States face pension fund gap approaching $1 trillion

Looks like we're heading into some big trouble here down the road, when, who knows. 19+T in debt, heading for trillion dollar deficit this year and probably more to come, like the movie says, something's gotta give.

"After years of not setting aside enough money, state pension funds are looking at a $1 trillion shortfall in what they owe workers in benefits, according to a new analysis from The Pew Charitable Trusts.

State retirement systems caught a break with strong investment returns in fiscal 2014, but the gap is expected to top $1 trillion in fiscal 2015, the last fiscal year with full results.

After years of not setting aside enough money, state pension funds are looking at a $1 trillion shortfall in what they owe workers in benefits, according to a new analysis from The Pew Charitable Trusts.

State retirement systems caught a break with strong investment returns in fiscal 2014, but the gap is expected to top $1 trillion in fiscal 2015, the last fiscal year with full results.

"The lesson here is that state and local policymakers cannot count solely on investment returns to close the pension funding gap over the long term," the report said.

While many states have cut benefits for new workers and frozen plans for current staff, they cannot cut benefits that have already been earned by public employees. That means they have to find money to make up the shortfall by cutting other programs, raising taxes or both.

The report is based on the most recent data from all 50 states, which are typically reported as much as a year after each fiscal year ends.

States were to make up $35 billion of their unfunded liabilities in fiscal 2014, leaving a shortfall of $934 billion. That's because of unusually strong returns averaging 17 percent in 2014, according to the study. But average returns fell sharply in 2015, it said, to just 3 percent..."

https://www.cnbc.com/2016/08/25/state-pension-fund-gap-to-top-1-trillion.html

I don't know why any entity in this day and age offers pensions as opposed to 401k accounts. Has their ever been a pension fund ...ever... That didn't fall under financial strain?

California pensions are going to be the cause of eventual bankruptcy in California. All of the other areas of the budget are collapsing while this is increasing. There are only going to many more people, who by the way are now living a lot longer. There are also people who started out in government and worked 20 years in one profession and then changed jobs and worked another 20 years and they now collect two pensions. The state can only raise taxes and fees to a certain point and things are going to bust.

If the states weren't trying to finance tax cuts for business and wealthy folks from funds that should be going to the pensions this wouldn't happen. Perhaps, the best solution is to reinstate all of those taxes the states couldn't afford to cut over the last 20 years.

Oh that is total nonsense. Some of those tax incentives are to get businesses to come to the state. Pensions are taking a greater percent of budgets every year and are going to bankrupt states.

OK, let's do it! You get the California legislature to write a bill to that effect and I will endorse and campaign for that bill......IF....the bill is written so that the money goes to the pensions and only the pensions. Of course we know that's not going to happen.

But lets say it did. It would easily pass a state wide vote. Now anyone with any kind of tax liability is going to reduce/eliminate said liability. Like I already did. Looks like it's up to the lower middle class to foot the bill again.

When you have more people collecting pensions (increasing every day) than are paying into pension funds by being employed, no tax will solve the problem. The pension contribution withheld from current employee's paychecks is a small fraction of what is being paid in pensions to those that are retired and collecting them. I don't know why some people think the burden of unfunded pensions rests on the shoulders of working people and businesses. All Ponzi schemes collapse eventually. Most don't drag city, county and state government budgets down in the process...until recently.

The ss/Medicare unfunded liability is over $60T. Within 20 years 100% of the federal tax revenue will go towards ss/Medicare/interest. No amount of tax increases will cover this liability as well as the states liability.

As the population ages & the number of retirees increases there are less and less working people to fund these programs. Math doesn't lie. There is only one solution. Reduction of benefits is the only answer.

Why don't these State and Local Governments just offer defined contribution plans (401K or 457) instead of pensions with defined benefit? Pensions in private industry mostly disappeared decades ago....replaced by 401K with employer matching. Why shouldn't our Government Employees manage their own retirement plans and pay into Social Security like the rest of us?