U.S.News & World Report
$5 Trillion Price Tag for Public Pensions
By Philip Moeller
Nov 8, 2012
As strapped state and local governments scramble for ways to balance their budgets, it's become very clear that it will be impossible for many to honor their pension promises to new employees and even current retirees. According to a recent economic study, the cost to fully fund these promises would cost taxpayers $5 trillion over a 30-year period, or nearly $1,400 a year in higher state and local taxes and fees for every household in the country.
Put another way, contributions to pay for public employees' retirement benefits now total 5.7 percent a year of all state and local taxes, fees, and other government charges. "Government contributions to state and local pension systems must rise to 14.1 percent" to produce fully funded pension systems, the study said, and it will take 30 years to get there.
They also studied other possible outcomes, including different combinations of the kinds of pension cutbacks that are already being tried in some states. The results were not encouraging for taxpayers. For example, in what they say has come to be known as a "soft freeze," some states are moving new employees out of guaranteed, defined-benefit pensions and into defined-contribution plans similar to private-sector 401(k) accounts. If all new state and local government employees were forced to use such defined-contribution plans, the study found, average household taxes would still rise by more than $1,200 a year.
Adopting a much harsher "hard freeze" policy would stop all future benefit increases. No benefits would be revoked, but they would not grow over time to reflect an employee's rising salary or added years of service. Having frozen future pension liabilities, their study assumes states and localities would add a new defined-contribution plan and would need to make employer contributions into that plan. This approach would reduce annual taxpayer increases to $800--a figure still above what many taxpayers would tolerate.
The alternative strategy, of course, is to reduce the retirement promises made to public employees. And that is what most people expect will happen to state and local government pensions.
Just another example of unions in cahoots with Democrat politicians. During the faux "negotiations," no one was representing the taxpayers' interests. THIS is what the whole Wisconsin bullsh!t was all about.
quote:it sucks for the retirees, but no one should expect their pension to actually show up.
It's Become Clear States Will Not Be Able to Honor Pension Promises to Retirees