Pension liabilities loom as states try to help retirees

[flashl]

The high price of gasoline and food is prompting many states to fatten cost-of-living increases for retired teachers and civil servants.

Those raises are easing the pain of inflation for government retirees but dealing a serious blow to efforts to improve the financial health of government pension plans. Cost-of-living hikes can add billions of dollars in unfunded obligations to state and local government pensions, which cover 14 million workers and 7 million retirees.

Pennsylvania is considering giving retirees their first inflation increase since 2002 — at a cost of $10 billion over 20 years.

Massachusetts legislators want to increase retired state workers' cost-of-living adjustment from $360 to $480 per year. That $120-a-year hike would add more than $1 billion to pension liabilities. "This is serious money. Cities would have to take it from other programs," says Geoff Beckwith, executive director of the Massachusetts Municipal Association, which represents city governments.

USA Today

Unfolding hand wringing stories about pension programs will make S&L+Enron+Halliburton No-Bid Contracts+Missing Billions in Iraq+SubCrime Loans look like child's play.