Monday, April 12, 2010

Pension Tsunami

When we look in practically any newspaper that reports municipal issues we find an ongoing friction between unionized public sector workers and management. Recently teachers in a local school district went on strike for improved contractual salary benefits and continued modest health care contributions that frankly make the rest of us glaze over with envy.

Behind the daily jostling for continuing generous retirement and health care benefits, on the not too distant horizon is a wall of trouble. In typical fashion we are kicking the issue down the road until the current embers turn into a fiscal inferno.

How voters and taxpayers will confront the coming crisis will be interesting to say the least because we sure aren't dealing with it adequately now. Public services we take for granted will clearly be jeopardized in years to come. In my activities on a local library board I am alarmed at the sanguine attitude that local municipal contributions for the operating expenses will continue to be available. When public pension contributions have to be increased dramatically through taxes to fund future obligations how deep will taxpayers dig for libraries, swimming pools, cultural events, fire and police protection, road maintenance etc. etc. etc?

Nationally, the municipal, state and local pension plans are currently underfunded by and estimated $2 to $2 TRILLION. Future pension plans will have to be terminated and defined contribution plans put in their place. Future benefits will become a battle royale when private sector neighbor eyes public sector neighbor with envy and anger. Let's get ready to rumblllllle.

The interactive chart below shows various pension plans in each state and their level of funding.

John Barnyak