Posted on 04/28/2012 12:55:50 PM PDT by SeekAndFind
Chicago Mayor Rahm Emanuel recently offered a stark assessment of the threat to his state's future that is posed by mounting pension and retiree health-care bills for government workers. Unless Illinois enacts reform quickly, he said, the costs of these programs will force taxes so high that, "You won't recruit a business, you won't recruit a family to live here."
We're likely to hear more such worries in coming years. That's because state and local governments across the country have accumulated several trillion dollars in unfunded retirement promises to public-sector workers, the costs of which will increasingly force taxes higher and crowd out other spending. Already businesses and residents are slowly starting to sit up and notice.
"Companies don't want to buy shares in a phenomenal tax burden that will unfold over the decades," the Chicago Tribune observed after Mr. Emanuel issued his warning on April 4. And neither will citizens.
Government retiree costs are likely to play an increasing role in the competition among states for business and people, because these liabilities are not evenly distributed. Some states have enormous retiree obligations that they will somehow have to pay; others have enacted significant reforms, or never made lofty promises to their workers in the first place.
Indiana's debt for unfunded retiree health-care benefits, for example, amounts to just $81 per person. Neighboring Illinois's accumulated obligations for the same benefit average $3,399 per person.
Illinois is an object lesson in why firms are starting to pay more attention to the long-term fiscal prospects of communities. Early last year, the state imposed $7 billion in new taxes on residents and business, pledging to use the money to eliminate its deficit and pay down a backlog of unpaid bills (to Medicaid providers, state vendors and delayed tax refunds to businesses).
(Excerpt) Read more at online.wsj.com ...
I predict that someday these debt straddled states will enact legislation that will stop benefit payments to retirees that move out of the state. That would tend to keep the money inside of the state instead of going to a different one with lower cost of living.
While I agree that people should keep their noses out of other people’s business, it is the taxpayer’s business when public employees retire, or at what level of compensation.
It is the taxpayer’s business because there isn’t a single defined benefit public employee pension plan in the US where the public employees have contributed/invested a sum of money during their working careers that will cover the expected payouts of defined benefits for their expected lifetime after retirement. Where systems like CalPERS used to assume an 8% return on their investments to grow their assets, they’re now seeing a 1.1% return (for 2011) and this means that CalPERS is having to go to the legislature and have their pension plan’s shortfalls augmented out of the general account for that year’s benefit payouts.
Illinois and California are realizing this, as are an increasing number of cities and counties all over the country. The defined benefit pension is mathematically unsustainable in the face of increased lifespans due to rapid advances in medical science, and in states like California and Illinois, where enough public employees have gamed the system to fatten their pension benefit stream just before they retired, it isn’t even an issue of lifespans. It is an issue that there are loopholes in the pension benefit computations that are allowing some people to game the system for huge rewards after retirement.
what are you saying?...you got yours from the govt so everyone should just shut up?...
It is MY business....
so any of the sanctimonious "don't tell me when to retire" people want to give up their fed/county/state pensions and live their lives ...fine...until then, its an obscene system and totally insane and totally unsustainable...period
this is the problem with democracy...eventually everyone votes to give themselves more and more and fewer and fewer are actually paying for it....
if the public just stops working and stops giving taxes, then the pensions of all the govt employees stops as well.......
About a decade ago, my state of Georgia moved to 401k plans for new state hires and the previous state employee pension plans weren’t that onerous to begin with. So GA is a right to work state and at least it has no unreasonable government unions to battle. Gov’t unions exist here but they don’t run things.
>>what are you saying?...you got yours from the govt so everyone should just shut up?..<<
The opposite. I got *NOTHING* from the govt — in fact I won’t even get the money *I* put into the National Ponzi Scheme back!
But don’t wag your finger at me and tell me I have to work until I die. If I am smart (I am), I can craft a plan wherein I can stop working, even WITHOUT the money *I* put in.
And if you are 55 or under you had better also craft a retirement plan that doesn’t include Social Security.
Reading is FUNdamental.
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