8 thoughts on “Forbes post, “Why Should You Care About The Illinois/New Jersey/Connecticut Pension Crisis? A Thanksgiving Dinner Discussion-Starter”

  1. People should care because it will come back to bite them. Real estate values in Illinois are dropping due to the pension overhang, which ultimately gets assessed and paid off through higher property taxes.

  2. The pensions should contract with the treasury for a prime loan and finance permanent life insurance on a carve out of pensioner-employees. Treasury funds, pensioners provide the mortality, insurance company pays death benefits to the pension.

  3. Taxpayers, retirees, and workers MUST share responsibility for the pension mess. Pension promises are empty promises if they aren’t funded. The best shared fix: suspend colas, increase retirement ages, and increase taxes. Also, formulas for current workers should be reduced for future work. Put new employees into cash balance or defined contribution plans. The only thing missing to fix it is a backbone.

  4. The insolvent pension funds are counting on two things: 1) a systemic crisis involving multiple programs over multiple states – the State-equivalent of TBTF, and 2) a media campaign focused on the hardship of teachers, policemen, firemen, etc. (because this resonates with the average American) to the exclusion of anything about discount rates, ARCs, or mortality tables (because average Americans don’t care). It’s all about the story, not the math.

    The big risk to this stragegy is also twofold: 1) a hundred million or so workers who don’t get government pensions and probably don’t have a pension at all will not be happy paying for it, and 2) the Senators and Representatves in States with well-funded pensions, like SD, WI, and TN will not be happy about indemnifying the imprudent States.

    Some level of bailout will be offered (since money printing is always the first choice) but it’s impossible to say how close to par the bailout will be. The more interesting question is whether Congress will prevent it from happening again by prohibiting the actions that created the selective insolvency in the first place. With any luck, the prudent States will demand it.

  5. I think we need to do a better job of connecting pension debt to its consequences for regular people who don’t get pensions. I’ve been working on that, focusing on how pensions drive Illinois’ high tax burden and how despite how much we pay, it’s not nearly enough. On top of that, we’re hollowing our core government services like education, public safety, and aid to the poor.

    Meanwhile, the instability of the funds is bad for retirees themselves.

    Until people feel like pension debt personally affects them (it does) they’ll continue to ignore it.

    Great piece Jane.

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