Pew Study Finds States Face $2.73 Trillion Bill for Retiree Benefits

[Adsos Letter]

Source: The Pew Charitable Trusts

States have promised at least $2.73 trillion in pension, health care and other retirement benefits for public employees over the next three decades, according to a report released today by The Pew Charitable Trusts’ Center on the States. Promises with a Price, the first 50-state analysis of its kind, finds that states have saved enough to cover about 85 percent of their long-term pension costs, but only 3 percent of the funds needed for promised retiree health care and other non-pension benefits. All told, states already have set aside about $2 trillion to meet their long-term obligations. But they still need to come up with about $731 billion—a conservative figure that does not include all costs for teachers and local government employees

“Now we know the magnitude of this bill—and paying it will require an enormous investment of taxpayer dollars,” said Susan Urahn, managing director of the Pew Center on the States. “For states that have dug themselves into a deep hole, there are no quick and easy solutions—but there are fiscally responsible steps all states can take. These will require time, attention and, above all, political will.”

Pensions

Nationally, state pension plans are in reasonably good shape. At the end of fiscal year (FY) 2006, states had set aside over $1.99 trillion of the $2.35 trillion they had made in pension promises—leaving about $361 billion unfunded.

But the good news nationally masks important variations across the states:



Read more: http://www.pewtrusts.org/news_room_detail.aspx?id=32368

[Psephos]

1. There is no chance that all those obligations are going to be met.

Which is good, because public "servants" have become the new plutocrats.

The only class distinction that will matter in the future is that between those who pay taxes and those who consume them.

[Adsos Letter]

2. As the lady said....

“Now we know the magnitude of this bill—and paying it will require an enormous investment of taxpayer dollars,”

[JDPriestly]

5. It wouldn't be a problem if we had not outsourced so man of our good jobs.

I remember doing research on pension and employee benefits in the 1990s. The fact that we have an aging population as do several other countries -- geographical areas -- was very much on people's minds. So what did our government do? It stopped investments here entered into trade agreements and enacted laws promoting other policies that facilitated the export of American manufacturing and good jobs. Without those jobs, of course, the U.S. has no financial base for paying pensions and other benefits for its seniors. We have been cheated and robbed. This is intentional. It was done knowingly. And we have been wronged.

[Goldstein1984]

7. The taxpayers received the services, they can pay the bill

I have ten years as an Alaska State employee. I was neither a "servant" or a "plutocrat." I was an environmental engineer doing what any employee does--trading my work for compensation. As I once told a BP Manager who pulled the "public servant" card during an enforcement hearing, "If you want to test that public servant theory, demand that I stop what I'm doing to go get you a cup of coffee, and let's see how this hearing goes."

For the State of Alaska to be competitive, they offered three things that valued to me at that time: 1) A livable but not competitive wage; 2) a 37.5-hour workweek and schedule flexibility; and 3) the Public Employees Retirement System (PERS), which was at that time and attractive defined benefit plan. In the early days of the oil rush, the state developed PERS to keep employees from leaving for much higher paying oilfield jobs. I collected the annual salary part of my compensation, and I am still owed the pension part of my compensation. It is protected by both state law and the Alaska Constitution, and it isn't negotiable.

I left state employment for one simple reason: I had reached a point in my career where the state could no longer afford me, the higher-level positions offered to me were more politics than science, the private sector was offering more than twice as much money plus bonuses and other benefits, and the advantages of state employment had lost their attraction in my situation. At any point in my time with the state, I could have left to make much more money in the private sector. Getting vested in the PERS system was one of the reasons I stayed as long as I did. As another post said, it isn't a "an optional benefit," it's delayed pay.

It's funny how supposedly liberal taxpayers suddenly start acting like Wall Street robber barons when it comes to dealing with their own employees.

[Iowa]

10. Well said Goldstein1984. Some of the posts in this thread are despicable.

[Go2Peace]

12. I think we have a lot of people here who are too young to understand the labor movement

and what used to be the norm.

They have grown up on Republican propaganda and little concept of how far we have fallen and why.

