

Democratic and Republican politicians have damaged the can so much by kicking it down the road that the aluminum can’t even be returned to the store for a nickel, which is, incidentally, how much governments have left in their coffers.
There is a public pension crisis unfolding in America today at the state level. This was confirmed in a new report by Pew Charitable Trusts which discovered that the funding gap for U.S. state public pension systems widened to an all-time high of $1.4 trillion in fiscal year 2016, a $300 billion jump from the previous year. Since politicians, bureaucrats, and unions are unlikely to propose any real solutions, the can will merely be kicked down the road again, ballooning the deficit for years to come.
According to Pew, state public worker retirement funds had $2.6 trillion in assets, but pension liabilities totaled $4 trillion. The numbers were made even worse because the rate of investment returns for multiple state retirement plans fell, adding an extra $138 billion to unfunded liabilities.
Should the market experience a steep downturn, or the projected rate of return dips, the funding deficit could spike to $1.7 trillion.
Only four states maintained fully funded or near fully funded government pensions. Wisconsin was at the top of the list with 99%, followed by New York, South Dakota, and Tennessee with at least 90%. The rest of the country had a maximum of 66% funding. The lowest funded pensions were Kentucky and New Jersey at 31%.
Researchers had a dire warning for states unable to fund their pensions:
“Many state retirement systems are on an unsustainable course, coming up short on their investment targets and having failed to set aside enough money to fund the pension promises made to public employees. Even as contributions from taxpayers over the past decade doubled as a share of state revenue, the total still fell short of what is needed to improve the funding situation.
There is no one-size-fits-all solution to the pension funding shortfall and the budgetary challenges facing individual states, but without new policies that commit states to fully funding retirement systems, the impact on other essential services—and the potential for unpaid pension promises—will increase.”
How does 2017 look so far? Preliminary figures suggest that there might be a drop in reported unfunded liabilities, buoyed by strong investment performance. Pew does state, however, that market volatility could present long-term headaches because lawmakers have failed to put forward adequate annual contributions to state pension systems.
So, how exactly did the Bluegrass State and The Garden State get to this point? Let’s explore.
The Pension Plight of Kentucky
Kentucky needs to fill a $39 billion hole to pay off pension and healthcare obligations for retirees over the next 30 years. The state’s pension woes have metastasized in the last decade as Kentucky once maintained a 94% fully funded pension scheme. This changed when politicians obtained some political capital in exchange for benefits for public workers, which took money out of the system and intensified the negative cash flow.
It doesn’t get any better for Governor Matt Bevin (R-KY), who was elected to fix this fiscal mess. He has engaged in a months-long battle with perturbed teachers over education funding and a pension plan that only has a third of what it needs to pay retirees. Though teachers have been some of the greatest beneficiaries of Mephistophelean politicians negotiating fat contracts, they are staging demonstrations to demand more.
Kentucky teacher compensation ranks 26th, but, according to the Bluegrass Institute for Public Policy Solutions, taxpayer ability to fund their pay ranks at the bottom.
A coalition of business leaders and GOP activists wrote in a letter to the General Assembly that the 2018 legislative session could switch all future civil servants from a defined-benefit system to a defined-contribution plan. The former is when an employer (taxpayer) covers all the costs and promises a monthly payment upon retirement, while the latter requires employees to add their own funds.
The letter said:
“Under the existing (defined-benefits) system, Kentucky taxpayers and businesses are forced to shoulder the entire burden of risk. Pension reform that fails to change the structure of the pension system is a disservice to the people of Kentucky.”
Despite Gov. Bevin’s best efforts for pension reform success, he is facing stiff resistance from one of the most powerful entities in the U.S. today: teachers unions.
The Pension Plight of New Jersey
New Jersey isn’t faring any better. Its public pension system is in shambles: unfunded pension and retiree healthcare liabilities top $200 billion. But, unlike his Kentucky counterpart, Governor Phil Murphy (D-NJ) is doing more of the same: spend, spend, spend and tax, tax, tax.
Last month, the governor delivered his first budget speech, and both Democrats and Republicans were disappointed because it failed to address the meat and potatoes of the state’s fiscal woes.
Murphy outlined a short-term solution for pension shortfalls: taxpayers will bail out the government. As part of the Murphy budget, there is a $3.2 billion payment coming to the $77.6 billion New Jersey Pension Fund.
This is a far cry from 2005 when Murphy headed a commission to study the matter. He was realistic in his findings and conclusions: raise the retirement age from 55 to 60, end gimmicks designed to mask liabilities, remove pension holidays, and eliminate borrowing. These ideas were swept under the rug for being politically unfeasible.
