The NYT‘s “Your Money” columnist, Ron Lieber, had a sobering column this week on the looming conflict over public pension obligations.
There’s a class war coming to the world of government pensions.
The haves are retirees who were once state or municipal workers. Their seemingly guaranteed and ever-escalating monthly pension benefits are breaking budgets nationwide.
The have-nots are taxpayers who don’t have generous pensions. Their 401(k)s or individual retirement accounts have taken a real beating in recent years and are not guaranteed. And soon, many of those people will be paying higher taxes or getting fewer state services as their states put more money aside to cover those pension checks.
At stake is at least $1 trillion. That’s trillion, with a “t,” as in titanic and terrifying.
Colorado, Lieber reports, is one of the few states that has tried to tackle this problem, enacting a bipartisan pension overhaul bill that, among other things, cuts back on cost-of-living increases for public pension payments. “This sort of thing just isn’t done,” Lieber notes. Some Colorado retirees have filed suit arguing Colorado can’t void its public pension obligations, while the state claims it’s an “actuarial necessity” because the money isn’t there. Barring this sort of reform, states are required to raise taxes or cut other programs.
The money quote from the article comes from former Colorado governor Richard Lamm (D): “The New Deal is demographically obsolete. You can’t fund the dream of the 1960s on the economy of 2010.”