Skip to comments.The State and Local Pension Crisis (Add these to the unfunded liabilities of the Federal Gov't)
Posted on 02/16/2012 6:11:39 AM PST by SeekAndFind
President Obama's new budget, with its trillion dollar deficit and interest payments of $5.6 trillion on the debt over the next decade, is only part of America's unfunded liability.
The state and local pension crisis is the subject of a new report by the Republican staff of the U.S. Senate Committee on Finance, entitled "State and Local Government Defined Benefit Pension Plans: The Pension Debt Crisis that Threatens America."
Senator Orrin Hatch, a Utah Republican and ranking member of the Senate Finance Committee, said last month, "Today, public pension debt stands at an alarming $4.4 trillion with outstanding state and local municipal debt at nearly $3 trillion. The public pension crisis plaguing our nation demands a real solution."
The Hatch report shows that the unfunded pension liabilities of state and local governments have been rising. Mr. Hatch plans to bring forward a series of proposals to reform public pension plans over the next few weeks.
By law, these pensions will have to be paid over time to the 19 million men and women who work for state, county, school district, and municipal government. The Hatch report warns that if pension fund income is insufficient to cover these obligations, they will have to be paid also by the taxpayers, either of the respective states or-possibly-by all of us, if Congress decides to ride to the rescue.
The latest estimate of unfunded pension and healthcare obligations for state and local government, $4.4 trillion, comes from Josh Rauh, a finance professor at the Kellogg School of Management at Northwestern University.
In 2009, Professor Rauh estimated $3 trillion in unfunded health and pension liabilities, based on Treasury bond yields ranging from 4.4 percent for 30-year bonds to 2.6 percent for 5-year bonds. Now yields are one-and-a-half percentage points lower, implying that liabilities are 23 percent higher, assuming a duration of 15 years. In either case, cities and states will not have adequate revenues to meet their obligations.
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This is our real sleeping giant. We are not so many years away from becomming Greece.
“Errin” Orrin needs to reform his own fat pension. He’s doing exactly what his contender Liljenquist did before- only it’s not his pension he wants to reform. What about the 7.6 trillion dollars of debt Hatch helped contribute? It’s a political game- nothing more. www.hatchrecord.com
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