The $2 trillion public sector pension shortfall created by decades of interest group bullying and political fecklessness is not going away on its own. In fact, according to a recent report from a major consulting firm, it’s getting steadily worse. The Financial Times:
The health of the US public pensions system is deteriorating. The latest figures reveal that retirement plans have less than three-quarters of the assets they need to pay current and future retirees.
… According to Wilshire Consulting, an institutional investment advisory company, state-sponsored pension plans in the US had just 73 per cent of the assets they needed in mid-2015, down from 77 per cent in 2014.
It’s important to note that the major market indices actually rose substantially over the time period covered by the report. If Wilshire assessed the solvency of public pension funds today, after months of market turmoil, the situation would likely be even more grim.
At least some state and local governments are taking steps to reform their public pension systems before it’s too late. For others, that moment may have already passed. It’s probably only a matter of time before the most indebted states and localities start going hat-in-hand to the federal government requesting massive bailouts. Time for think tanks, academics, and policymakers to start preparing for this eventuality: Should Congress be prepared to offer any assistance, and if so, on what terms?