Pension Debt Burdens Will Fall on Millennials
January 22, 2015
Millennials were credited with Obama's electoral victories, and many believe they will continue to vote Democrat. But Lance Christensen, director of the Pension Reform Project at the Reason Foundation, says that in states with large pension deficits such as California, millennials might become disillusioned with the crushing debt that can accompany big government.
What kind of shape is California's pension system in? CalPERS, its public employee retirement system, has an unfunded liability of more than $60 billion. This is relatively healthy compared to the $70.5 billion unfunded liability from the state teachers union and the nearly $14 billion unfunded liability for the University of California.
Altogether, Christensen says the California defined benefit pension system (defined benefit plans guarantee payments based on funding formulas, not based on contributions) had $142.7 billion in unfunded liabilities as of 2012, and last year, the state paid just 65.6 percent of required contributions to its pension funds.
What does this have to do with millennials? They'll be the ones paying for these promises through the higher taxes that will be necessary to fund public employees' retirements. Christensen argues for reforming the pension system, including making state retirement accounts portable and transferable.
Source: Lance Christensen, "Millennials and Pensions - Do They Know Public Pension Systems need Reform?" Reason Foundation, January 13, 2014.
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