Bailout the states? McConnell has a point, but who cares❓

Several states, the worst being Kentucky, New Jersey and Illinois, but others as well have poorly funded pension funds for state workers. In fact, they are way below funding levels acceptable for private employer plans.

Why? Mismanagement pure and simple.

  • Assumed investment returns were unrealistic with the intent to lower funding requirements and make the fund appear on a better financial footing
  • Politicians trying to appease public employee unions agreed to pensions that were way more generous than the typical private plan and then failed to provide adequate funding over many years
  • Plan provisions are overly generous in many ways, allowing benefits to be greatly increased by overtime pay, exceptional early retirement provisions, even allowing workers to borrow from the fund at an interest rate below the assumed investment return. Etc.
  • The failure to adequately fund was the result of politicians not having the courage to tell the public the truth, raise taxes or trim other services to allow the funding

Despite all this, efforts to bring pensions (and other retiree benefits) more in line with the private sector are typically met with public support for the unions and state workers while vilifying anyone making such suggestions.

Now we have several states faced with a financial crisis made worse by the health crisis.

CNN April 23, 2020 …”McConnell suggested in interviews Wednesday that Democrats are trying to get the federal government to essentially bail out state and local governments for bad decisions they made related to public pension obligations and other sources of expensive debt.

Of course, even though there has been an uproar over his comments, can you really argue with the logic? But, no matter, we are used to rewarding irresponsible behavior and foregoing accountability by rationalizing who may be hurt and by making excuses.

It’s only money, your money!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s