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The Looming Fiscal Nightmare Of Extravagant Unfunded Pensions For State And Local Bureaucrats
Apr 17, 2018



Simply stated, politicians have a giant incentive to provide lavish benefits to interest groups that then recycle some of the loot back to elected officials in the form of campaign contributions.

But the real key to the scam is that the bill gets imposed on future generations.

The American Legislative Exchange Council has a must-read report on the giant funding gaps that this has produced in the pension plans for state and local government bureaucrats.

If net pension assets are determined using more realistic investment return assumptions, pension funding gaps are much wider than even the large sums reported in state financial documents.

Unfunded liabilities (using a risk-free rate of return assumption) of state-administered pension plans now exceed $6 trillion—an increase of $433 billion since our 2016 report.

The national average funding ratio is a mere 33.7 percent, amounting to $18,676 dollars of unfunded liabilities for every resident of the United States.
…the personal share of liability for every resident in each state, an indicator of the severity of the taxes to be borne now or in the future by each taxpayer for promises made but not funded. In Alaska, each resident is on the hook for a staggering $45,689, the highest in the nation. Connecticut, Ohio, Illinois, and New Mexico follow for the five highest per person unfunded pension liabilities.


This map is the most important takeaway from the report. It shows which states have the highest per-capita unfunded liabilities.

Connecticut has just 31.7% of what it needs to pay its employees’ future retirement benefits, according to state financial reports. A fund for teachers has 52.3%.Together, that adds up to more than $37 billion in unfunded pension liabilities, or about $10,300 per Connecticut resident.

Connecticut’s unfunded pension liabilities resulted from nearly 40 years of politicians making promises about benefits without adequately funding them, according to a 2015 study by the Center for Retirement Research at Boston College.

And it gives an example of trouble at the local level from a city in Michigan.

East Lansing, home of Michigan State University…is struggling with almost $125 million in unfunded pension and retiree health-care liabilities, has been cutting services… East Lansing asked MSU to pony up $100 million over 20 years to help shore up the city’s underfunded pension plan.
The alternative, the city said, was asking voters to approve a 1% income tax that would hit university employees and working students.
After negotiations went nowhere, the city brought the income-tax proposal before voters in a referendum last November.

…On Nov. 7, East Lansing residents shot down the income-tax referendum, forcing the city to debate what services to cut to save money for the pension obligations.

…The city hopes to shed another 17 police and fire positions over the next two years… Altmann suggested a long list of potential cuts to make more room in the budget for increased pension payments:
closing the fire station on MSU’s campus,
shuttering the city’s pool, aquatic center,
dog park and soccer complex,
suspending bulk leaf pickup and
plowing of public sidewalks and
ending annual jazz, folk, film and art festivals.

https://finance.townhall.com/columnists/danieljmitchell/2018/04/17/the-looming-fiscal-nightmare-of-extravagant-unfunded-pensions-for-state-and-local-bureaucrats-n2471701