Some state pensions in dire straits
New Jersey Gov. Chris Christie doesn't waste an opportunity to raise the specter of Detroit when talking about his state's finances... Christie, a Republican, has included a $2.25 billion payment to New Jersey's public pension system in 2015, the highest in the state's history and more than his predecessor, Democrat Jon Corzine, allocated in his entire four-year term. But it does little to narrow the gap left by years of poor accounting, deferred payments and, according to Christie, ignorance of state leaders.
New Jersey's pension system is still short by $52 billion, and Christie, who successfully pushed through pension overhauls in 2011, is looking for another round of concessions from unions and public employees to rein in the soaring cost of retiree benefits.
At recent public appearances, Christie told his audience to look at Detroit, the largest American city to file for bankruptcy... "Ladies and gentlemen, that's where we're headed," Christie said at a town hall meeting in Burlington County on March 13.
Three years after a wave of pension overhauls swept across America, many states find themselves still hemmed-in by ballooning retiree costs and budget-sucking liabilities, setting the table for more battles between states and public workers.
More than 40 states have enacted some sort of pension changes since 2011, yet for all states in aggregate, the net pension liability increased 24%, from $998 billion in 2011 to $1.2 trillion in 2012, the latest data available, according to Moody's Investors Service. A 2013 Nelson A. Rockefeller Institute of Government report said some economists estimate both state and local pension liabilities to be as much as $4 trillion.
...Eileen Norcross, senior research fellow at the Mercatus Center at George Mason University... said that many states "absolutely" must enact more reforms, and soon... "The math is just unforgiving," she said. "It's sort of like telling yourself you weigh less, even though you're not getting on the scale. There's kind of an illusion there. Under the surface of the illusion is the truth."
...In Illinois, which has the lowest credit rating in the U.S. and was most recently downgraded for failing to properly fulfill pension obligations, its $187 billion pension liability represents 318% of its revenues despite a range of overhauls, according to Moody's. Connecticut's $57 billion liability is at 243%, and Kentucky's $41 billion liability is 211% relative to revenues, according to the service.
Throughout American history -- and as recently as the 1950s -- there were no unions for government workers. Public-sector employees were expected to earn a bit less than their private-sector equivalents. The reasons they did so included an interest in public service, job security and reasonable benefits.
But that changed in the late fifties with New York City Mayor Robert Wagner's cynical appeal to the votes of city workers. He signed an executive order authorizing them to unionize, and soon other local and state Democrat legislators around the country followed his lead.
The net result is the unfolding catastrophe occurring in cities and states around the country.
Related: A Brief, Illustrated History of the Public Sector Unions That, Together With The Democrat Party, Are Waging War on the Taxpayer. Hat tip: Lee.
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