Actually, the real title of the new study by the Chicago-based Heartland Institute is this:
Heartland’s Eli Lehrer and Steve Stanek have produced a 35-page report on the topic that is now reaching critical mass in the public square. As this column and this website continue to point out, the only missing ingredient now is enlightened and courageous political leadership.
Balancing a budget in today’s America is evidently too much to ask of our political parties because it causes much screaming from the old media and taxeating interest groups. Likewise, the notion of setting up a pension plan that actually makes fiscal sense is evidently also beyond the capacity of those we elect.
You would think that at least those who proudly call themselves “educators” would be able to do the arithmetic. But as pension expert Bill Zettler has said, the new math for them means we pay.
Here is how Lehrer and Stanek open their report:
Taxpayers in almost every U.S. state owe large and possibly unpayable retirement pensions to the men and women who work for the government. The deep recession of 2008-2009 has moved up the day of reckoning, requiring immediate action by many states to avoid financial catastrophe.
A day of reckoning indeed. And in most cases – their diplomatic use of the words “possibly unpayable” understate it. In Illinois, anyway, there is no way to pay them. The pensions have been over-promised and the government employees have failed to fund them at the necessary levels for too many years.
Lehrer and Stanek have a section on Illinois – and use a number higher than any I’ve heard yet:
Illinois: A $219.1 Billion Unfunded Liability
In Illinois, the state’s unfunded pension liability calculated under [Government Accounting Standards Board] procedures exceeds $85 billion. Robert Novy-Marx and Josuha Rauh [in a paper for the National Bureau of Economic Research] contend the GASB accounting method enables Illinois and other states to lowball liabilities. They put Illinois’ true unfunded pension liability at an astonishing $219.1 billion in 2009.
Jeffrey Brown, writing for the Center for Business and Public Policy at the University of Illinois-Champaign, noted: ‘If the state of Illinois wanted to be certain it had enough money set aside today so that it could meet all public pension benefit obligations that have already been accrued, it would need to set aside an additional $219.1 billion. For perspective, that is about 1/3 of Illinois GDP, about 1/3 of state revenues, and about four times the outstanding state debt.’
The Heartland Institute’s full report can be read here.
There is no better example of how our governmental and political leaders have failed in their task than the gross irresponsibility of over-promising pension benefits to a politically powerful group of people.
The issue also brings to the fore a way to test the mettle of our would-be leaders. If they don’t have the courage to level with the public on matters of basic math, it’s doubtful they’ll have the kind of courage to enact reforms of any consequence.