My local transit authority (h/t Atrios) is on strike, idling the subway lines and busses that 300,000+ people use to move around the urban core as well as working-class neighborhoods in the South and North. (It should shock nobody that the suburban railroad continues to bring in commuters from the Main Line, but that's for somebody else's diary.)
The sticking point in the negotiation between the union and management appears to be the soundness of the pension fund after it took massive losses last year.
From the Inquirer:
SEPTA's pension fund, which has become a key issue in the three-day-old transit strike, contained about $640 million at the end of September, down from $719 million in June 2008.
The fund, affected by rising and falling stock markets, has rebounded from its level in March, when it was down to $471 million. But it remains well short of being "fully funded" - able to meet all potential payments to current and future retirees.
In essence, SEPTA is playing AIG in this drama: as the pension fund misses its investment targets it seems less of a sure thing, and the people it's supposed to pay demand to see real cash. Here's SETPA's general manager trying to explain:
Casey said the fund would eventually be fully funded if there were no changes in benefits payments and if it met its investment goal of an annual 8 percent return.
From 1991 through June, the annual return was 6.42 percent. That was down from a year earlier: From 1991 through June 2008, the fund earned 8.36 percent a year. [emphasis mine]
"Have we ever missed a pension payment? No," Casey said. "Is there any risk we will miss a pension payment? No."
Is it any wonder that policy makers are trying any kooky thing they can come up with to raise asset prices? How many other local governments and agencies are sitting on budgetary bombs if they can't generate 8--10% risk free returns?
Update: tr GW diaries the strike from a less antiseptic perspective here.
Update x2: burrow owl points us at the note on pp 45–48 of SEPTA's 2008 financials with the commentary:
In the back of the transit authority's financials, the pension has pretty vanilla investments (which isn't to say well-balanced....), w/ the bulk (~65%) in regular equities and a lot in corporate bonds. That explains how they got rocked. (I didn't see anything exotic, and interestingly not even any alternatives [although if they had hedging derivatives, it wouldn't show up per GAAP])