Pension Crisis Hurting PA Families

Raise your hand if you are fully saved or on target to fully save for your retirement. What about your kids? Are you on track to pay for their college tuition or retirement?

These are not ridiculous questions. We all have tasks we don’t like but know we should be doing or even that we have good intentions of doing, like losing ten pounds or dusting on top of the TV or saving for retirement. No matter how much expert advice we get about doing these things, they often remain undone for a variety of reasons. Turns out, the same is true for elected officials.

Even though the "experts" have been clamoring for years about the need to reform Pennsylvania’s pension system, lawmakers have failed to do so. Why? Because real reform can hurt.in a lot of ways but most specifically it can hurt their chances for re-election because the public sector unions do not want their pension system reformed. They don’t want the kind of treatment that economic times have forced upon the private sector. Paying more or paying at all into their own pension plan or for their own health care is foreign to them and violates what they were "promised." What they are "due."

Well, guess what guys… some promises cannot be kept and honestly should have never been made. And if you insist of clinging to these promises like a drowning man in a swimming pool, you may likely pull us all under water. The truth is we are taxed out of our minds at all levels of government and cannot bear much more. Many of us, myself included, do not think it is fair to ask us to pay more in taxes to fund the lavish pension funds for state employees when we cannot afford to save for our retirement.

As a result of the union’s stubborn self-righteousness we now find ourselves in a mess; a huge mess.

But sadly most lawmakers will chose to "kick the can down the road" and let it be the next legislature’s or the next generation’s problem. But what happens when we run out of road? That may be closer than we think.

One of the main sources of Pennsylvania’s state and local spending crisis is its unfunded public pension liabilities. For decades, state and local governments have been promising their public employees generous pension and health benefit liabilities while not putting aside the necessary savings to support these promises, basically trading political gains for fiscal strength. Unfortunately for the taxpayer, most of these promises do match up with what state and local governments can actually afford, thus placing tremendous pressure on future budgets as the promises grow and the underlying funding decreases.

It can be hard to find the full cost of states’ pension liabilities in their budgets. Since they’re future payments, states can and do use a lot of budget gimmickry to conceal the full cost of these promises. By using optimistic assumptions, states can make the value of these future liabilities smaller underplaying the seriousness of the issue. Furthermore, there is emerging consensus among economists that formulas set by the Governmental Accounting Standards Board to calculate pension liabilities are overly optimistic. Most states assume an 8% return on the assets they use to fund pension payments when, in reality, states typically receive only half of that in return.

Applying this fair market valuation to Pennsylvania, one can see that our state and local government’s unfunded liabilities exceed their total debt. Altogether, Pennsylvania state and local governments owe $131.4 billion in unfunded pension and health benefit retirees. That’s billion with a "b." Don’t forget to add that number to the $122.3 billion they already owe in debt.

While Pennsylvania’s teachers, public safety workers, and civil servants all deserve a decent salary and benefits, they may not be able to reap the benefits of their current package at retirement because of its fiscally unrealistic promises. For the sake of our state’s fiscal health and our public employees, we need to demand real pension reform before things get any worse and any more impractical promises are made that the taxpayers of Pennsylvania simply cannot afford to keep.

You can learn more by following me on twitter @stefanospeaks or check out my organization at americansforproperity.org.