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 $3 trillion for broader measures. This shortfall has to be borne by some party: taxpayers or public employees, be they past, current, or future.
In essence, then, the debate over the solution is over transfers. The current situation is one in which beneficiaries view their benefits as secure promises and taxpayers do not perceive that they will be held accountable for guaranteeing those promises.
In short, the stage is set for a war between taxpayers and public sector retirees.
Memo to the drones: the era of big government, socialist Ponzi schemes is drawing to a close. And the crash will be painful.
Oh, and be sure to thank ex-SEIU head Andy Stern and the other Democrat Socialists when you see them around town. Their insane, Utopian vision of central planning has failed us, just as it failed the Soviet Union, Cuba, North Korea, and every other damn place it's ever been tried.
Say, I've got an idea: since they've done such a great job with these pensions, Social Security, Medicare, Medicaid, the Post Office, Amtrak, and such, let's let the Democrats run the entire health care system!
Hat tip: The Foundry.
*Thanks to Jeff for the correct university.
THERE'S NO PROBLEM HERE: JUST GIVE THEM WHAT is FUNDED.
IOW:" THEY ONLY GET 35% OF WHAT THEY THOUGHT THEY WERE GETTING!
The problem is NOT that the public employees didn't pay in enough, and were trying to bilk the state for the balance. The problem is that the &%$%$# state SPENT the pension money on other things! Just like the feds spent all the SS money on other things and now they're broke, too. These pension funds were not designed to be ATMs for the government. Who's to blame? The politicians, but they'll never suffer, because they are on a different pension system!
It's really unfair. Many of us 'state employees' (public health workers, teachers, firemen, policemen, prison guards, etc) do our jobs every day the best we can, and often at lower salaries than we could get if we worked in the private sector, often making that job choice precisely because of the good pension plans PROMISED us as part of the deal. Now the public wants break their promise and take that away from us. If that happens, you can forget filling most of those jobs in the future - who's going to want to wipe your kids snotty nose, teach the ABCs, go after perps, fight fires, etc, for lower pay and little or no benefits? Be fair. Put the blame where it belongs: state and federal government politicians who thought the pension plans and SS was a bottomless pit of money. Shame on them!
Shame on them?
Here in NJ before the last election, the public employee union effectively ran the state. Sure the state was broke and underfunding the pension plan - BECAUSE THEY SPENT IT ALL HIRING MORE STATE EMPLOYEES! And allowing state employees to double-dip - Retiring after 20years with an outrageous pension no private sector employee dreams of, then getting another state job and working on the second pension.
Give them all 401K's (403B's technically) just like the rest of us.
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