COMMENTARY: Happy New Year suckers, pay up: Your share of public pension crisis now $424,500

By   /   December 30, 2011  /   2 Comments

By Frank Keegan

Here is a New Year’s resolution every American private sector worker must keep no matter what: Write a check for $14,150 Jan. 1 to make up for state and municipal pension shortfalls. Prepare to write one every year for 30 years. This is on top of all other taxes and fees governments at all levels gouge from us.

Taxpayers – through governments and public workers – pumped $25 billion into the top 100 pension funds in three months ending Sept. 30, according to the latest report. Those fund’s managers paid out $52 billion and lost $199 billion in market value. How deep into the fiscal abyss do they have to plunge us before somebody wakes up?

Even if by some miracle fund managers can meet promised average earnings to pay benefits through 2036 — which would require an average annual risk-free return of almost 10 percent  —  somebody must come up with an additional $45 trillion for all state and municipal pension funds in between to pay promised benefits.
That’s about $1.5 trillion a year  —  one and a half times greater than the entire U.S. Defense budget —  to provide absolutely no public services. No police on the streets, teachers in classrooms, sanitation workers picking up our trash. No public buildings repaired or built, no food for the hungry or shelter for the homeless, no health care for the indigent  —  no anything.
For decades through accounting tricks and outright lies politicians used pension funds as secret credit cards. The Great Recession market crash did not cause the pension crisis but merely exposed the scam.
The latest U.S. Census report on 100 top public pension funds, representing about 89 percent of value, for the third quarter proves the accelerating death spiral. It shows those funds down $395 billion, 13.5 percent, from the 2007 peak of $2.9 trillion.
Based on those numbers, taxpayers and state and municipal workers pumped at least $28 billion total into all public pensions during in the third quarter, and fund managers lost it all plus another $195 billion. In addition to those losses, pensions paid out almost $58 billion  —  more than double the “contributions.” That’s $56.6 billion in benefits and $1.5 billion in “withdrawals” by those who lost all the money in “earnings on investments.”
Those investments  —  which must grow every month, every quarter, every year to pay promised benefits  —   lost money in seven of the past 23 quarters and did not produce enough income to pay benefits and expenses in three more.
None of this massive accumulating debt shows up on state and municipal books when they claim “balanced” budgets. It just continues to accrue and compound while politicians and their crony managers, brokers and placement agents loot and pillage pension funds at will.
Oblivious taxpayers refuse to pay attention, and public workers continue to cling to those who betray them.
Nobody knows what will happen when the money runs out. What politicians refer to as “structural” deficits  —  deficits they themselves structured  —  are set to eat more and more revenue through health care, infrastructure repair and replacement, mandates, debt service, catastrophe and insurance funding, and an array of cost increases  —  including more for themselves  —  that politicians built into the budget process.
The declining number of private sector taxpayers who pick up the tab for everybody else  —  down 3.1 million, or 2.8 percent, in a decade  —  simply cannot continue to fund government when all the hidden deferred costs start hitting the abyss of reality in coming decades.
Total private wages increased only 25 percent from 2001 to 2010, but total official government spending increased 73 percent. The real catastrophe is that number does not include spending politicians hid and inflicted on future taxpayers.
False pension promises to state and municipal workers are a big part of that secret debt and are growing every year.
The longer politicians try to stretch out the payments the more it costs, ultimately passing a fiscal event horizon of no return.
For example, the latest census data mean that during the past five years state and municipal pension funds paid about $98 billion more in benefits than they earned on investments.
Total earnings on investments was about 3.4 percent a year for the average total cash and security holdings, not the 8 percent pension managers claim they miraculously will get every year.
What that means, best case, dear private sector worker, is we owe $14,150 in extra taxes for 2012 and every year for the next 30 years even if the politicians who have lied to us for decades somehow accomplish what they failed to accomplish in the past.
Good luck on that. Happy New Year suckers. Just pay up and shut up.
Frank Keegan is a national editor for The Franklin Center for Government and Public Integrity, and . Any disgusted public employee, journalist, activist organization or citizen watchdog who wants help exposing government waste, fraud and abuse may contact him at: [email protected]
For a comprehensive primer on state and municipal government pensions, check and . And for an aggregation of news from around the country, check .


  • Steve

    Frank, I understand what you are saying and agree that public pensions pose a challenge, but you’re comparing apples and oranges when you talk about money “paid out” vs the “market value” of funds. Moreover, it would be nice to see a constructive, positive solution proposed, rather than be asked to read yet another anti-government “sky is falling” diatribe. We live in a representative democracy, do we not? The government is, in actuality, us. Eliminating the retirement security of the few remaining workers who have any isn’t going to do much to help the country. The fact is, private enterprise and the recession shoulder a large portion of blame, as do the failed trickle-down economic policies of the past several years. Public employees earn on average much less than they would in the private sector. We need dedicated, qualified people in public service and they deserve to be compensated. I would suggest focusing your attention on the disproportionately large amount of money spent in this country on the military; on high-cost, private-sector health care; and on energy–problems which are far greater than any perceived pension woes.

  • Thanks for input Steve. I have proposed solutions in past columns, primarily taking the first step of at least honestly accounting this debt. The People cannot take appropriate action when they are being deceived by their leaders. Accounting for it honestly would enable us to make the tough choices, as you point out we must do. Continued denial is not a solution. Before we can argue about what is fair and appropriate, we must know the true cost. The fact is, many states and municipalities simply will not have money to pay promised pension benefits over the next 30 to 50 years. What happens when the money runs out? Who is going to pay? If we do not act now, the catastrophe becomes inevitable.