What do the Republicans call it? The bigotry of low expectations?

[Iowa]

18. There's also a lot of "anti-boomer" propaganda circulating on the net...

...and it has all the markings of an organized effort designed to herd the sheep and stir up hatred toward a scapegoat. This thread reminded me of it. The underlying theme is that the lazy, selfish, shiftless baby-boomers are hoarding all the wealth and depriving everyone else - very much along the same lines as some of the anti-Jewish propaganda in Nazi Germany. I've noticed a fair amount of it recently on Reddit, Digg, and some other places. It's very nasty and divisive stuff. It's also quite cleverly designed - almost too slick not to be designed by folks who really know what they're doing. I suspect they're softening the population up for the dismantling of Social Security and Medicare.

Something is afoot.

[Goldstein1984]

19. Thank you for writing that, because I've been thinking it myself

Another way to divide the people, turning generation against generation.

I take a little comfort in the fact that the Boomer generation that may be made the scapegoat has its roots in the activism of the 60s, not in the corporatism of the 80s, 90s, and 00s. The spirits of MLK, Saul Alinsky, Cesar Chavez and Abbie Hoffman are inside all of us. We've just been ignoring them in our failed pursuit of the American Dream and fat 401(k) accounts that disintegrated so recently.

One other thing--There are a hell of a lot of Boomer voters to risk pissing us off too much. And, since the Great Recession, more of them are going to be needing Social Security to survive.

[Skink]

31. The Boomers gave us Reagan.

[Goldstein1984]

33. And what generation gave us George W. Bu$h?

[Skink]

34. I suspect there was Boomer activity there also.

the folks that shut down the Florida recount were definately boomers.

[Goldstein1984]

35. There's been Boomer activity since the first Boomers were

old enough to vote. It was boomers that supported the Civil Rights and the Voting Rights acts. It was Boomers hitting the streets that drove down support for the Vietnam War.

I don't recall a lot of Republicans being in college when I attended, but it was a liberal place, with conservatives sitting quietly in their corners. It was the the generation after the Boomers that gave us the huge Republican movements on campus. My biology professor, who is still teaching, recently was lamenting how over the past two decades his classes have been stuffed with what he calls "little fascist creationist whiners."

I personally know a large number of liberal boomers who left the Democratic Party back when I did--in the 1990s when it became just a slightly liberal arm of the Republican Party.

Personally, when I occasionally teach courses for the university, or take a class myself, I'm appalled by the number of young people who express conservative values. My gut feeling is that, on campus, except for the liberal arts, the majority of the current college crop tends toward conservatism. I hope the numbers are better outside of Alaska, since this is such a red state.

This isn't a generation thing. There's lots of blame to go around. I'm guessing the Boomers are split about down the middle. The swing votes are coming from someplace else. Based only on the number of creationists disrupting biology lessons, I'd say the current generation tends toward the conservative born-again variety.

One thing I do notice. When my generation was opposed to the Vietnam War, it hit the streets in a big way. So much so that the Joint Chiefs of Staff advised against sending more troops to Vietnam following the Tet Offensive specifically because they feared they would be needed to control civil unrest at home. If the wars in Afghanistan and Iraq are equally wrong, where is "Gen X" or whatever generation? Here's my theory: With an all-volunteer force, there is no real threat to anyone who doesn't plan to enlist, and without a threat there's no reason to walk the anti-war talk. One might argue that it was only self-interest that caused the Boomers to protest Vietnam, because of the draft, but the draft didn't apply to women, who were out in equal numbers at every protest I attended. And I was only twelve when I was joining the protests, so the draft was a distant concern for me.

This is far too complex a situation to reduce to a problem of generations.

[CBHagman]

41. Except for the millions who didn't vote for him.

And the electorate is not a monolith; it consists of various demographic groups. I suspect the media-driven tendency to boil a poll down to a talking point and a headline and the pronouncement of trend has seduced a great many people.

