Re “Whose Pensions Should Worry Us?, 8/25/10”:
The author is absolutely right that private-sector employees are facing a retirement security crisis. To add insult to their injury, those same private-sector employees are on the hook for trillions of dollars of unfunded pension and healthcare promises made by politicians to state and local government employees without their consent.
Prefunded pension and healthcare promises are not a problem, but because of deceptive pension fund accounting and chronic underfunding, prefunding is not the case. As a result, the average 55-year-old state employee in 2010 is retiring with a $1 million retirement account that’s only 50 percent funded and a $500,000 retiree healthcare account that’s 0 percent funded, portending disaster for government budgets and the private-sector taxpayers who fund those budgets.
Unfunded retirement benefit debt stands at $550 billion and growing. This year, the state will take $6.5 billion from programs to service that debt. Next year, it’ll be more than $7 billion and in 10 years upward of $30 billion, doubling every 4.5 years, without end in sight.
Special interests will keep trying to distract observers from this reality, but the issuance by politicians of massive amounts of retirement benefit debt that must be paid by private-sector citizens with inadequate retirement accounts of their own is a scandal of enormous proportions.
— David Crane, Special Advisor to Gov. Schwarzenegger for Jobs and Economic Growth, Sacramento