Tags: Public | Pension | Shortfall | budget

Public-Pension Shortfall $4.6 Trillion, Budget Group Says

Wednesday, 18 July 2012 02:30 PM

U.S. public pensions are $4.6 trillion short of the amount of assets needed to cover projected liabilities, an advocacy group said, more than twice what Moody’s Investors Service estimated this month.

The average plan is 41 percent funded, State Budget Solutions said in a report. The Alexandria, Virginia, group’s partners include the American Legislative Exchange Council, which advocates “conservative public policy solutions,” the Freedom Foundation and the State Policy Network, which is composed of “free-market think tanks.”

State Budget Solutions said that taxpayers must make up the difference between investment performance and promised benefits. The group, using its report to advocate pension cuts, called the gap “a hole that will overtake local and state governments.”

“Without government actions, states, counties, cities and towns all over America will go bankrupt,” said Bob Williams, president of State Budget Solutions, in the release. “Failing to understand the scope of the pension crisis sets taxpayers up for a bigger catastrophe in the future.”

Pension projections differ because of varying assumptions. State Budget Solutions said its liability figure is higher than others published recently because funds’ calculations depend on “politicians’ guesses.”

Moody’s, which rates debt in the $3.7 trillion municipal market, said in a July 2 report that unfunded liabilities of state and local pensions are $2 trillion, which it said was three times the total reported by governments.

Conservative Assumptions

State Budget Solutions said its calculations, based on “fair market value and risk-free investment returns,” were done by Andrew Biggs, a former principal deputy commissioner for the Social Security Administration, who is now a resident scholar at the Washington-based American Enterprise Institute, which advocates free enterprise.

Budget cuts in Washington may put added pressure on state governments already strained by employee pensions and rising health-care costs, a group of former government officials led by former Federal Reserve Chairman Paul Volcker said a separate report. That report put unfunded pension liabilities at $3 trillion.

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Wednesday, 18 July 2012 02:30 PM
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