But getting back to the subject, you can't say, "The boomers gave us Reagan," any more than you could say, "Women gave us Reagan," or "Whites gave us Reagan," or "Men gave us Reagan." Look at the figures for the 1980 election in particular.


http://www.ropercenter.uconn.edu/elections/how_groups_voted/voted_80.html

http://www.ropercenter.uconn.edu/elections/how_groups_voted/voted_84.html

[bossy22]

36. very true...also

there is this misconception that boomers are going to retire en masse at age 65, which is showing to not be true. In the past few years of seen countless articles in newspapers talking about how the boomer generation may keep working into their early 70's. 65 is the new 55 to many and i think many boomers that are getting close to this age still feel they have alot of "productivity" left in them. Many boomers may retire from their current jobs and start a new career (my father is planning to retire in a few years at age 64 but has been taking classes at a local college to get his teaching certification to teach mathematics). I think when it comes to this "entitlement spending boom" we will find that the people recieving these entitlements are giving much more back to the system.

thats just my take

[dkf]

20. Corporations are too iffy to depend on for a pension.

The only entity with a guaranteed life span is the government. But when the average federal employee makes 77000 as compared to the population who pays for that salary it's a problem.

[Goldstein1984]

22. It depends on what the federal employee is doing.

Increasingly, lower paying (i.e. Unskilled or low-skilled) government jobs are being privatized. I'm very familiar with this, because the company I work for has a huge number of contracts for providing basic services on federal facilities. The jobs on these contracts include sweeping streets, cutting grass, custodial work, building maintenance, and hazmat work. All of these employees make less money than the engineers, scientists, managers, military officers, and other professionals working in facilities we maintain.

As the number of federal, low-skilled jobs is reduced, the average salary of federal employee's will go up. This is for one simple reason--federal jobs are more highly skilled, on average, than the average job in the private economy. You don't see a lot of federal employees working for minimum wage plus tips--those jobs tend all to be in the private sector.

A better test is to compare salaries between equivalent federal and private sector jobs. I don't know about all fields, but in mine (environmental engineering and science; safety; training; corporate management), a federal employee with my background (education, years of experience, responsibilities) makes about 65% of what I make; an Alaska state employee doing an equivalent job makes about 50% of what I do.

The question isn't how much money federal employees make. That is dictated by the job market and the pay required to keep the necessary talent and skills. The question is the level of service taxpayers are willing to pay for.

Public "servants" shouldn't be confused with charity workers.

[dkf]

23. The problem is the perception that the people who work for us make more than we do.

See how that goes? And with a guaranteed pension and much better job security and probably better hours. It's turned the government job into a better job than the private sector. The value of a pension cannot be overstated. It is worth at least a million.

[Goldstein1984]

25. My doctor works for me, and he makes more than I do.

The problem isn't the perception that people who work for us make more than we do, the problem is the belief that they should not.

As an environmental engineer with two advanced degrees and thirty years of experience, I guess you could say that I worked for the person who came into our building at night to do the custodial work--I was a public employee, the custodian was a citizen. What in that relationship suggests that an experienced engineer managing a multi-million dollar state program should not make more than the citizen who vacuums his office floor and empties the trash. Both jobs have value to society; any job well done is an honorable thing; but pay will not be equal for those two tasks. My degrees were expensive and difficult to obtain; my years of experience made me an effective manager and a very successful enforcement officer. The custodian could not have done my job; I could easily have done his.

The value of a pension depends on the terms of the pension and vested years in the pension. With 10 years of state service, if I retire at 60 and live until I'm 80, my pension will be worth only $120K before taxes, with no adjustments for inflation as the years pass. If I buy my Marine Corps years into the pension, which I plan to do when I can cash out a small private pension at age 55, it will be only a little larger with 14.5 years of service.

The root cause of this misconception of pay equity is the incorrect characterization of the relationship between public employees and citizens. The structural relationship between a public employee and a citizen is not the same thing as the relationship between an employee and an employer. A citizen did not hire me; a citizen could not fire me; the citizen did not sign my paycheck, approve my leave, or perform my evaluation; citizens were routinely on the receiving end of compliance and enforcement actions I initiated; I testified as a technical expert in cases that resulted in fines and imprisonment for citizens.

