into bailing out the pension plans like they did with the big banks.