Tags: States | Hire | Pension | Funds | Broke

States Continue to Hire While Pension Funds Go Broke

By    |   Monday, 21 Jun 2010 08:40 AM

Seven states whose public pension plans will run out of money by 2020 are still hiring new workers.

The seven states are Illinois, Connecticut, Indiana, New Jersey, Hawaii, Louisiana and Oklahoma, according to a study Joshua Rauh, a Northwestern University finance professor.

Those states and their local governments increased payrolls by 9,700 combined from December 2007 to April 2009.

“Politicians have talked a lot about layoffs during this recession,” writes Bloomberg columnist Joe Mysak.

“In most cases, that talk is an empty threat. Nobody wants to fire teachers, or firemen, or policemen, in the name of efficiency or good government.”

State and local politicians have an attitude of entitlement and arrogance, he says.

“If you really want to provoke outrage, of the same populist stripe that once targeted bankers’ bonuses, you have to take into consideration public pensions.”

State pension shortfalls represent a monumental problem, Rauh writes in his report.

“The total size of a federal rescue plan could exceed the seriousness of the recent economic crisis and potentially cost more than $1 trillion,” he said.

“Plus, this scenario could happen sooner if taxpayers flee to other states with lower taxes and higher services, if contributions are deferred or not made, or if returns are lower than expected.”

Investment legend Warren Buffet warned of the problem in his 2008 letter to shareholders: “Public pension promises are huge, and, in many cases, funding is woefully inadequate.”

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Seven states whose public pension plans will run out of money by 2020 are still hiring new workers. The seven states are Illinois, Connecticut, Indiana, New Jersey, Hawaii, Louisiana and Oklahoma, according to a study Joshua Rauh, a Northwestern University finance...
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Monday, 21 Jun 2010 08:40 AM
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