This public-pension scandal (or “party”) is one of the best things that prove that rarely do we elect the best and the brightest. Here is Jon L. Pritchett writing at National Review:
Several states have unfunded liabilities that can only be fixed with major reforms. Unfortunately, politicians find it easier to ignore the problem.
Unfunded public-pension liabilities are not a fun subject, and most politicians do all they can to avoid it. Nobody wants to be the sober one in a room full of drunks — but the party can’t go on forever, and eventually someone will have to clean up the mess.
According to a comprehensive survey by the American Legislative Exchange Council (ALEC) of 280 state-administered public-pension plans, the unfunded liabilities of state-administered pensions now exceed $6 trillion. The number increased by $433 billion in the last twelve months. An April report from Pew Charitable Trusts shows that state-pension debt has increased for 15 consecutive years. While this growing gap is a major concern for current public-sector employees and retirees, it should also worry the rest of us.
As the costs of providing current pension benefits begin to weigh on city and state budgets, other public services are getting crowded out. This is putting pressure on many pension-plan managers to seek greater returns by buying riskier assets. Decades of underfunding adds to the pressure, as governments scramble to meet unrealistic return targets and pay out promised benefits at a level the private sector moved away from decades ago. This all points to the growing possibility that many states will need to raise taxes to keep the party going. But without major pension reform, we may soon see the day when taxpayers in fiscally responsible states are asked to bail out those states that just couldn’t, or wouldn’t, stop partying.
Read more: National Review
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