Kellogg has published a study by two academics which outlines the scope of the public sector pension funding crisis (PDF). I can summarize it in one word: pain.
Using proper actuarial calculations, the study determined that states' defined-benefit pension plans are 65% underfunded. Not 65% funded (that would be bad enough)--but 65% underfunded. As of mid-2009, the plans held $1.8 trillion in assets and had $5.2 trillion in liabilities. Even dramatic plan reductions -- like excising cost-of-living-allowances (COLA) -- won't make significant dents in the plans' shortfalls.
Even under the most conservative measures, public pension liabilities are currently over $1 trillion larger than plan assets. Using discount rates that actually reflect the promise reveals shortfalls of $2.5 billion for accumulated benefits only and over $3 trillion for broader measures. This shortfall has to be borne by some party: taxpayers or public employees, be they past, current, or future.
In essence, then, the debate over the solution is over transfers. The current situation is one in which beneficiaries view their benefits as secure promises and taxpayers do not perceive that they will be held accountable for guaranteeing those promises.
In short, the stage is set for a war between taxpayers and public sector retirees.
Memo to the drones: the era of big government, socialist Ponzi schemes is drawing to a close. And the crash will be painful.
Oh, and be sure to thank ex-SEIU head Andy Stern and the other Democrat Socialists when you see them around town. Their insane, Utopian vision of central planning has failed us, just as it failed the Soviet Union, Cuba, North Korea, and every other damn place it's ever been tried.
Say, I've got an idea: since they've done such a great job with these pensions, Social Security, Medicare, Medicaid, the Post Office, Amtrak, and such, let's let the Democrats run the entire health care system!
Hat tip: The Foundry.
*Thanks to Jeff for the correct university.