An editorial in USA Today reviews the bad news about government employee union pension funds, which are seriously underfunded in many cities and states. It is interesting to note that all of the states where bankruptcies have occurred were forced unionism states at the time of the bankruptcies. Detroit’s bankruptcy proceedings began before Michigan became the 24th Right to Work State in 2012.
One lesson is that public disgust with government — and particularly government spending — includes anger over the unaffordable sweetheart deals that states and localities signed with public employee labor unions, a core Democratic constituency.
Fueling taxpayers’ anger is that they are financing benefits no longer available to most private-sector workers. Some state and local government workers can retire in their 50s, after 33 years of service, and continue drawing the same income.
Estimates for the total shortfall of public pensions start at about $700 billion. In 2011, the Congressional Budget Office said that $2 trillion to $3 trillion was more accurate. Even a long bull market won’t make the problem go away.
Some of the pension shortfall is the result of governments not putting as much into the plans as they promised. But a prime reason that pension costs have spiraled out of control is that spineless public officials buy votes by creating liabilities that won’t come due until long after they leave office.