It’s pension panic time. Panic early. Panic often. Demand reform. Public employees must take control of their financial destinies.
Politicians have made promises they never can keep. They and the union bosses who fleece workers don’t have to worry about it because they figured by the time the inexorable mill of reality turns up their deceit, it all will be somebody else’s problem.
They counted on being long gone with millions – maybe billions. Well, the day of reckoning arrived a little earlier than they anticipated.
Why state and municipal workers are not up in arms about it is anybody’s guess, but they and taxpayers must prepare for a battle for survival.
Even before the financial Apocalypse last week, total retirement benefits for Maryland’s public employees were underfunded by at least $45 billion.
If fundamental assumptions about investment returns, economic growth and health care cost inflation turn out to be overly optimistic – gee, what are the odds? – it will be billions worse.
Maryland’s $88 million pension contribution “glitch” discovered last week is just one egregious example. The problem is that every $1 of investment deferred now turns into $5, $10 or more due when an employee retires.
Since 1984, when the Government Accounting Standards Board formed to try to impose at least some appearance of rationality on government delusions, saving pensions has been a high priority.
GASB failed. According to one study released three weeks ago, “The value of pension promises already made by U.S. state governments will grow to approximately $7.9 trillion in 15 years. Adjusting for risk, the true intergenerational transfer is substantially larger. Insuring both taxpayers … and plan participants … would cost almost $2 trillion today, even though governments portray state pensions as almost fully funded.”
Guess what? Adjust risk up exponentially as of last week. Underfunding now could turn into an abyss. Market reality is draining the stagnant pond of American high finance, and one of the stinkiest rotting corpses exposed is public pensions.
Baltimore City’s fire and police pension board firing Legg Mason — hired and retained under political pressure from Gov. Martin O’Malley — is just one indicator of how nasty the incest is in public pensions. Politicians and union bosses love the setup because they can rob both workers and taxpayers in the dark.
Public employees must demand accountability. They must scream for reform. They must take control of their destinies. Taxpayers are not going to pick up the tab on this one.
Check it out, suckers:
- Government Accounting Standards Board
- The Intergenerational Transfer of Public Pension Promises
- Wilshire Trust: Institutional returns experience 1st negative year since 2003
- Public Sector Pension Plans: Current Challenges and Future Directions
- Pension Tsunami
State Retirement and Pension System of Maryland
