COMMENTARY: State lawmakers sink deeper into denial on pension catastrophe
Published: August 8th, 2012
CHICAGO — We’re going to pay enough for 2,000 “Curiosity” Mars rover missions, but the money will produce no government services or benefits of any kind. Yet, nowhere does a state legislative directive on pensions approved Tuesday mention how states are going to pay this debt.
National Conference of State Legislatures committee members at their “Build Strong States” annual summit here voted 19-0 without discussion to approve a “Public Pensions, Health Insurance and Post Retirement Benefits” directive without a single proposal to pay off a debt locked in at $4.6 trillion last year that has been growing uncontrollably since.
A sample of public pension investments by Wilshire Associates reportedly shows funds lost money in the second quarter, ending the fiscal year flat. Municipal and state pension investments must gain 7 percent to 9 percent every year forever to pay promised benefits without taking trillions of dollars more from taxpayers for government services rendered.
Continued failure just puts pension funds further behind and taxpayers deeper into debt, because current prevailing legal interpretations claim public pension benefits are guaranteed no matter how poorly investments perform.
Politicians hide pension debt off the books, so they can loot funds for secret loans.
None of that stark reality was evident at the NCSL committee meeting.
The directive focused on blocking federal regulation and squeezing more out of taxpayers for government retirees.
“Current federal regulations that impose excessive and unnecessary administrative costs on state and localities should be simplified or eliminated,” is the top general priority of NCSL, according to the directive’s introduction.
It specifically called for:
• “Congress to enact legislation that will reduce or eliminate the impact of the GPO (Government Pension Offset) and WEP (Windfall Elimination Provision) on state and local government retirees …” so taxpayers have to pay retirement benefits twice.
• No “… expansion of mandatory Social Security and Medicaid Coverage to public employees of state and local governments …” to benefit those programs with contributions from public workers.
• Avoiding federal “… mandates that would replace existing (pension) plans with methods designed for the private sector,” that would take some of the pension catastrophe risk off taxpayers.
• Opposition to “… any effort by Congress to impose annual federal reporting and funding requirements on state and local governments regarding various aspects of their public employee pension plans and penalties for non-compliance, such as loss of federal tax exempt financing benefits for bonds … .”
• Support for “… federal efforts that allow public sector retirees to deduct health care premium costs and/or additional medical expenses from their taxable income, as well as federal efforts to allow retirees to save for health care costs through tax preferred vehicles.”
Politicians’ false promises to public workers for retirement health care are not guaranteed like pensions may be, so legislators need to cushion the blow when they snatch those benefits away. An optimistic estimate of that debt as of 2010 was $627 billion — as long as health-care inflation is low — with politicians setting aside virtually no money to pay it.
Protecting beleaguered taxpayers was not in the Committee on Budgets and Revenue’s agenda Tuesday as a way to “Build Strong States.”
Nor was a single idea proposed for paying off a debt that will reach $5 trillion this year and never produce anything.
Instead of funding 1,999 more “Curiosity” missions to Mars, citizens will pay for nothing.
NCSL leaders have to put that injustice on their agenda before it is too late.
For links to recent studies proving the true immensity and urgency of this public pension crisis:
NOTE: Keegan is editor of State Budget Solutions.org, a project of sunshinereview.org. The State Budget Solutions Project is non-partisan, positive, pro-reform, proactive and anchored in fundamental-systemic solutions. The goal is to successfully engage political journalists/bloggers, state officials and opinion leaders in a new way of thinking about state government and budgets, fundamental reforms, transparency and accountability. This essay first appeared at the Watchdog.org webiste. Keegan can be contacted via email here: frankkeegan@statebudgetsolutions.org.