Each U.S. state has some form of pension programs for their government employees. Helping employees maintain a good retirement fund is an admirable goal, but the pursuit of that goal must not overshadow fiscal realities. However, many states have simply ignored those realities, and are setting themselves up for assured disaster in the coming decades.
Unsurprisingly, most of the states that have the worst unfunded pension liabilities are Democratic, and have been so for many decades. The Left-wing leaders in those states have continuously upped the pension benefits for their government employees, but have not taken into consideration that there are fiscal realities, such as a lack of money, that will eventually bring down those structures.
Illinois is one of the most recent examples of this kind of reckless endangerment. The state is teetering on the edge of complete bankruptcy, as it cannot pay its debts without paying for its pension liabilities, which now exceed the entire state’s budget. As of June, their pension debt is at $250 billion.
The state was close to getting a “junk” credit rating this summer, if not for a budget deal that once again increased taxes on residents. Yet even with that, the debts and liabilities will still not be paid with this deal. What in God’s name are they doing?
As bad as Illinois’ situation is, there are actually several states with far worse pension liability issues. And, you guessed it, they are all bastions of left-wing government policies.
According to CNBC, this debt problem hits closer to home than even the reprehensible $20 trillion national debt accrued by the federal government. Despite recent economic growth, the state governments are not getting their act together, and residents are feeling the effects.
States are falling further behind in the money they owe public employee pension funds, leaving taxpayers on the hook, according to the latest analysis from S&P Global Ratings, which tracks state debts.
Despite recent stock market gains, state governments are not setting aside enough money to keep up with the rising liability of paying public worker pensions and other retirement benefits, according to the latest data.
In all but two states (Michigan and Alabama), the money set aside as a share of what’s needed fell last year to an average ratio of 68 percent. That means states have funded just 68 cents for every dollar they owe in future payments.
New Jersey has set aside just 31 percent of what it needs to pay pensions costs. Kentucky, (31 percent) Illinois (36 percent) Connecticut (41 percent) and Hawaii (51 percent) are the worst off.
Payments to state debts and pensions are taking a bigger portion of state governments’ budgets as time goes on. The governments will have to either raise taxes (unpopular) or cut spending (also unpopular) to address these commitments and liabilities.
Part of the problem lies in the fact that many of the pensions plan for years and years. The pension plans also have outdated models for investments that do not have realistic expectations for rates of return.
Some states have implemented pension reforms, closing their funds to new employees and freezing existing plans. But those measures have also cut contributions from active workers, reducing new funding to pay workers who have already retired.
Eventually, those liabilities will have to be met. And the burden on individual taxpayers varies widely from one state to another.
Some states, such as New Jersey, Connecticut, Maryland, and Illinois have to implement radical changes imminently. If not, then the liabilities will only increase over time, and their systems will collapse under their own unsustainability. It’s only a matter of time, and no faith in government bureaucrats and other incompetents will save it.
For the time being, let’s take a moment to consider why these states are in such a situation: greed. The state governments got extremely greedy over the past several decades, going all the way back to the 1950s I would say, and created these massive pension plans with no feasible way to actually pay them later on. It’s almost as if they did not actually plan on the eventuality that such a greedy system is simply not tenable.
And you know what? The ones who will end up paying these liabilities will not be the buffoons and idiots who created this mess. They’ll largely be dead by that time. No, it will be the people my age, the GenXer’s and the Millennials, who will bear the burden, the burden that someone else created but apparently has no qualms passing on to us.
Rail against Millennials all you want (I do as well when deserved), but it’s not our generation that has taken our states down the path of criminal irresponsibility with pensions for the past 5, 6, 7 decades, destroyed the housing market, and racking up unpayable trillions in debt. But what do I know? I’m just the one whom the creditors will come to looking for their money.