By Frank Keegan – Failure to fund state and municipal retirement plans means most of those workers either will have to drain government services, impose ruinous tax increases and stiff bondholders, or simply die early and die often.
Defined benefit pension planners refer to it as mortality risk sharing. No matter what it’s called, the numbers are irrefutable: Retirement promises are anywhere from $1 trillion to more than $5 trillion in the hole if we include the most optimistic estimates of retiree health care costs.
Politicians and union leaders dug the hole by betraying public workers and taxpayers with false promises of benefits they secretly don’t pay for, leaving a time bomb to explode once they have enriched themselves and their cronies and moved on.
That betrayal inflicts upon America the worst of all possible worlds: average public workers impoverished in retirement – $19,500 a year, according to the American Federation of State, County and Municipal Employees – taxpayers burdened for generations and investors wondering whether municipal bonds are the sure things they’re supposed to be.
Many public workers are not covered by Social Security and cannot use tax deferred long-term defined contribution investment plans. They are stuck with what they get from their pensions.
As for taxpayers, right now the most optimistic estimates of hidden state and municipal liabilities, including retirement promises, equals $41,000 for each private sector worker on top of all other taxes, fees and debt service.
Bond markets have spoken in recent months through a meltdown.
The big problem is, no retirement benefit reforms now can have any impact on the trillions of dollars we already owe. State and local politicians have no choice but to severely cut services and impose crippling tax increases.
That’s why actuaries, the only people never wrong, this week entered the growing debate about public pensions. After all, actuaries are the ones who do the immense and complicated calculations that determine how much we must put into retirement plans, how much investments must earn to pay future benefits and how liquid plans must be to pay current benefits.
Actuaries also are the experts most widely ignored by politicians who want to hide true retirement costs until they are safely out of office drawing their way-above-average public pensions.
In a rare public statement on a political issue, The American Academy of Actuaries “emphasized … the importance of meaningful and consistent disclosures by state and local government pension plans. With the Dec. 2 introduction of the Public Employee Pension Transparency Act by Rep. Devin Nunes, the Academy offered context for evaluating the pension disclosures included in that legislation or that may be included in any other disclosure proposals.”
While not actually endorsing the proposed law to require that governments come clean on their nasty pension plan secrets if they want tax-exempt status for their bonds, Academy president Mary Frances Miller did say:
“The funded status of state and local government-sponsored pension plans is a major concern of the approximately 20 million workers, retirees and family members who are the beneficiaries of those plans, as well as the current and future taxpayers and recipients of public services who share in the financial obligation to provide those benefits. Public confidence in these retirement systems starts with the availability of consistently disclosed financial information on plan assets and obligations and system risks. And as government entities pursue comprehensive solutions to their financial challenges, they need clear and relevant information that will help them manage the risks associated with their pension plans.”
Politicians, pension officials and union leaders don’t want to disclose clear and relevant financial information because they and their broker, manager and placement agent cronies have been scraping billions off while pensions crash and burn.
Citizens already set up, sucker punched and robbed by Wall Street and government – then taxed to pay bonuses to the very people who did it – might not be in the mood to pay more and get less because state and local politicians cheat on pensions.
Many state and local governments – nobody is sure how many – are writing pension checks by eating into savings. All already are doing it for retiree health benefits.
If they again next year defer making the minimum contributions their experts say they must to pay for retirees who will draw benefits for decades, nothing can balance the books but premature death.
Frank Keegan is a national editor for The Franklin Center for Government and Public Integrity, watchdog.org and statehousenewsonline.com . Any disgusted public employee, journalist, activist organization or citizen watchdog who wants help exposing government waste, fraud and abuse may contact him at: frank.keegan@franklincenterhq.org
Tags: actuaries, AFSCME, mortality, municipal, Nunes, pensions, public, risk, State
[...] enough during the next 30 years to catch up. Sluggish GASB efforts, quicker NABL guidelines, the Public Employee Pension Transparency Act and proposed Truth in Accounting laws are efforts to force state and local governments to be honest [...]