By Frank Keegan — If the best state in America at protecting public workers’ pensions still has to worry about falling short, how bad are the worst states? Catastrophic. That’s the message from Utah state Sen. Dan Liljenquist, who Thursday accepted the first awards presented by State Budget Solutions, a national nonpartisan organization researching specific fiscal reform.

Liljenquist, R-Bountiful, accepted the “Reality Check” award for his state, and the “Real Leader” personal award for recognizing and acting immediately on Utah’s public pension crisis.

“They put me on as chairman of the retirement committee when I got elected in 2008, and told me not to worry because nothing happens there,” he said.

When “one year of bad returns blew a 30 percent hole in our pension system,” Liljenquist said he realized “this could cost us up to 10 percent of our general fund for 25 years. That’s equal to 8,000 teachers.”

He pointed out, “Utah always has put in every penny we were supposed to … our state pension system was one of the best run in the country, and our losses far better than most.”

Yet taxpayers still faced a system that would bankrupt the state without immediate reforms.

Even with the reforms, Utah faces an existing unfunded liability estimated to range from $3.6 billion to $18.6 billion. Other states face liabilities that now are as high as $200 billion. The total for all is more than $3 trillion — about $10,000 for every child, woman and man in the United States — and growing every day.

Utah’s reforms only will work, if pension fund investments earn 7.75 percent every year for the next 25 years, and there are no market downturns. “We’re concerned about another systemic shock,” Liljenquist said.

Asked if the state will have to raise taxes to pay pensions, he said, “We don’t know yet.”

If Utah — first state in the nation to pass real public pension reform — is worried, what about other states?

Unless lawmakers act immediately, pension funds in at least 31 states will start running out of money in less than a decade. Then the billions of dollars a year for retirement benefits will have to come from the pockets of current public workers and taxpayers.

Liljenquist called his reform legislation capping liability and lowering future costs “the Wage Liberation Act,” because it attempts to reduce the impact of retiree costs on state workers. Even with the reforms, he said pension costs now “are making it difficult to hire needed teachers.”

As other states realize the magnitude of the looming costs, they have been contacting Utah. “We’re working with 18 other states,” Liljenquist said.

That is the reason for starting the “Reality Check” and “Real Leader” awards this year, said SBS president Bob Williams, to raise awareness. (SBS sometimes works with The Franklin Center for Government and Public Integrity on research and education about state fiscal matters.)

He said SBS plans to give the awards every year to highlight best practices. “The reality is much worse than the politicians are willing to admit,” Williams said Thursday in presenting the awards during a national conference call.

“States have balanced budgets only by using accounting gimmicks. Most states are ignoring fiscal reality,” he said.

Liljenquist said, “Reality is not negotiable.”

Asked if public workers resisted the reforms, he said, “You know, 4,500 protestors rallied the weekend before our session began, thousands of emails. But we were trying to make their pensions safe. Once they understood that, we could get it passed.”

“We started getting every union group together to go over the numbers,” he said. “Behind the scenes they (union leaders) were very good to work with.”

But, “it was never a fun process,” Liljenquist said.

According to Williams, “We wanted to recognize a state that has taken decisive action … a senator who asked the right questions.” He said political, union, business and civic leaders must wake up before it is too late.

“Bill Gates has come out three times this year about fraudulent accounting of pensions costing public education,” Williams said. “We’re working with 10 states looking at changing their entire budget process.”

But even if states act now on pension and retiree health-care promises politicians did not fund, it can take a long time to fix.

“Ten to 15 years from now, we will not be in this situation,” Liljenquist said — if pension investments can earn 7.75 percent a year risk free — because the state capped runaway liability increases.

He said the fiscal crisis “is like a toxic chemical spill. First you cap it; then you work on cleaning it up over the long term.”

The alternative could be historic: Sovereign default.

“The one thing that can bankrupt a state is if they make 60-year commitments to people without funding,” Liljenquist said.

Frank Keegan is a national editor for The Franklin Center for Government and Public Integrity, watchdog.org and statehousenewsonline.com . Any disgusted public employee, journalist, activist organization or citizen watchdog who wants help exposing government waste, fraud and abuse may contact him at: frank.keegan@franklincenterhq.org

For a comprehensive primer on state and municipal government pensions, check sunshinereview.org .