The Manhattan Institute, a conservative think-tank, warned of a pending catastrophe, too:
“It is highly unlikely that New Jersey will generate enough new revenues to meet its pension obligations without severely hobbling the rest of the state’s budget. At the same time, allowing its pension system to continue to accumulate debt by not contributing adequately to it will push New Jersey toward a potentially catastrophic failure of its government pensions.”
New Jersey taxpayers would love to shout “fuhgeddaboudit,” but that’s unlikely to happen.
Crumbling Pensions in America
We took too much, we paid too little. We thought we could get something for nothing. We were wrong.
Across the U.S. today, nearly every level of government is witnessing the collapse of their pension systems. Social Security faces a $11.4 trillion shortfall, California’s government pensions are $1 trillion underwater, city governments risk bankruptcy because they’re on the hook for hundreds of millions of dollars in unfunded liabilities.
The private sector has been in a retirement crisis for a long time. After years of sponging off the taxpayer, the public sector is now in the same boat. The taxpayer is tapped out, government coffers are bare, civil servants want more, and politicians are too frightened to grab the chainsaw. What a dilly of a pickle. Mass madness has infected the public ledger. When will this fiscal insanity finally be cured?
What do you think of the U.S. pension crisis? Let us know in the comments section!
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16 Comments
libertyanyday
The ostrich refuses to take its head out of the sand…………the mere thought of the massive defaults is so paralyzing that nothing, NOTHING will be done. There really is no way to sugar coat it many thousands are going to get ZERO. Complain all you want but believing it was going to be true was less than honest.
God help you.
Anonymous
5
Guest
andrewscott5
That is a grim assessment, but you are correct. Would the same apply to local governments?
Guest
UnabashedSarcasm
When we moved to where we live now, I called about having a new water meter put in just a few feet from my neighbor’s. I was told that as long as they didn’t have to go under a road,and could just set it near the other one, it would be about $1500.
I told the lady they could keep their water and that I’d call a well driller. That same $1500 bought a 100 foot well — with no need of a recurring monthly bill for water. And the electricity required to run a pump wasn’t anywhere near the $30 a month minimum water bill regardless of usage.
When I had a guy come out to design the septic system, he said that the install price was so high because despite the fact that there were several qualified pros in the area, the county only allowed one of them to actually install water meters, effectively allowing him to set his price wherever he liked. The guy just happened to have an uncle on the water commission.
Long story short: that corruption is at all levels of government.
cheatemandhowe
One solution would be to outlaw ALL public employee unions, they’re nothing but a tool of corruption since they help elect the people who decide their pensions.
libertyanyday
low skilled and the unintelligent will never allow this…………even the godfather of the left, FDR , rejected the idea of public employee unions……..and still they exist.
dondworryaboudit
As a federal DoD retiree and SS recipient, mea culpa. It’s funny, looking back through the decades; most of us, as children, experienced the trauma inflicted by the older, wiser, kids remonstrating about the mythological nature of Santa Claus. Yet, it seems most of us held fast to our confidence in the promises of Marxism/Socialism, ignoring the many tell-tale signs of a Ponzi scheme that accompany such a regime. I would say, not to worry about the collapse of the gigantic Marxist Ponzi scheme, but worry about how you’re going to defend yourself & family from your neighbors when they get hungry and cold. And if you think there’s any chance of convincing people to give up the myth of Marxism, “You can’t fix stupid.”
Kevin
I would be willing to give up 10% of my public pension each year if the state is willing to stop illegal immigration and all the public tax dollars that they receive. We have to all share in the pain to create
some stability.
libertyanyday
they wont……….they lie and steal and swindle……….right to the bitter end. godspeed
madad
Sad for all of us who’ve worked all our adult lives, to one day SOON awaken to no more money in our retirement accounts…. better start stocking up on your personal food stashes…and your ammo to protect it!
andrewscott5
Don’t forget physical gold, madad!
Thanks for the comment.
JonfromCA
Please don’t forget California. The State lies about their obligation and promises. The State says they are underfunded, but a separate audit by Stanford reveals that the State is almost $ 1 Trillion underfunded! I’m sure the State of California’s accounting department would never lie to us? If Stanford’s accounting dept is correct, then the State employees will be lucky to get pennies on the dollar for their promises. The State of California has created an entire generation of people with phony pension plans that when they retire will be poor and even more dependent of the State for welfare.
andrewscott5
Thanks for the comment JonfromCA!
I certainly have not forgotten about California. Be sure to check out this: https://www.libertynation.com/impending-pension-crisis-california-looking-little-less-golden/
JonfromCA
Thanks for the reply and the article. WOW! 20 cents out of each dollar for pension obligations only. That should scare everyone that lives in California and plans on having a pension from this State…Great article.