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State and local pension plans are underfunded, in many cases dramatically. Enough so that, in the next decade, many states will have to cut benefits or services, raise taxes, or receive some form of a bailout. Matt Taibbi’s latest in Rolling Stone blames the situation on a convenient villain — Wall Street.
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The US government has its own retirement crisis on its hands.
A new study for the Mercatus Center at George Mason University examines both the overall financial condition of state and local pension plans and the legal impediments to pension reform. It argues that reform proposals that assume the federal government will bail out state and local pen- sions are politically and economically unworkable and unfair. Instead, it presents a two-pronged reform proposal: (1) require state and local authorities to disclose the financial condition of their pension plans to beneficiaries in plain language and using standardized conservative accounting assumptions, and (2) allow state and local governments to offer beneficiaries a choice between accepting the uncertain and risky future benefits originally promised or receiving a discounted lump-sum benefit right away.
Most private-sector workers grew up with no promise of pensions, but the problem of our cities and states haunts us all
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Public Pensions Are Underfunded
States dont contribute enough to public pension plans.
Caused by legal constraints that keep them from contributing the full amount.
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One Third of State Pension Plans Can Only Pay 80% of What They O
Only one-third of state plans claimed they have enough assets to pay 80 percent of their promises.
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Public workers are promised that a fraction of their highest salary will be paid to them upon retirement and for the remainder of their lives.
By contrast, most people in the private sector finance their retirement with an account they manage themselves.