To be very honest, the whole "You work for me!" thing is kind of a joke to public employees. In enforcement training, there is actually a little list of things to say when that gets tossed at you.

[SomeGuyInEagan]

39. +1 .... wish I could rec'd your reply

[Go2Peace]

17. Why should I invest in your health care stability and unemployment? I have a perfectly good plan

I have a job and good health benefits. I spent much of my life single and paid for the children of others to go to school.

But you know what? IT WAS AND IS THE RIGHT THING TO DO. And part of being a civilized society.

It is what strong societies do, and despite what the memes are out there, ultimately the only way to build a sustainable nation.

[JDPriestly]

3. Those obligations are deferred pay. The contracts that guarantee them are enforceable.

They are just as enforceable as the contracts that the employees of AIG and other organizations had that guaranteed certain bonuses.

[Psephos]

47. Enforceable until discharged in bankruptcy.

I'm not advocating that, just observing.

[Hannah Bell]

16. lol. you're a funny boy. sure, $50K government workers = "plutocrats".

here's a hint: those government workers pay taxes & spend their money in businesses.

[Psephos]

49. Here's a hint. The multiplier is negative. n/t

[Hannah Bell]

53. here's a hint: in what universe?

[donco6]

43. Thanks. I'll pass that along to my teachers.

They'll be so encouraged.

[we can do it]

45. OK So Someone Risks Their Life To Help Others Often Injuring Themselves

as a firefighter, then they do not deserve a pension that they paid into? WTF is wrong with you.

[Psephos]

48. My grandfather was fire chief of Cincinnati. What you said is absurd.

"Public servants" is a broad category. Most of them are not providers of emergency services. Most public servants work in an office. The term "servants" is misleading. They are workers, like the rest of us. They do it for the money.

Most of them are individually good people, conscientious workers, and provide value through their efforts. They deserve just as much in return as anyone else.

My rhetorical point about public servant "plutocrats" was intended to be slightly shocking. Government employment has actually increased during this economic downturn, while private employment has tanked, and government revenues have shriveled. Private employment is the tax engine that makes public employment possible. Public employees as a group now enjoy higher wages and better benefits than private employees as a group. They also retire earlier. Their jobs are more secure, and less threatened by economic ups and downs.

In short, as a group they are faring better in wages, health coverage, pension plans, days worked annually, job security, and retirement age than private employees. Yet private employees are the source of their income. Public employees do not deserve less than private employees, but they also do not deserve more.

My original observation is apolitical, but you, like others, read into to it value judgments I did not make. There are strong real-world examples right now showing what happens when government spends too much and takes in too little. That cannot and will not last, and when it comes apart, everyone will suffer...especially the less well-off. That's why, in my opinion, the most progressive philosophy of all is fiscal responsibility and a sound economy.

My prediction is that as tax payers increasingly come to see themselves as the underprivileged class, the usual class cultural warfare will result. I do not relish it. It will harm everyone.

[Downwinder]

4. The Public sector will just have to find the same solution as the

Private sector. Bankruptcy.

[Go2Peace]

6. Why do you guys buy into such obvious propaganda

We have got to be the most moronic people in the world. Not that we aren't going to have financial challenges, but we will not because people get pensions, sick leave, 40 hour work weeks, or vacations, but because we are all so damn jealous we will kill each other by stripping each other's dignity and fighting against each other when we should be fighting for these things for each other.

There has been a HUGE productivity and prosperity increase like never before in history. Instead of asking what happened to all that prosperity and why there is not enough to fulfill our commitments, we are destined to drive each other to the bottom. This kind of thinking and lack of cooperation belongs with the Neanderthal neocons, it blows me away to see people here admitting to believing it.

[JCMach1]

8. Exactly, the deficit figures the pensions will grow at 0%

Damn, I hope they grow over the next 30 years or the whole country is pooched beyond repair.

