Associated Press reports:
Massive investment losses sustained by public pension funds are pressuring state lawmakers from New Mexico to New York to spend more taxpayer money to shore up their programs, boost the retirement age for newly hired government workers and seek more from employee paychecks.
Pensions need $270 billion in additional contributions over the next four years, and more than $100 billion annually for two decades hence, according to the Center for Retirement Research at Boston College.
The pension trouble is just one more economic challenge for states. Income and sales tax collections are dropping fast as unemployment rises. Jobless benefits funds are running dry, requiring federal borrowing. And because of substantial budget holes, states are cutting back on a wide range of services, including child care subsidies for low-income families and aid to public schools, and in some cases laying off workers.
But as bad as the budget picture looks, it is dwarfed by the size of the gaps in states’ pensions, which have collectively lost at least $1 trillion as financial markets swooned over the past year. Public pensions cover about 14 million state and local employees and paid out almost $163 billion to seven million retirees in 2006-2007, according to the Census Bureau.
Update: Pension pulse at Naked Capitalism has a thorough look at the problem as well.
Because pensions involve long-term obligations and investments, there’s no immediate risk that states will be unable to pay retiree benefits. But replenishing pensions could squeeze states for years to come, forcing lawmakers and governors to juggle their spending priorities — pitting pensions against schools, colleges, health care, prisons and other government services.
“What you hear concern about out there right now is, ‘We the taxpayers are going to be stuck with a bill paying for public pensions. And we don’t want taxes raised to pay for public pensions.’ And that is understandable,” says Mike Burnside, executive director of the Kentucky Retirement Systems.