JOEL L. NAROFF
POSTED: Sunday, April 5, 2015, 1:09 AM
Pension reform is like the weather: Everybody talks about it, but nobody does anything about it.
Despite years of dire warnings that pension shortfalls could become the monster that ate state budgets, little progress has been made to reduce the gap. Since changes must occur, it’s time to understand the causes of the crisis so past mistakes will not be repeated.
Pensions in Pennsylvania and New Jersey are staggeringly underfunded. This misery, though, has lots of company. Recently, the Dallas Morning News wrote an editorial about the looming crisis in Texas, which it called “an embarrassment.”
Not being alone is no excuse. Public-sector pensions are promissory notes between the public, through their elected representatives and government workers, for future payments. Unfortunately, politicians have been very willing to fail their fiduciary responsibilities.
Pension plans are underfunded because governing bodies have underfunded them. Contractually agreed-to plan payments have been diverted to other uses, and the trend continues. In New Jersey, a state court recently ruled the Christie administration violated a 2011 pension-reform law by not making this year’s required pension payment.
Let’s be clear: The failure to make necessary pension payments was not because of an inability to pay. The funds that should have gone to the pension plan went, instead, to fund other programs and to keep taxes from rising. The fiscal capacity to fund the pensions was there. The political will was not.
Who got the billions of dollars that didn’t go into the pension plans? The beneficiaries were individuals and businesses who paid lower taxes, and programs that received extra funding. In other words, everyone, which is why this is a politically feasible transfer of income.
Read more at https://www.philly.com/philly/business/20150405_How_states_got_into_such_a_pension_fix.html#M5Kojp7yDCs2SuO3.99