By my calculation 1.25% growth would more than cover the deficit.

The scare-mongering on the right about "entitlements" continues unabated.

[OnlinePoker]

44. Only if that's 1.25% real growth (after inflation) n/t

[Iowa]

9. Go2Peace, you beat me to it. Well said...

Some of the posts up-thread are despicable. They just swallow the propaganda and can be herded like sheep. Anti-union. Anti-worker. Pro-race-to-the-bottom.

And just wait... these same posters will be cheering them on when they try to renege on the bonds in the Social Security trust fund.

Idiots.

[JCMach1]

11. +1

[Hannah Bell]

13. +100. I'm amazed at how many posters on this supposedly "democratic" board are colluding in the

ruling class effort to drive everyone's pay into the toilet & to impoverish the body politic.

Hey guys -- reducing other people's wages will put more downward pressure on *yours,* & further enrich the filthy robber class who started this depression.

[Go2Peace]

14. "The only class distinction that will matter in the future is that between those who pay taxes and

those who consume them"

That was said by Psephos in the second reply above. That is not a statement from a Democrat, that is straight out of the Republican playbook. I would say we have some well established disinformation agents on this site.

[Hannah Bell]

15. i'd say so.

[Psephos]

50. "We have some well established disinformation agents on this site." ooga-booga!!

Next thing you know, they'll be messing with our PRECIOUS BODILY FLUIDS!!!

Hey, just a thought, but you're using the same approach that the John Birchers used in the 60s during their purity purging.

Hmmm....

Maybe YOU'RE the disinformation agent. VERY tricky !!! ;-)

[Romulox]

29. And I'm surprised at how many are utterly unconcerned with younger people

(so long as my check is cut!)

[Romulox]

28. Except it's not as if YOU are fighting for young workers...

America is a country in which we've all been lead to believe that the other guy will happily sacrifice so that we don't have to.

Well, like any Ponzi scheme, eventually the base collapses...

[cmd]

21. I'm one of those collecting benefits.

I paid into my retirement system for over 30 years. As part of my salary, my school district paid part of my retirement. I get no social security; not even the potion I would normally get as a wife of one who collects social security. My pension is what I live on. This is part of the contract that I made when I began teaching. I lived up to my part of the bargain. I expect the same from my retirement system.

[fasttense]

24. If the insurance corporations had NOT run up health care costs in the US

these benefits for state employees would NOT be so expensive. We are paying for:

Ins. Co. & CEO With 2008 Total CEO Compensation

■Aetna, Ronald A. Williams: $24,300,112
■Cigna, H. Edward Hanway: $12,236,740
■Coventry, Dale Wolf: $9,047,469
■Health Net, Jay Gellert: $4,425,355
■Humana, Michael McCallister: $4,764,309
■U. Health Group, Stephen J. Hemsley: $3,241,042
■Wellpoint, Angela Braly: $9,844,212

http://www.healthreformwatch.com/2009/05/20/health-insurance-ceos-total-compensation-in-2008/

That was 2008, it has gone up since then and does NOT include their bonuses (no doubt for denying services to people who paid for health insurance coverage).

So instead of complaining about over paying these CEOs who make 100s of millions of dollars, we are complaining about civil service employees making a measly 50 grand a year. There is something wrong with this picture.

[DCBob]

26. Retiree benefits are a giant financial albatross smothering many states and organizations...

Something has to change.

[JCMach1]

37. Read the numbers!

The glass is more than half-full with 30 years to fill it... 1.25% return would give you that!

[DCBob]

40. "they still need to come up with about $731 billion—a conservative figure"..

not to mention many states are broke and getting broker by the minute.

[JCMach1]

52. not today, these needs are 30 yrs. in the future

Are they going to get 0 return on their money over 30yrs. If so, the whole country is going down!

[DCBob]

54. BTW, the gap is likely even much bigger since the study was done in 2008 prior to economic collapse.

read this..

