DESPITE GAINS, PUBLIC PENSIONS CRASHING
July 23, 2010
Each private sector worker in America owes state and local government pension funds at least $12,000 right now just to get them even. That's on top of all current taxes, debt, deficits and other obligations. And it doesn't even include promised health care for retirees, which could easily more than double the cost, says the Franklin Center for Government and Public integrity.
According the U.S. Census Bureau quarterly survey released Monday of the 100 largest public employee retirement systems representing 89.4 percent of all public pension fund value, the first quarter of this year showed continuing growth after more than a year of declines. But those gains still left pension funds $319 billion below the first quarter of 2008 and only 4.9 percent ahead of 2005. That was as of March 31; markets peaked in April and fell more than 15 percent overall since.
It gets worse, says the Franklin Center:
- Funds continue to base pension promises on assumptions of 7.5 percent to 8.5 percent growth every year forever and politicians making billions of dollars in annual required contributions, which most do not.
- In fact many states and municipalities loot high earnings during the good years to fund minimum contributions instead of letting the money accumulate to smooth out downturns.
- Calculating where pensions funds should be based on a 7.5 percent return every year for the last decade yields the $1.3 trillion shortage as of March despite first quarter gains.
This expense is locked in and not lessened by future reforms. Governments must pay it whether pension funds are available or not. If not, the money has to come out of taxpayers' pockets and through real operating expense cuts. Taxpayers are going to pay more, get less. Current and future public workers will have to sacrifice for those who came before them even as they face a future of declining pay and benefits, says the Franklin Center.
Source: ''Despite gains, public pensions crashing,'' Franklin Center for Government and Public Integrity, July 21, 2010.
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