Thursday, May 20, 2010

US state pensions becoming federal issue

Promises, promises, promises; politicians love to be loved and love Big Government and government employee unions. The problem is, they buy this love with other peoples money, yours. The number $3,000bn is $3 trillion at risk. States that try to push this off to the Federal government are irresponsible. The Fed. Govt. has no money and all it can do is print money, borrow and tax. Printing money causes inflation, which is a silent form of taxation. Sooner or later, you pay.

States must correct their own problem by reducing benefits and replacing unwieldy pensions with 401k or similar plans. This is what private businesses have been doing for years.

The fact that Obama's home state is the "worst of the worst" is no surprise.

Mr Long, director of the Commission on Government Forecasting and Accountability, the non-partisan auditing arm of the Illinois state legislature, remembers that, back in 1994, the state laid out a proposal that would have paid off most of what was then a $17bn gap by 2011.

But Illinois could not stick to the plan.

With financial year 2011 less than six weeks away, the pension arrears of the 1990s look quaint. Instead of a balanced system, the state faces unfunded liabilities of about $78bn, the biggest pension hole in the US, and contributions of more than $4bn for 2011, the largest single element of its $13bn budget deficit.

Illinois is the poster child of unfunded pensions in the US. But state retirement systems could become a national concern, new research shows.

“It is more than a local problem,” Mr Rauh said. “The federal government could be on the hook.”

Estimates put the unfunded liabilities at between $1,000bn and $3,000bn after years of states promising benefits but not contributing enough in both good times and bad to cover them.
US state pensions becoming federal issue

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