Loom­ing state pen­sion cri­sis

The Southern Berks News - - OPINION - Jerry Shenk Colum­nist Jerry Shenk Email Jerry Shenk: jshenk2010@gmail.com

In­sti­tu­tional flaws and fail­ures are en­demic to po­lit­i­cal sys­tems, in­clud­ing Penn­syl­va­nia’s where spe­cial in­ter­est claims on lim­ited re­sources de­volve into crises.

For ex­am­ple, in 2017, Penn­syl­va­nia had an “of­fi­cial” $74 bil­lion un­funded pen­sion li­a­bil­ity for cur­rent pub­lic em­ploy­ees. Pro­fes­sional ac­tu­ar­ies pegged the real num­ber at over $100 bil­lion.

While $74 bil­lion is stag­ger­ing, a $100 bil­lion-plus prob­lem is ex­is­ten­tial.

Un­less it’s fixed, many will suf­fer.

Gen­er­ous pub­lic em­ployee pen­sions ap­peared sus­tain­able while Post-World War II baby boomers were in the tax­pay­ing work­force and re­turns on safe in­vest­ments were bet­ter.

But, the de­mo­graph­ics shifted as med­i­cal ad­vances al­lowed boomers to live to older ages and birthrates de­clined.

The num­bers just don’t pen­cil out any­more.

Not only are there pro­gres­sively fewer work­ing tax­pay­ers avail­able to sup­port an aging pen­sioner pop­u­la­tion, but mar­ket events and Fed­eral Re­serve mone­tary poli­cies have had dele­te­ri­ous ef­fects on pen­sion funds.

The pri­vate sec­tor moved from de­fined ben­e­fits to de­fined con­tri­bu­tion/401K plans years ago.

Govern­ment em­ployee unions have re­sisted that change, and the politi­cians they fund have mostly com­plied.

Cen­tral to the prob­lem are mis­man­aged pen­sion funds, fund­ing “hol­i­days” and the un­healthy re­la­tion­ships be­tween elected of­fi­cials and the unions that fund cam­paigns and whose mem­bers re­ceive pub­lic pen­sions.

Tax­pay­ers and con­sumers are tapped out, so so­lu­tions must be found else­where.

The best way to in­crease rev­enues would be to pass right-to-work leg­is­la­tion that will create more tax­pay­ers by at­tract­ing new busi­ness in­vest­ments, en­cour­ag­ing job growth and keep­ing young peo­ple in Penn­syl­va­nia.

Among other sav­ings op­por­tu­ni­ties, Penn­syl­va­nia could con­trol and de­crease spend­ing by elim­i­nat­ing pre­vail­ing wage laws and re­form­ing, polic­ing and en­forc­ing en­ti­tle­ments.

As im­por­tantly, pru­dent union bar­gain­ing agents for pen­sion­ers, cur­rent and fu­ture, could make rel­a­tively pain less, mi­nor con­ces­sions now to help as­sure fu­ture pen­sion fund health and con­tin­ued payouts.

There’s plenty of blame to go around: Democrats de­fend the failed sta­tus quo, and, so far, Repub­li­can ma­jori­ties haven’t produced sus­tain­able fixes.

Last year, the leg­is­la­ture passed and the gover­nor signed “his­toric” pen­sion re­form leg­is­la­tion, a hy­brid plan — de­fined-ben­e­fit for ex­ist­ing em­ploy­ees and de­fined-con­tri­bu­tion for new em­ploy­ees — that will have lit­tle ef­fect on un­funded li­a­bil­i­ties and may, in fact, grow them as sim­i­lar mea­sures did in Michi­gan.

Chalk it up to po­lit­i­cal cyn­i­cism.

The gover­nor wanted to defuse the pen­sion is­sue go­ing into his re­elec­tion year, and leg­is­la­tors wanted to be able to say they did “some­thing” while ex­empt­ing them­selves from the “re­form.”

Govern­ment em­ployee unions tol­er­ated the mod­est change to safe­guard a Demo­cratic gover­nor whose veto power pro­tects Penn­syl­va­nia’s other union-friendly la­bor poli­cies.

Penn­syl­va­ni­ans have en­dured years of false prom­ises from politi­cians who fail be­gin­ner’s math.

As Penn­syl­va­nia’s pen­sion li­a­bil­i­ties grow and the bills come due, peo­ple lower in so­ci­ety, those most re­liant on the Com­mon­wealth’s de­cay­ing ser­vices, will suf­fer most egre­giously from the in­evitable fi­nan­cial melt­down.

Un­less some­thing is done — and soon — the ad­just­ments will be painful as pub­lic em­ploy­ees near­ing re­tire­ment re­al­ize that the com­fort­able pen­sions they an­tic­i­pated aren’t avail­able.

Those al­ready re­tired and re­ceiv­ing pen­sion pay­ments may learn the well has run dry.

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