A disturbing report from the American Legislative Exchange Council revealed this week that the unfunded liabilities of state public pension plans now tops $6 trillion. This is an increase of $433 billion from the previous year, foreshadowing a crisis of epic proportions, according to The Washington Free Beacon.
“Unfunded liabilities of public pension plans continue to loom over state governments nationwide,” the report warns. “Absent significant reforms, unfunded liabilities of state-administered pension plans will continue to grow and threaten the financial security of state retirees and taxpayers alike.”
Taxpayers are the ones funding the wages of government employees, so they will certainly be affected, but that’s only part of the story. According to the report, all Americans will feel the impact of this issue due to the fact that the funds that go to pensions actually siphon away resources from government services such as public safety, education, and roads.
Every single American citizen currently carries an average liability of more than $18.5K, and in some states, the liabilities average is much higher. In Alaska, for instance, each resident is on the hook for a whopping $45,689 in pension liability—the highest cost in the nation.
Residents of Illinois, Connecticut, New Mexico, and Ohio are among those facing the highest costs in the nation for unfunded pension liabilities per person. However, when looking at unfunded liabilities as a whole, people living in California, New York, Illinois, Ohio, and Texas will be hit the hardest.
Officials in Utah, Arizona, Alaska, Oklahoma, Pennsylvania, and Michigan have made attempts to solve their liability crisis by implementing reforms. For example, Arizona governor Doug Ducey’s implemented reforms focus on cost-of-living adjustments and could save taxpayers $1.5 billion over the next three decades.
Facing an insurmountable pension crisis in Pennsylvania, lawmakers created a defined-contribution component for every school district and state employee, giving employees more retirement options such as a 401(k)-style plan.
“Absent fundamental reform, broken pension systems threaten the financial sustainability of state budgets and the financial future of public servants,” said Jonathan Williams, chief economist at ALEC. “Taxpayers, workers, and retirees will all share in the burden unless policymakers make significant changes.”
Lawmakers and officials are responsible for the looming crisis and should be held accountable, according to the report, which suggests that all financial information should be made accessible to the public online.
“Transparency enables voters, taxpayers and all stakeholders to access, research and understand the operations of the government and hold lawmakers and officials accountable for their actions,” the report states. “For more than a decade, ALEC has called on state and local governments to put their budgets online, in an accessible format for all taxpayers to see.”
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