Pensions

Those of us who have been self-employed or run small businesses cannot rely on pension plans offered by someone else. Our retirement security is in our hands. If we're responsible, we establish a 401-K, Keogh plan, SEP-IRA, or even a simple IRA, fund it regularly with relatively small amounts, and over time, build up a retirement nest egg. But if we act irresponsibly, if we don't "fund" any of those plans ourselves, we're left with a few uncomfortable options: (1) continue working until we drop; (2) live on meager social security income, or (3) rely on savings and/or other assets that may be inadequate. The decision is ours, and the benefits or problems are defined by what we do.

In the corporate sector, there are stringent laws the define how pension plans are created and funded. A company MUST show proof that it is adequately funding it retirement plans. When it negotiates plans with a union, it has an incentive to balance fairness with cost, because it will have to bear that cost long term.

And now we come to government. Everything changes. Politicians negotiate with public sector unions (you know, the people whose votes they need to get re-elected). They invariably offer exceedingly generous pension plans. They then avoid fully funding those plans (it's legal to do so if you're government), hoping that the bill will come due on someone else's watch.

Consider Illinois, a blue state with pension liabilities of somewhere between $150 and $230 billion that is only 38 percent funded. That's trouble ... big, big trouble. When a few responsible IL politicians tried to moderate pension benefits, the state Supreme Court (appointed by progressives) said no, they must be paid out as is. The court didn't provide guidance as to how that might be done.

The editors of USA Today comment:

... in many ways Illinois is simply the poster child for what is wrong with states. They are supposedly the providers of education, roads, parks, mass transit and public safety, among other services to their residents. But their real purpose in many instances has been to appease militant public sector labor unions.

Unions representing public workers have managed to persuade state agencies to reward them with gold-plated pension plans, and in some cases, retiree health care. These plans have been agreed to with little or no public input, or understanding by bureaucrats and lawmakers who know they will not around when the bills come due.

The most generous states are Alaska, California, Colorado and Nevada, where the average career worker pulls in more than $60,000 annually and many take in six figures. Those in the worst fiscal shape are Illinois, Kentucky, Connecticut, Alaska and Kansas.

What is most inexplicable about all of this is that progressive groups and progressive voters continue to support public sector unions even as make off with the family jewels.

The vast sums states are forced to throw into pension systems erode their ability to provide good public education, safe streets and livable communities — all goals deeply cherished by progressives.

Roughly a quarter of the entire Illinois budget in recent years has gone to funding pensions. And yet,all this money has done is slow the rate of decline of its financial outlook.

It is time for Americans to recognize the troubling fiscal plight in many states. Perhaps when Illinois or other states like it finally hit a fiscal wall, voters will wake up to the calamity that awaits them.

The irony in all of this is that the taxpayers, who will be squeezed to fund pension payouts on a day to day basis, have only one way to alleviate their burden—leave. And they're doing that in increasing numbers—the term "tax refugees" come to mind.

What IL and CT, CA and AK, KY and KS face is a fiscal calamity, brought on by irresponsible politicians, greedy unions that put their own workers in serious jeopardy, and laws that don't hold the government to the same standards as the rest of us. Pathetic.