Wednesday, January 11, 2012

Hatch report reveals massive public pension underfunding

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 United States.”
Get full story here.

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