Add Washington to the list of blue states with grossly underfunded public pension systems. A great new investigative piece in the Seattle Times finds that the state is using fanciful figures to provide teachers and taxpayers with misleading assurances about the safety of the pension system, one of the largest in the nation:
After consulting with several economists and pension experts, The Times decided to use discount rates derived from yields on long-term state general-obligation bonds, matched to each individual plan’s duration. The rates ranged from 3.48 percent to 6.26 percent.Those rates were used to compute present-day values of each plan’s projected future payments, using data provided by the state actuary’s office. The values were compared to the market value of each plan’s assets, as disclosed in their financial statements.Looked at this way, funding levels varied widely from plan to plan. Though none was fully funded, the two plans that cover local police and firefighters came closest: They were about 83 percent funded, generally considered a reasonably healthy level.On the other hand, the gap between assets and liabilities in the original (and now closed ) state workers’ plan grew from $3.7 billion to nearly $10 billion. The gap in the original teachers’ plan, also now closed, widened from $1.8 billion to $6.8 billion.
The investigation found that the system as a whole was underfunded to the tune of almost $31 billion. Much like we’ve already seen in California, cash-strapped local governments will be asked to make up the difference by upping their contributions to the plans.Take the time this Monday morning to read the whole thing. It’s as well-written a summary of a pension crisis story as you’re likely to get, and this is a story that’s being repeated all across the nation. Then, if you haven’t already, have a look at how much you or your loved ones are relying on generous promises made by state bureaucrats to fund your retirement—and start asking some hard questions.Then take a look at what’s coming, as all over America battles will erupt over whether to cut services to poor people and kids today to honor unrealistic promises made to retired workers. Will non-state workers who don’t have pension programs vote to slash the funding for their kids’ education? Will a generation that’s been systematically lied to and bilked by irresponsible Boomers tax itself to the eyeballs to give the Boomers a stress-free retirement that younger folks won’t be able to share?A world of ugly is coming in American retail politics, and the Democratic Party in particular is going to be split by conflicts among different wings of its large coalition.