Commentary: If public pension checks bounce, blame union leaders and politicians, not taxpayers
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Published: 17-May-2011

(May 13, 2011) Politicians and public pension fund managers betting the stock market never will fall again also are presuming they can extort more money from taxpayers to guarantee pension checks don’t bounce.

That may not be as sure a thing as they think it is. Check with Prichard, Ala.

… [A]ll those scamming SOBs (mayor, City Council and pension board members) all should be sent to the federal pen in Atlanta for letting this money be totally and stolen from the retired employees who paid it to the fund over the years!”

-- Comment by “slowboat” on news report in the Press-Register newspaper 

Prichard simply stopped writing pension checks almost two years ago, leaving retirees without promised income even as the town forces current employees and taxpayers to keep paying into the fund.

Sure, Prichard is only a municipality, and states are states. But that might not make much difference when the money runs out. In fact, as sovereigns, states can pretty much pay — or not pay — whom they choose.

None of the pension reforms states have proposed or passed will have any significant impact on the existing pension liability estimated at $700 billion to more than $3 trillion. 

According to a report this month by the Congressional Budget Office, “By any measure, nearly all state and local pension plans are underfunded, which means the value of the plan’s assets is less than their accrued pension liabilities for current workers and retirees.”

CBO acknowledges reality based calculations showing pension fund money for some states and municipalities will be gone long before workers die even in the unlikely event taxpayers and employees keep making full required contributions and investments achieve the most optimistic gains.

Then what? The CBO report admits the longer governments wait, “the larger those shortfalls could become. Most of the additional funding … will require higher taxes or reduced government services for residents.”

Why must taxpayers take the big hit for government misfeasance and malfeasance?

Because, CBO said, “Additional funding for pension benefits already accrued is unlikely to come from current workers; state laws and court opinions indicate that efforts toward that end could be successfully challenged in court in the majority of states.”

But what if beleaguered taxpayers challenge that presumption in court and at the ballot box?

Well, a recent brief by the Congressional Research Service finds that even though U.S. and state constitutions, statutes and court decisions appear to put public servants first and taxpayers last, that “is not absolute but rather ‘must be accommodated to the inherent police power of the state to safeguard the vital interests of its people.’”

Governments can serve The People instead of public workers “if ‘it is reasonable and necessary to serve an important public purpose.’ This rule ensures … the state is protecting the broad public interest, rather than its own selfinterest,” CRS said.

Higher taxes and reduced public services self-evidently are contrary to the broad vital public interest.

When pension fund money runs out, must governments turn on The People to guarantee false promise of benefits? Is serving public employees the highest priority of government?

Not according to a report for the Civic Committee of the Commercial Club of Chicago.

In a study on the dystopia state of Illinois — the biggest fiscal catastrophe in the nation with the strongest legal protections — ¬≠¬≠pension “… debt obligations rest solely with the State’s employee pension funds. The State itself is not a guarantor of that obligation.”

So, while some states must fully fund contributions to pension plans every year — most don’t — nothing requires them to pay specific benefits.

Illinois Senate Democrats  responded to the Civic Committee opinion with a 76-page analysis that “… concludes that welching on public pension promises is not an option in Illinois,” no matter how false those promises were when politicians made them.

Illinois may have no choice but to “welch.”

According to Chicago attorney James E. Spiotto, “You reach a point where it’s not theoretical anymore. When there’s no money; no cash flow; what happens?”

Spiotto recently told members of the National Conference of State Legislators they may have to say “or else” when dealing with pension benefits already earned by public employees -- Accept benefits less than they earned, or else face a future with no pension benefits at all.

He proposes a Sovereign Debt Resolution Mehanism for the “pension underfunding problem,” to provide “… alternatives available to state and local governments short of a financial meltdown ….”   

One absolute fact is that the only people not at fault for any meltdown are taxpayers — many not yet even born.

Those at fault are politicians and union leaders put in power by the public workers they betrayed. In the process, they and their clique of pension managers and cronies enriched themselves, delaying the day of reckoning until after they flee the scene of their crimes.

When that day of reckoning comes, state, county and municipal workers, don’t blame taxpayers. Blame the leaders who lied to you.

Listen to the voice of “slowboat” in Prichard, Ala.

NOTE: Frank Keegan is a national editor for the Franklin Center for Government and Public Integrity, watchdog.org, and statehousenewsonline.com. Any disgusted public employee, journalist, activist organization or citizen watchdog who wants help exposing government waste, fraud and abuse may contact him at: frank.keegan@franklincenterhq.org. For a comprehensive primer on state and municipal government pensions, check sunshinereview.org.

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