George Will: A remedy for beggar states

from theblogprof by The blogprof


George Will: A remedy for beggar states: "California, New York and Illinois - the unholy trinity of liberalism. They have promised public sector unions the sky and far beyond what they can ever hope to deliver. The proverbial day of reckoning is upon them:

Which brings me to yet another great piece from George Will: A remedy for beggar states

The nation's menu of crises caused by governmental malpractice may soon include states coming to Congress as mendicants, seeking relief from the consequences of their choices. Congress should forestall this by passing a bill with a bland title but explosive potential.

Principal author of the Public Employee Pension Transparency Act is Rep. Devin Nunes, a Republican from California, where about 80 cents of every government dollar goes for government employees' pay and benefits. His bill would define the scale of the problem of underfunded state and local government pensions and would notify states not to approach Congress like Oliver Twists, holding out porridge bowls and asking for more.

Corporate pension funds are heavily regulated, including pre-funding requirements. A federal agency, the Pension Benefit Guaranty Corp., copes with insolvent ones. By requiring transparency, the government gave the private sector an incentive to move to defined contributions from defined-benefit plans, which are now primarily luxuries enjoyed by public employees.

Less candor, realism and pre-funding are required of state and municipal governments regarding their pension plans. Nunes's bill would require them to disclose the size of their pension liabilities - and the often-dreamy assumptions behind the calculations. Noncompliant governments would be ineligible for issuing bonds exempt from federal taxation. Furthermore, the bill would stipulate that state and local governments are entirely responsible for their pension obligations and the federal government will provide no bailouts.

The states have an estimated $3.3 trillion in unfunded pension liabilities. And I would bet dollars to doughnuts that the vast majority of that liability rests with California, New York, Illinois and a few other of them.

Nunes says that 10 states will exhaust their pension money by 2020, and all but eight states will by 2030.

Perhaps it is not a bad thing that California, New York and Illinois each elected Democratic governors beholden to public employee unions.It will speed up the day of reckoning and serve as a warning to others. Michigan might yet turn around its ship before hitting the iceberg. HT: memeorandum

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