- The Washington Times - Saturday, June 5, 2004

During the past three years, there has been much wailing and crocodile-tear shedding by state and local government officials over their supposedly recession-induced budget shortfalls. Under such presumably desperate conditions, one would think these public servants would have been hard at work protecting what tax revenues have flowed into their coffers, including those generated by recent property-, income- and/or sales-tax increases. In fact, in the wake of the 2000-2001 stock market collapse, which decimated much of the financial wealth accumulated in the 401(k)s of so many workers in the private sector, many state and local government officials have been busy continuing to build outrageous current and future liabilities in the form of unaffordable public-employee pension improvements. In some jurisdictions, from the states of New York and Massachusetts to the cities of Portland, Ore., and Burlington, Vt., the bill has already come due — in the form of still-higher taxes or massive service reductions. In others, the bill will arrive soon. But arrive it will.

In its May 31 issue, Fortune magazine blows the whistle on one of the biggest anti-taxpayer scams ever perpetrated. Citing Wilshire Associates, a pension consultancy, Fortune reports that the pension plans covering 16 million state and local government employees “owe an incredible $366 billion more in pension benefits to current and future retirees than the money stashed away to pay for them.” In just three years, from 2000 to 2003, the difference between assets and liabilities in these plans has gone from a positive $245 billion to a negative $366 billion. That’s a shift of more than $600 billion in three years.

Moreover, even as the “perfect storm” of a cascading stock market and plunging interest rates was trimming the investment portfolios of public-employee retirement funds, at least 17 states increased pension benefits for their state and local workers in 2001 alone. The chickens have already come home to roost in Houston and San Diego, whose pension funds are running deficits of $1.9 billion and $1.1 billion, respectively. Nevertheless, long after the stock-market bubble burst in March 2000, Houston and San Diego embarked upon significant benefit-enhancement programs in 2001 and 2002, respectively. Despite the fact that its unfunded pension liabilities were rapidly approaching today’s $35 billion, Illinois, whose elected officials were pleading poverty, “offered a generous early-retirement package to state workers in 2002 that enabled 50-year-olds to retire with generous, unreduced benefits, a deal that cost the state $222,000 for each of the 11,000 or so employees who jumped on it (a scary $2.4 billion in total),” Fortune reports.

Due to widespread constitutional and legal guarantees of already-negotiated public-employee pensions, there appears to be little that can be done to correct the outrageous abuses of the past. Pension packages negotiated for the future are a different matter. However, only an informed and overtaxed citizens — who will have to bear this crushing burden — will be able to force cavalier politicians to hold the line. This page plans to contribute to that informed debate.

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