Posted on 06/22/2011 1:42:53 PM PDT by NoLibZone
U.S. state and local governments will need to raise taxes by $1,398 per household every year for the next 30 years if they are to fully fund their pension systems, a study released on Wednesday said.
The study, co-authored by Joshua Rauh of Northwestern University and Robert Novy-Marx of the University of Rochester, both of whom are finance professors, argues that states will have to cut services or raise taxes to make up funding gaps if promises made to municipal employees are to be honored.
Pension funding in U.S. cities and states has deteriorated in the wake of the 2007-2009 economic recession as investment earnings dropped, and some states, such as New Jersey and Illinois, skipped or reduced required payments.
The issue has sparked heated debates, from the streets of Wisconsin's capital, Madison, where thousands demonstrated over public employees' rights to bargain, to New Jersey, where lawmakers are expected to give final approval this week to a plan that will scale back benefits for public sector workers.
Wall Street rating agencies and investors in the $2.9 trillion U.S. municipal bond market are increasingly focusing on unfunded pension liabilities as they weigh the credit-worthiness of state and local government debt.
Rauh and Novy-Marx have previously stirred up the debate over state pension obligations, including the dire prediction that existing pension liabilities total around $3 trillion, if expected returns on investments are not counted.
Other studies have estimated the shortfall as far less. The Pew Center on the States, for example, found the pension shortfall for states could be $1.8 trillion, or as much as $2.4 trillion based on a 30-year Treasury bond.
The study issued on Wednesday said contributions will far outstrip gains in revenue.
"To achieve fully funded pension systems within 30 years, contributions would have to rise today to the levels we calculate and then continue to grow along with the economy," Rauh said.
New Jersey will need to increase its revenue by the largest margin, requiring $2,475 more from each household per year, according to the study.
The contribution requirements may be higher for states that already have a significant amount of debt on their books and "cannot tap municipal bond markets as easily for large contributions," the report said.
Illinois, for example, which has the lowest funded ratio of any state pension system, sold billions of dollars of pension bonds over the last two years to make its pension payments.
Conservatives have warned of this for over thirty years.
We each need to spend $116.00 a month more for the next 30 years to pay off the DNC vote buys.
Well ain’t that too darn bad. Just downsize government and use the leftover $$$$$$$$$$$$$$$$$$$$$$$$$ for the freakin pensions.
Ain’t paying for it...if governments want to do it, they can have a bake sale or something. But otherwise, P-— off.
You in Nj need to give over $200.00 a month for 30 years to cover DNC Vote buys.
Not a problem for the feds...they’ll just print what they need. /s
The whole lot of them can go to H E L L!!
Even the 47% who don't pay taxes?
Good luck with that.
If the debt was paid off tomorrow morning congress would put us back into debt tomorrow afternoon. The only way they’ll ever stop spending is when they no longer exist. And that will be some scary times of survival of the fittest.
Of course there is no talk on raising taxes on the over half of US households which pay no federal tax. Why are these people not paying their fair share?
We need rope, lots and lots of rope.
so i get to pay $1400/yr for someone else’s luxury retirement package?
yea... that ain’t happening
Wonder why people didn’t bring up these stats during the WI debates.
On the one hand... people were promised these pensions. That was when the economy was booming. I’d be angry too.
On the other hand... the pension system is simply not sustainable. Many of us in the private sector are very worried about our pensions and retirement. Doesn’t seem fair to us either.
Especially, if it means that we can’t afford a “pension” because we are paying for public sector employee’s pensions and commitments.
CWII will be along soon.
Of course, they’ll laugh it off the next year and claimed they “screwed up” and we need 2k a year, then the next year—so funny, we messed up again—it’s $2,500.
But you might need retirement too, so where’s that money coming from?—well, screw ya. We need your money.
“We need rope, lots and lots of rope.”
Well thank god the envirowhackos want to save the trees. More unintended consequences?
The U.S. private sector is being robbed and gang raped by government, at all levels...
It’s even worse because not all households contribute, many are already net tax users and that will probably get worse over time since the baby boomer demographic is now beginning to retire.
“per household”
well, that ain’t gonna happen, is it?
Here’s a story that half the “middle class” couldn’t put its hands on $2000 extra in case of an emergency
http://www.daytondailynews.com/business/in-a-pinch-half-of-u-s-families-cant-find-2-000-1182312.html
My city/county combined are raising property taxes, water and sewer rates, and trash fees to the tune of $1000 per “average” household this year alone
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