It is time for the cities and states to stand up to the unions. Stop paying the benefits, make the employees pay more for their pension plans, just as most U.S. citizens. The cities and states have to stand up for their taxpayers, many of whom can not afford more taxes to pay for these bloated benefits. It is time for the cities and states to do what is right for ALL CITIZENS, not just a FEW!
States see pension crisis looming despite cuts
Almost every state in the U.S. has made cuts to its public-employee pensions, seeking to dig out from the economic downturn, but so far the measures have fallen well short of bridging a nearly $1 trillion funding gap.
Since 2009, 45 states have rolled back pension benefits for teachers, police, firefighters and other public workers, including cuts by Michigan and California this month. Next week, Republican Ohio Gov. John Kasich is expected to sign legislation requiring, for example, that certain teachers work longer and pay more toward their pensions.
The state measures show how economic forces are reshaping traditional ivalries, convincing lawmakers and labor leaders that past public pension plans are unsustainable. In Ohio and elsewhere, politically potent unions have locked arms with state officials over the pension cuts.
But the new laws have trimmed just $100 billion out of the $900 billion gap between what the states and their workers put into their retirement plans and what the states owe in retirement benefits, according to estimates prepared for The Wall Street Journal by researchers at Boston College.
Unfunded liabilities in many states grew to troubling levels after investment losses in the 2008 financial crisis depleted pension assets. While most states have approved some form of pension cuts, many have opted to apply those changes only to workers who have yet to be hired.
That means most of the savings won't be realized for decades, when the most expensive retirement benefits come off the books. Changes made to the retirement plans of newly hired workers are expected to reduce pension costs by 25% over the next 35 years, according to Boston College estimates.
For years, part of the attraction of public service jobs has been guaranteed pensions and other benefits. That remains largely intact for current workers. Only a handful of states have replaced some guaranteed pension benefits with 401(k)-style retirement accounts that are commonplace in U.S. corporations.
Experts say the differences between public and private retirement benefits will eventually narrow as cuts to new workers' plans take hold.
Many states have avoided reducing benefits for current workers or retirees, saying the plans have legal protections. Courts in Minnesota and Colorado have ruled that cost-of-living raises can be reduced.
"There is a lot of gray area,'' said Alicia Munnell, director of the Center for Retirement Research at Boston College. More states could try to cut future benefits for current workers because the laws aren't clear, she said.
Earlier this month, California Gov. Jerry Brown, a Democrat, signed pension reductions he called the "biggest rollback to public pension benefits in the history of California pensions." The changes, mostly for newly hired workers, are expected to save the state retirement system as much as $55 billion over the next few decades. But the measures won't immediately reduce unfunded liability, said spokesman for Calpers, the state pension fund.
A spokesman for the California department of finance said the pension changes would achieve some immediate savings, but they are largely designed to address the long term sustainability of the retirement system. He said pensions of current workers were "vested rights" that can't be altered
The $100 billion reduction in unfunded liabilities comes from such states as Rhode Island and New Jersey, which suspended annual cost-of-living raises for retirees, according to the Boston College estimates.
States also have shifted more pension costs to employees. As of 2010, state workers were paying 10% more toward their retirement plans compared with three years earlier, according to Boston College. These increased contributions will gradually reduce unfunded liabilities.
Some states say they need more immediate relief.
On Friday, the Teachers Retirement System of the State of Illinois said its pension bill to the state would increase by about $300 million in the fiscal year that starts next July. The higher costs derive from a pension board decision to lower its assumed rate of investment return, citing the "volatility of the world economy."
The lower the expected return, the more the pension's unfunded liabilities grow—unless the state fills the gap with higher contributions from employees or taxpayers, or tries to cut benefits.
Illinois lawmakers had a chance to address the deepening hole last month but they couldn't agree on a bill to limit cost-of-living adjustments. "Changes of some sort are necessary and everyone expects them to happen,'' said Richard Ingram, executive director of the Illinois teachers' pension fund.
In Ohio, lawmakers this month passed a series of changes that touch current and retired workers, along with new hires.
Many of the state's public-employee unions supported the pension cuts less than a year after they fought a bruising battle with Republican lawmakers to retain their current rights to collective bargaining. But on the pension issue, many state labor leaders agreed that their members' retirement benefits needed to be trimmed.
"It is a tough pill to swallow,'' said Kevin Griffin, who is president of the local teachers union and an English teacher in Dublin, Ohio.
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