By Rick Manning
U.S. Senator Orrin Hatch released a shocking report on Jan. 10 on the outstanding public debt that threatens to sink our state and local governments in a sea of red ink.
Hatch, who serves as the Ranking Member of the Senate Finance
Committee rings alarm bells over the public pension debt shortfalls that
beset state and local governments which may exceed $4 trillion.
Perhaps as stunning as the overall public pension shortfall is the fact
that a key member of the U.S. Senate cannot definitively report on
exactly how much debt is owed because there is little transparency for
public employee pension plans.
Adam Bitely of Americans for Limited Government reported in July of 2011
how the Commonwealth of Virginia was manipulating their budget to
appear to have a surplus while underfunding the public employee pension
fund writing, “Each year, the General Assembly is supposed to make
payments to the Virginia Retirement System (VRS), a pension fund for
state employees. For the past two years, the General Assembly, along
with Governor McDonnell, have neglected making these payments in full,
allowing VRS to be underfunded. Currently, the state owes around $620
million to the VRS.
Conveniently, the payments are being skipped until 2013, the year that Governor McDonnell leaves office.
As Virginia political blogger Doug Mataconis put it,
“Here in Virginia we have a ‘surplus’ of $311 million. That money will
go, by law, in to education funding and into the state’s ‘rainy day’
fund. In reality, though, is what we’ve got a cooked set of books that
says ‘+$311,000,000’ with a little entry at the bottom of the page that
says ‘I.O.U. $620,000,000.00.’”
But Virginia is hardly alone in facing a future public employee
pension funding crisis as the Hatch report states that 31 states have
underfunded plans and eleven states are projected to have exhausted all
of their pension assets by 2020.
To make matters worse, the report finds that there is an acute risk
of these pension debts leading to the insolvency of large states like
California or Illinois that, “could damage the fiscal health of the
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