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.
Cloward-Pivin!
Something tells me Texas doesn’t have this problem. Where’s a good place to retire in Texas?
Don't contribute?
Lets see, millions lost their homes, jobs, businesses, investments, millions of others had their hours, benefits cut or dramatically reduced, wages stagnant for years, while the everything goes up and up except their wages and homes values...
Hmmmm...
I'll be voting with my feet. Good Luck.
Please, oh please break your promise. It should never been made in the first place. It was and always will be unsustainable. Public sector is not different than private when it comes to sacrifice. Private sector already took the hit, time for public sector to do the same.
the “baby boomer demographic”, even in retirement, may be the last segment of American society that feels a moral obligation to pay its bills and property taxes, even at the point of sacrifice
At least, until even that isn’t enough
Then the city bosses will demand that “rich” seniors who have saved and paid off their homes for retirement, sell the house or get a reverse mortgage to keep sending them tax money
The future looks like this: lots of cities filing for bankruptcy, and many states being put into receivership by the feds. Judges will have to sort much of this out. Public sector employees: the day of reckoning is coming, and it won’t be pretty.
Go soon, while there is still someone else who will buy your house and pay those taxes
Yawn. This bs is collpasing the nation.
“Not a problem for the feds...they’ll just print what they need. /s”
I went out to dinner with a career federal employee last night who was a former neighbor.
He started to complain about the “Private Sector Businesses screwing him and other Federal employees” so they couldn’t get raises every year.
I tried to explain that not only does the private sector not get raises every year, but they have to pay for all the government workers.
He didn’t get it.
Then he complained about getting screwed over changes in pension from “High-3” to “High-5” salary basis.
He didn’t get that either.
....I ended up paying for dinner too, to add to the humorous irony.
“Private sector already took the hit, time for public sector to do the same.”
They don’t get it. They keep getting told (and believing it) they are “heros” for their service. They will not understand, or be able to cope when they are no longer employable, even in a charity government position.
How come nobody ever lauds the “heroic efforts of the private sector taxpayer” to pay for all our state, local, and federal tax burdens?
Just because the government swells wrote themselves generous checks doesn’t mean we have to cash them.
I agree . Governments decided to be overly generous with Tax Payer Money. But the Money well has now run dry. So don’t come looking for me to foot the Tab for these lucrative Pensions.
Workin’ on it.
If you have a pension fund either fund it or phase it out, don't raid the piggy-bank for other purposes.
And stop asking us to pay for your misdeeds.
The answer is simple:
“We will be energy self-sufficient, and a net exporter of energy in the next three years. In addition, we have eliminated the EPA and have passed its enforcement responsibilities to the FBI, without adding a single dollar to the FBI’s budget. All reclassifications of federal property classified into national park land that has occurred in the last thirty years is heretofor suspended, and those lands retain the original classifications they once had.
Uranium and Thorium mining on federal property in Montana, Wyoming, and Colorado is no a national strategic priority.
All EPA Air Permits are officially extended automatically for the next 10 years.
All applications for new EPA air permits will now be routed to the Secretary of Commerce office in Washington DC. Any new permit requiring more the sixty days to process will automatically be deemed granted for a span of 20 years.
All federal civil lawsuits, from this day forward, will be subject to ‘loser pays’ rules. All class action lawsuits not already adjudicated are deemed ‘not qualified’.
The Departments of Education, HHS, and Energy are hereby dissolved. All Energy properties and responsibilities are now Department of Defense.
The USAF is now the US Naval Aviation and Space Command, and is hereby dissolved.
The US Coast Guard is hereby dissolved.
The US Department of the Interior is dissolved
The Department of Homeland Security is hereby dissolved. All TSA functions are now under the jurisdiction of the Department of Defense.
The Department of Labor is hereby dissolved, and all of its functions are hereby suspended in full. Social Security and Medicare elements of this department have now been reassigned to Treasury.
All federal pensions from 2000 onward will be replaced with a 403B program, with a contribution made to each employee for each year in federal service. This includes all members of the United States Military in all branches.”
Not too tough, as I see it. /s
They pay FICA, and they pay excise taxes, and a variety of other taxes.
Most of the folks who forget the details end up making a blanket charge because they, themselves, are never involved in any transactions where such charges take place ~ they don't even buy their own automobile tires, nor do they pick up a bottle of wine, or a 6-pack of beer ~ nothing but champagne for them I am sure.
You wouldn't want to be in that crowd, right?
“You in Nj need to give over $200.00 a month for 30 years to cover DNC Vote buys.”
Based on that, who’s going to stay in NJ?
These state and local government scumbag leaches can go screw themselves before I will pay one single dime, never mind $1400 per year for the next 30.
Well the large states that influence federal elections and have a lot of congress reps (NY/IL/CA) are among those in the worst financial shape.
My guess is that they will be able to force through federal bailouts via taxpayer guaranteed state bonds.
I don’t know abut all of you but our household can’t afford $1400 more a year in taxes nor can we afford to ahve it rasied by that each year for the next 30 years.We already realize we won’t be retiring I wish more people would realize we ca\n’t afford to pay for their’s either.Those promises they made have to be broken.
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