"A train wreck waiting to happen. That's the only way to describe the mess that state pension systems are in right now, according to a report published today by the Pew Center on the States. According to Pew, there's a $1 trillion gap between the $3.35 trillion in pension, health care and other retirement benefits states promised their current and retired workers as of fiscal year 2008 and the $2.35 trillion they have on hand to pay them. What's worse, the gap may be even higher given that the study was conducted prior to the market collapsing in 2008 and given the way most states allow for smoothing of investment gains and losses over time."

http://finance.yahoo.com/focus-retirement/article/108868/pension-systems-on-the-brink?mod=fidelity-readytoretire

[RUMMYisFROSTED]

27. 85% paid for. Divided by 30 years and 50 states.

What's the problem?

[JCMach1]

38. +1

The problem is the same right wingers who want to conflate Social Security with medicare and medicaid...

[Psephos]

51. RTFA and you'll find out.

Other key findings include:

* Only six states—Arizona, North Dakota, Ohio, Oregon, Utah and Wisconsin—were on track at the end of FY 2006 to have fully funded their non-pension promises for the next 30 years.
* Half of the states account for almost 94 percent of the non-pension liabilities.
* None of the five largest states—California, Texas, New York, Florida and Illinois—had put aside money for non-pension benefits as of FY 2006.
* Per capita costs for retiree health care and other benefits range from less than $200 in North Dakota, South Dakota and Wyoming to more than $5,000 in Delaware, Hawaii and Connecticut. (Note that per-capita statistics do not tell the whole story because they do not take into account state differences in wealth or ability to pay the bill.)
* Eleven states face long-term liabilities in excess of $10 billion. These include New York at $50 billion, California at $48 billion, and Connecticut and New Jersey at nearly $22 billion each.

[JackRiddler]

30. More panic-making about future bills to ignore that the country is already bankrupt...

Thanks to the routine operation of the "free market."

This is part of the diversion from the present-day failure of the capitalist system to the issue of "entitlements" 20 years down the line.

Seriously. Between 8 and 13 trillion was just committed to allow the fraud banks to take over even more of the financial sector.

More than a trillion a year being paid for wars and "defense," or for the expenses that have followed from past wars and "defense."

That's right now. Right now.

Social Security has a 2+ trillion dollar surplus invested in T-bills, and thus financing the regular budget debt. And SS is in a crisis calling for immediate urgent action amounting to privatization, according to the establishment propaganda, while the precious "private sector" financial casinos on Wall Street, the biggest ponzi scheme in the universe, must be helped to right themselves at all costs!

[Skink]

32. After 10 years I've got about 10,000 in a 401k at a 3 percent contribution.

I recently cut my contribution to 1 percent cause I couldn't afford the three percent.

[EFerrari]

42. How much are we spending on Bush's illegal, immoral wars every day?

[madville]

46. Were pension plans more sustainable when life expectancies were lower?

If people live longer and healthier won't it further increase the states' burden in regards to pension plans and health benefits? At some point there just won't be enough money to pay out, more jobs are privatized or outsourced so there are less domestic contributors and health care gets more expensive with every day that passes, am I incorrect in this thinking?

[Steerpike]

55. I have no real retirement.

I'm 52 and have 17k in a 401k plan. I can't can't collect full social security until I'm 70 and It's not really something I can live off of. Of course I'm sure I will be federally and locally taxed until I can't afford to support myself or my family...but that's OK, becouse I'm middle class. My escrow goes up 100 bucks every couple of months and my pay stays static. I blame this all on the Corporatists. But, even with Democrats in the political majority, nothing seems to change that will effect my families financial situation. My credit cards started off at 6 per cent or so and now they are all at 29 per cent. No relief for me. I baught a home for my family last year and my payment has already gone up 200 dollars with more hikes to come. I guess the days of yore when my dad could work one job and have 2 cars and a 3 bedroom ranch and send the kids to college and retire with comfort and some dignity are over. I'm not alone either...lots of other like me and many others in worse shape. The middle class...the former middle class and the working poor. I don't mind paying taxes to pay for your retirement....but you cannot squeeze blood from a rock...