Pensions were an exchange for lower base salaries for public employees. Now, that once promise is now not a guarantee. Sarah Krouse reported in a Wall Street Journal article that the pension shortfall is the size of Germany’s economy. This unknown national financial crisis is crippling all hope pensioners once had in a comfortable retirement.
The true state of pension shortcomings are jarring. Kentucky’s pension plan covering the state employees is underfunded by 86%. The city of Chicago, amid a financial crisis of its own, had less than 40% needed for its fiscal year. New Jersey’s pension system could dissolve completely in just twelve years. These statistics are real for the pensioners. Central Falls firefighter and retiree Paul Grenon described the anxiety of uncertainty saying, “It really gets you sick mentally and physically to go through something like this. It’s a betrayal, as far as I’m concerned.”
The question becomes, how do we correct this blatant betrayal leaving the question – what do we do next? The Wall Street Journal article describes three solutions to fixing the pension crisis in our country. First, raise taxes to fund the pension a move often avoided by most lawmakers for fear of political retaliation. Second, cut public services such as funding for public schools, ambulances, and roadways. Or, third, reduce pension payouts in a move that Grenon describes as a betrayal.
During the 2008 – 2009 recession, state and local pensions lost roughly $35 billion. The funding rates before the great recession were 92 and 97 percent for state and local plans, compared to 68 and 72 percent for the same plans in 2016. Today, the unseen benefit for pension funds is an economy on the rise and the DOW reporting records highs. Pension funds should seize this opportunity to close the funding gap. It comes as a surprise that the first window of hope for pension funds lawmakers and pension fund managers are playing politics with pensions through untested investment strategies.
Now is not the time to play politics. Now is the time to get serious about the national pension crisis the size of the German economy. For the sake of Grenon and others, we must course correct the current method of kicking the can down the road and address the pension crisis head on.