At Work

The never ending problem of state pensions

Yet another state reveals a pension shortfall generated by a failure of the state to adequately fund the trust while not adapting to changing circumstances. 

It’s the same old story I have written about numerous times; union leaders and politicians (typically their Democratic allies) making promises to workers and then failing to pay for those promises. In this case and in many others they attempt to mask the true cost by using unrealistic assumptions on what the funds can earn over time. 

Here is the full story. 

The state’s pension problems represent “a ticking time bomb,” said State Sen. L. Scott Frantz, a Republican whose district includes the wealthiest section of the state. He is worried residents will leave and Connecticut will “end up as another Detroit,” a city that filed for bankruptcy protection in 2013, absent more dramatic changes.

Some Connecticut officials and union leaders said they are unfazed by the pension problems and pledge to reverse the deficit in the coming decades. Their strategy hinges partly on predictions the various state retirement systems will be able to earn 8% or more annually, a goal that is more optimistic than most public pensions across the U.S. The average target for all state plans is 7.68%, according to the National Association of State Retirement Administrators.

Excerpt WSJ 10/15

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2 replies »

  1. Lower seniority employees should force their own pension plans into bankruptcy. Most states treat pension funds as independent entities — separate from the cities and counties that maintain the plans. These employees should raise the issue that the underfunded plans are simply paying out money to retirees which will result in the plans running dry in 5-10 years, leaving nothing for the younger employees. Instead, the court should divide up the assets so the younger workers’ share is protected.

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    • Or, states should change the plans fairly to lower future liabilities and then fully fund the obligations they have committed to. (And tell taxpayers the truth).

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