07/10/17

One Chart Explains What Bernie Madoff And Kentucky Public Pensions Have In Common



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One Chart Explains What Bernie Madoff And Kentucky Public Pensions Have In Common
// Zero Hedge

If Bernie Madoff taught us anything it's that every successful ponzi scheme requires precisely one critical component to keep it afloat: a steady stream of fresh capital to fund redemptions.  Absent that key component, even the most carefully crafted ponzi, with the best, most creative accounting fabrications in the world, will inevitably fail from a lack of real, cold, hard cash to keep the illusion going.

Unfortunately, it seems that Kentucky's public pensions are now running into the very same problem that ultimately brought down Madoff's multi-billion dollar 'empire'.  As the Lexington Herald Leader points out today, it's no coincidence that the Kentucky public pension system is suddenly collapsing just as the number of retirees (redemptions) has surged beyond the number of active employees (fresh capital) required to keep the ponzi going.

It's impossible to know exactly who, where or when, but one day in 2016, a Kentucky state employee packed up her desk, said goodbye to her colleagues and retired.

 

Once she hit the exit, the number of retirees drawing a pension from the Kentucky Employees Retirement System (Non-Hazardous), the struggling $2.6 billion fund that serves most of state government, officially topped the number of active workers paying into it.

 

The 60-year-old fund has been mathematically upside down from that day forward.

 

Social Security, by comparison, has a roughly 3-to-1 ratio of workers supporting retirees, but KERS' ratio is less than 1 to 1. Its numbers are expected to worsen as state government continues to cut its work force and aging baby boomers keep heading into retirement. The average age of a worker in KERS is 45, up from 43 just a few years ago. And they retire at age 57 on average to draw a lifetime pension.

 

"You just can't depend on this model anymore," said state Sen. Joe Bowen, R-Owensboro.

As Senator Joe Bowen notes, "it creates a cash flow problem"...

Bowen is working with Gov. Matt Bevin and other GOP lawmakers on proposed changes to Kentucky's public pension systems, which face tens of billions of ....

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