Pensions + Politician's Plunder = Pensioner's Peril

Billions in public pension fund assets are targeted to be used for rebuilding or refurbishing schools, because private financing has either disappeared, or proposed loans are not large enough. These funds have been collected from worker's paychecks and employer's matching contributions over the years for the specific purpose of providing pensions.

But when politicians want to spend money on a project like this, and private sector financial firms say "No", what's the next step? Convince the bankers that better schools are an investment in the nation's future? Postpone, or downsize the project until the economy stabilizes and lending returns to normal? Or salivate over, and greedily grab from public pension funds, thereby threatening the stability, and possibly the ability, of these funds to pay retirees so their chance of living out their lives with a modicum of dignity is diminished? I'll give you three guesses, and the first two don't count.

Oh, have I mentioned yet that I'm not talking about the outrageous 'reappropriation' of U.S. Social Security funds by our own short-sighted politicians and bureaucrats? Those thefts are legendary, distressing, and immoral enough. In August, 2001, the nonpartisan Congressional Budget Office reported that Social Security money would be used to cover other government deficits in these amounts: $9 billion in 2002; $18 billion in 2003; and $3 billion in 2004.

No. Today's blog refers to Great Britain. The London Times, on February 20, reported that:

"Billions of pounds could be taken from council staff pension schemes to bail out the Government’s PFI school projects, The Times has learnt.

Partnership for Schools, the government body responsible for the £55 billion building programme, has approached several local authorities to ask for emergency cash from pension funds because private finance has dried up.

The funds, worth £100 billion, cover final-salary pensions for two million council staff including social workers, cleaners, refuse collectors, lollipop ladies and town hall officials. Unlike other public sector schemes, they are made up of contributions from staff and employers.

Under the proposal, a council would invest pension cash in a school building project. The cash would be paid back by the Government in instalments with an agreed rate of return." Click here to read more

#1. Isn't it more than a little bit ironic that public pension plans are being used to bail out projects known as PFI (Private Finance Initiative)? One might dare to imagine that a "Private Finance Initiative" would involve, well, PRIVATE FINANCING!

#2. Public pension funds should be a separate and distinct line item in any country's budget. Investments allowed in federal government securities only.

#3. Even though this project appears to be structured as a loan, doesn't it sound like a very risky one, in that the private banking sector has declined to fully fund it?

#4. This project did not manifest itself overnight. If it was so vital to the nation's future that it could not wait, then it should have been funded in the budget by reducing expenditures in other areas, rather than relying on public pension funds.

#5. This type of scheme is actually a safety valve for Great Britain's politicians. Instead of doing the hard work required to help fix the foul economic climate besetting us all, they chose the easy road. Tap pension funds now - pass the problems on to the politicians who'll be there when the bills come due.

I'm reminded of a poster from the 1960s that I saw in the Old Town neighborhood in Chicago. It read: "it will be a great day when our schools get all the money they need and the Air Force has to hold a bake sale to buy a bomber."