Sunday, November 23, 2008
Our Spendthrift States Don't Need a Bailout - WSJ.com
Well, so much for letting the states handle the money...
Steve Malanga writes about them in the Wall Street Journal:
"This is not the first time states have been caught in this trap. One reason is because many fail to address their deep, structural budget problems during the good times, preferring to use booming tax revenues to start or expand politically popular (and often costly) programs. Another, deadlier issue is their failure to deal with huge and growing employee pension and benefits liabilities.
For years, state and local politicians have bought support from public sector unions by promising big benefits. Over time these promises exert severe pressure on their budgets. A study three years ago by the Employee Benefit Research Institute estimated that the average public sector worker earns 46% more in total compensation than his counterpart in the private sector, largely because government employers spend 60% more per worker on benefits than counterparts in the private sector.
States have collectively racked up some $731 billion in unfunded liabilities for pensions and other retirement benefits, according to a study published last December by the Pew Charitable Trusts' Center on the States. In particular, the states have been promising their employees rich nonpension benefits -- such as retirement health and dental care -- and paying for virtually none of it. According to Pew estimates, states have put aside a mere $11 billion to fund $381 billion in future nonpension benefits. Illinois, which has the largest percentage of unfunded pension liabilities among the states, actually cut its contributions to pension funds by $2.3 billion in the flush years of 2006 and 2007 as stock market returns were rising."
