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Wednesday, July 25, 2018

Public Sector Pensions: The Parasite Devours Its Host

The Wall Street Journal recently highlighted a better method of analysing the impact of public sector pensions on state and local budgets.

The results are ominous for government finances, the bond markets, and pretty much everything else:

Why Your Pension Is Doomed

A new study shows that benefits are rising faster than GDP in most states.

Pension costs are soaring across the country, and government unions blame politicians for “under-funding” benefits. Lo, if only taxes were higher, state budgets would be peachy. The real problem, as a new study shows, is that politicians have promised over-generous benefits.

In a novel analysis, the Illinois-based policy outfit Wirepoints compared the growth of state pension liabilities relative to state GDP and fund assets. Most studies have examined “unfunded” pension liabilities, which is the difference between current assets and the present value of owed benefits. But this obfuscates the excessive pension promises that politicians have made.

According to the study, accrued liabilities—how much states are on the hook for—between 2003 and 2016 grew more than 50% faster than the economies in 28 states and more than twice as fast as GDP in 12 states. Leading the list are the usual suspects of New Jersey (4.3 times faster than GDP), Illinois (3.23) and Connecticut (3.18), as well as New Hampshire (3.46) and Kentucky (3.08).

Between 2003 and 2016, New Jersey’s pension liability ballooned 176%. Unions blame lawmakers for not socking away more money years ago, though lower pension payments helped them bargain for higher pay.The reality is that New Jersey’s pension funds would be broke even had politicians squirrelled away billions more.

Ditto for Illinois, where the pension liability has grown by 8.8% annually over the last 30 years. Yet when the Illinois Supreme Court in 2015 blocked state pension reforms, the judges rebuked politicians for inadequately funding pensions. The solution, according to unions, is always to raise taxes. But no tax hike is ever enough because benefits keep growing faster than revenues.



Anonymous said...

Pensions are not parasites. They are financial outlays accrued because the state made a firm commitment/contract to workers who held up their end of the agreement.

Anonymous said...

Why can't they be dumped like those in the public sector?

Anonymous said...

The people who finance the campaigns of the politicians are . . . the parasites.

Anonymous said...

I contributed to my retirement and the MD Politians, including the Govender Hogan, is robbing / stealing money from the State Employee Retirement Fund every budget. They have never reimbursed or paid back with interest any amount to this fund. These crooks are the reason pensions are being ruined.

Anonymous said...

Let's not even talk about how many unions have walked away from their members, taking their pension money with them and leaving them high and dry except for Social Security and whatever they may have put aside on their own.

lmclain said...

Buy guns. And lots of ammo.
It's coming......