State Pensions Could Be the Next Big Government Bailout

Government, Politics, Retirement 6 comments

I stumbled upon this article quite by accident as it was linked to one of those Chris Christie pension funding bashing stories. 

It’s nothing new of course. In fact the story is much worse for many states and this was written in 2012. Can you imagine such a bailout? Many states would be bankrupt if they were businesses simply because of pension liabilities. No matter, public employee unions and their Democratic allies continue to push for non solutions with taxpayer money. 

What continues to boggle my mind is that taxpayers don’t seem to care and in many cases side with the unions when the taxpayers don’t have pensions and are struggling to fund their own retirement. Go figure😳

U.S. News and World Report

By Kristina Rasmussen 

Kristina Rasmussen is executive vice president of the Illinois Policy Institute

Now that the presidential debates are over, Americans have heard President Barack Obama and former Gov. Mitt Romney spar over an array of bailouts: auto bailouts, housing bailouts, bank bailouts, green industry bailouts and so on.
The bailout not mentioned? A bailout of state pension systems, which is on the horizon unless politicians up-and-down the government food chain get their act in order. A bailout would reward irresponsible states at the expense of responsible ones while setting a massive and destructive transfer of wealth in motion.
Pensions costs are growing at an unsustainable rate. State-run pension systems are underfunded by $2.8 trillion according to a recent report from Congress’s Joint Economic Committee. Mounting pension payments are crowding out funds for core government services (think roads, safety, education) while putting pressure on maxed-out taxpayers.
Government unions have made it clear they will fight any and all attempts to rein in pension costs. And the politicians who rely on union campaign contributions and get-out-the-vote machines won’t want to upset the apple cart.
The easier road for state and local leaders is to seek assistance from the federal government. This isn’t an unthinkable proposition—it’s happened in recent years with education budgets and Medicaid funding under the guise of “stimulus” spending. Why shouldn’t pensions go the same way?

November 5, 2012

6 comments

  2. What I don’t understand is all the outrage taxpayers (many are PUBLICLY EMPLOYED OR TEACHERS) should have about those great pensions, yet no-one talks about the politicians PLAYING POLITICS with the yearly budget contributions that were never made, or double/triple dipping politicians & appointees, or contract agreements to privately employed people to be included in the public pension system having contributed to the problem as much or more then the average pensioner receiving $18.000.00 to maybe $30,000.00 from their CONTRIBUTORY PENSION ,after a full career not a couple of elections? That press isn’t as good to read I guess.
    I agree there is a problem but blaming the (UNION EMPLOYEES) for all of it doesn’t fly. Maybe POLITICIANS, ELECTED SCHOOL BOARDS SHOULD NOT BE NEGOTIATING FOR VOTES! Maybe when the bill is due, as in private business or your own budget, it has to be budgeted and payed WHEN DUE!

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    1. Nobody is blaming the union workers, certainly not me. They are the victims as much as taxpayers. The culprits are the union leaders and the politicians (mostly Democratic) who made deals trading generous benefits for support at the polls, but without regard to the cost or ability to fund.

      To give you a perspective. What workers contribute as a percentage of pay in NJ would alone fund a good pension in the private sector. However, their pensions actually cost nearly twice that amount; the balance being the state obligation.

      Why should government workers have benefits and a total compensation package that exceeds that which the vast majority of taxpayers have? Why should their pensions and benefits exceed the average of the largest employers in their state?

      States who agreed to all this have an obligation to fund the benefits. The problem is no politician wants to tell voters the true cost or what it will mean for their taxes to fully fund the pensions and other benefit obligations.

      The unions grabbed all they could from sleazy politicians who figured they wouldn’t be around when the bill came so didn’t care what they agreed to. If states were private companies the way they handle pensions somebody would be in jail.

      In many cases the same is true of health benefits for active and retired state employees. They are far more generous than those of taxpayers. Wait until the 40% Cadillac tax comes due in 2018 and see all the finger pointing then.

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      1. RD, I agree that the primary culprits in the cycle of unfulfillable promises are the politicians and the union leaders. However, when you back away and take a hundred-thousand-foot view of this issue (i.e. multi-generational), I think you have to give a little of the overall blame to utopia-wishful voters who bought the promises without questioning them, ignoring all possibility of negative long-term consequences. They voted these temporary politicians into office because they liked the permanent promises. Also, many of those voters chose to be union members, if not leaders. So all those folks aren’t just innocent victims. “We get the government that we vote for.”

        So in the interest of identifying ALL the accountable parties, the “victims” have to look themselves in the mirror and ask why they thought this whole racket was sustainable. Didn’t they stop to think it was too good to be true? A few months ago I wrote an article about this point. I called it , making the point that just because the ‘majority’ of voters want a certain municipal or state policy regarding government employee retirement benefits, that doesn’t make it automatically feasible and sustainable in the world of long-term economics. Fiscal sustainability has nothing to do with political desirability.

        I do not automatically agree with you that “States who agreed to all this have an obligation to fund the benefits.” At least not the full promised extent of those benefits. The amount of those benefits that were overpromised must now be the subject of a realistic political discussion — perhaps the first time for such realism in those cities and states. It would be wrong to just void all those benefits. The only solution I see is to have a really tough dialogue, and get the pensioners to understand that their choice is to either agree to 2/3 or 3/4 of the promised benefits, or stick to their guns and watch their cities and states declare bankruptcy – thus probably receiving FAR less, if anything.

        Keep up the good work here, sir.
        – Jeff

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      3. Sorry, my rant was not direct AT you, but really AT the press ie. T.V. INTERNET, & WRITTEN. The articles always seem to come from a political viewpoint, pitting taxpayers against workers ( usually union ). When there are many reasons for the financial condition of many cities & states, and their pensions & benefits. I included a few that I heard & there may even be more, but those were included almost as a fpn to the articles. Most voters (taxpayers) never seem to understand how much those Elected EMPLOYEES of the voters make out also. More investigation & PRESS is needed on how our government finances really work. I still agree & am going with 1 & done approach to electing for all offices. Though I didn’t always agree with my union leaders or company leadership, I feel you & they always worked together for the benefit of all the employees, stockholders & customers to deliver a reliable & cost effective product. I agree about being jailed, for many more reasons than pension & benefits also.

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