Thursday, February 18, 2010
Public employee pensions, benefits threaten to bankrupt government as they soar out of control
Will state governments in the United States have to collapse before political leaders take the pension funding crisis seriously? What will happen to the already-gasping financial system if that happens? These questions returned to the headlines Thursday when the nonprofit Pew Center on the States released a new report revealing a $1 trillion shortfall nationwide in state contributions to employee pension and retirement plans. Only four states -- Florida, New York, Washington and Wisconsin -- had paid enough into their pension plans to cover their obligations, the report said, according to the Reuters international news service. Pew Center managing director Susan Urahn characterized the first 10 years of the new century as a "decade of irresponsibility," Reuters said. "Over the last 10 years, many states have shortchanged pension plans in good times and bad," Urahn said. "The growing bill coming due to states could have significant consequences for taxpayers -- higher taxes, less money for public services and lower state bond ratings." The situation with retiree health benefits also is dire, the report said, with only five percent of $587 billion in expected liabilities paid. Only Alaska and Arizona have more than 50 percent of the assets needed to pay that bill. It looks like it's well past time for states to change the system of having public management employees negotiate with public rank-and-file employees to set salaries and benefits, because it's obvious that no one is looking out for the taxpayer.