Saturday, April 21, 2012

The Public Pension Saga

State and local governments in the United States have a major fiscal disaster on their hands.  The obligations of these governments embodied in their pension plans for government employees are not funded and there are no serious plans to fund them.  The result: a combination of looming state bankruptcies and drastically reduced pension benefits for covered employees.  The biggest single group of pensioners threatened by this looming disaster are public school teachers.

Yesterday, Democratic Governor Pat Quinn of Illinois made a last ditch desperate effort to avoid disaster in Illinois by urging state employees to "voluntarily" accept a shift in the retirement age to 67 and to contribute an additional three percent of salary to their pension funds.  This is not a reform, this is an emergency and Quinn is a Democrat elected with strong union support in a traditionally Democratic state.  Even if Quinn's suggestion is taken up by public employees, which it won't be, it is only a drop in the bucket compared to the real problem that Illinois' pension fund faces. That tells you how bad things have become.

Illinois is in the vanguard of this coming catastrophe.  New York, California, New Jersey are waiting in the wings.  South Dakota may be the only state of the 50 states in the US that has a real shot at delivering on their public employee retirement promises.  No one else is coming anywhere near close to properly funding their systems.  Some states, Virginia is an example, have recently enacted "reforms" that will have minimal impact on the massive funding deficits of their public pension plans.  These reforms are notable in their inadequacy.

Inevitably, the younger members of the work force will find little or nothing waiting for them when the time for retirement comes.  This parallels the outcome of social security for this same work force demographic.  There is simply nothing out there to fund the promises that politicians continue to make and continue to pretend will be there when the time comes.

On this score, the coming retirement disaster is a bi-partisan affair.  Republicans as well as Democrats are both complicit in confusing the public as to where this situation is headed.  Ultimately, Democrats like Governor Quinn of Illinois and Republicans yet to be named will be forced to tell the truth to their employees, well past the date that these employees could increase their personal savings to offset the abandoned promises of the politicians.  Government and politics at its worst.

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