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  • States Take Action to Combat $1.26 Trillion Shortfall

    States are facing a whopping $1.26 trillion shortfall in funds to pay pension and health-care benefits for public sector employees, according to a new study by the Pew Center on the States.

    Wisconsin and Ohio, both of which made headlines for working to get pension costs under control, aren’t the only ones taking action. According to The Washington Post, “Concern about underfunded pensions has prompted at least 29 states to either reduce pension promises to new employees or require workers to contribute more toward their retirement benefits.”

    And in California, where the state is struggling to cope with its $25 billion budget shortfall, a new poll shows that public opinion has shifted in favor of cutting benefits from public sector employees, as the LA Times reports:

    Seventy percent of respondents said they supported a cap on pensions for current and future public employees. Nearly as many, 68%, approved of raising the amount of money government workers should be required to contribute to their retirement. Increasing the age at which government employees may collect pensions was favored by 52%.

    Cities, too, are feeling the burn and are taking previously unthinkable actions to curb costs. In Detroit, where organized labor is king, Mayor Dave Bing (D) is asking city employees to pay an additional 20 percent of their health care premiums and take smaller pensions, all while he eliminates defined-benefit pensions for all new employees. As The Post reports, Bing says the changes are necessary:

    Even as the city is shrinking, Bing calls the current state of city services unacceptable. And he says they are not going to improve unless he can reduce the city’s personnel costs, which are overwhelming the budget. This year, the city paid $200 million in pension benefits, which Bing said was $25 million more than the city paid for fire department and ambulance services last year.

    “The old days, when getting a good city job meant that you put in your 20 years with the expectation that city government could take care of you for the next 40, is no longer a realistic or viable option,” Bing said.

    States and local government are getting the message that they’re spending beyond their means, so why can’t the U.S. Congress?

    Tell us what you think by leaving a comment below.

    Posted in Ongoing Priorities [slideshow_deploy]

    10 Responses to States Take Action to Combat $1.26 Trillion Shortfall

    1. NW Indiana says:

      It a shame that things must get this bad before Democrats are willing to do anything about such huge overcommittments. Even then, only some of them have snapped out of denial.

    2. GSL says:

      It's sad to ponder that over a third of that $1.3T unfunded pension liability is California's alone.

    3. Mo Kingston MA says:

      If it sounds too good to be true, it is. We never learned that the Pyramid clubs were a scam. They have to stop now. We have to face reality. Work hard and enjoy the fruits but don't expect to be a lottery winner in every case.

    4. Brad, Detroit, MI says:

      It is comforting to see some politicians in Detroit telling the truth. Dave Bing has run a business before and knows some tough decisions have to be made. The only thing the former mayor ran was his mouth.

    5. Leon Lundquist, Dura says:

      Mike I was overimpressed, perhaps, by the Heritage graphs which showed that Medicaid was far and away the greater cause of the looming Entitlement's Crisis. I noticed that Social Security was relatively flat. Medicare was relatively flat. The costs of Government Employee Pensions was a State Bankruptcy threat, but of course the Feds have that problem too. It seemed to me if all we did was to fix Medicaid, stop the crazy Inflation of Medical Costs then we would have no Budget Crisis!

      Lo! And behold! The Government has driven up the costs of Medical Care! Driven it over the Moon already! And what do you get for your Medical Dollar? Grandpa? What do you get? Seventeen different Prescriptions with a hundred deadly Side Effects! "We won't pay your Doctor anything, but your Medical File will sure look good!"

      I swear! There is nothing wrong with American Medicine, not really! What is wrong is Over Regulation! The Government makes more money off Medicine than the Doctors do! But don't feel bad, Dr. Doctor! The Oil Industry pays more tax than it makes in Profits! The American Consumer pays for all of it! All of it! "You don't need too much money!" thus saith Obama!

    6. Wes in cincy says:

      When will we learn to reject anything that comes out of california. The only solution is to keep the democrats out of power for the next 20 years. It will take us that long to recover.

    7. George Colgrove VA says:

      This is one of those things that should have never mounted. Pension plans will need to be eliminated and replaced with 401k like plans. The feds have gone to this already, but they also get a fairly good pension to boot – something that legislators are considering eliminating for new federal workers. That all being said, the federal TSP allows federal workers 10% higher investment by a more generous taxpayer contribution to the accounts. Feds get a full match for the first 5% of their paycheck where most corporation that provide 401k will give a full match for the first 3% and some reduced match of any other contribution (like 2% or 3%). This gives the federal workers 10% more investment power over the private sector – add in their much higher pay, it only compounds. Regardless, the taxpayer is footing the bill for lucrative pension plans for public workers, while they lose their houses, jobs, salaries and so on.

      Things need to become more fair and the only way to do that is getting benefits out of corporations and governments. Make people got to benefits brokers on Main Street to assemble a benefits package in the competitive market (will lower costs) then let the companies provide finding for all or part of that package during hiring negotiations. The public sector will simply apply the private sector average contribution – be it he minimum of a percentage or a cap amount.

      This puts both sectors on the same playing field and it is fair. It drives up competition, which will lower costs. It allows people to move from job to job and if we invent a new industry called benefits insurance, people who lose a job can have their benefits packages protected for a period of time between jobs.

      This plan will eliminate the need for a lot of taxpayer costs in unemployment as it puts people in command of it in their personal lives.

    8. Poole1Dan, Milford, says:

      I have lived no more than 45 miles from Detroit my whole life, and I have kept an eye on what Dave Bing is doing. Last March, I said this in a blog post:

      "Right now, Detroit is making it's most honest effort to revitalize itself since before the riots, and new mayor Dave Bing deserves the most credit for that. While Bing is a Democrat, he at least has a background as a businessman as opposed to a career politician or a bureaucrat, and he has been taking steps to encourage new businesses to invest in Detroit beyond the city's three main boosters (Mike Ilitch, Dan Gilbert, and Peter Karmonos).

      What Bing is doing is a good start, but so much more needs to be done, and quite frankly, I don't think Bing or the city council is going to do it. Will they follow the Republican Giuliani's model on decreasing violent crime? Will they cut or eliminate Detroit's income tax on individuals and corporations? Will they role back burdensome city regulations that drive businesses away?"


      Less then 2 months later, Bing has proven me wrong in at least one aspect. I'm very proud that he explicitly said city employees can no longer continue to live their lavish lifestyles on the taxpayers dime. For Detroit's sake, I hope he keeps it up.

      Moreover, if a Democrat Mayor of Detroit sees the folly in maintaining the status quo for public employees, then anybody who still refuses to see it is a far left ideologue who doesn't care about reality and wants to live in a utopia that cannot exist and will never exist! So addicted to totalitarianism are progressives that they don't want public workers to give up ANY benefits even though they make 22% more then comparable private sector workers!!

    9. Pingback: States Take Action to Combat $1.26 Trillion Shortfall | Fix Pensions First | FixPensionsFirst.com

    10. Pingback: Obama’s High-Speed Spending on Slow-Speed Rail | The Foundry

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