Looming state pension crisis
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.