Political commentary, opinion & insight into the state of the United States of America.

No less that four of my readers have sent me information regarding the mess the state and local pension funds are in. State and local employees represent 12% of the workforce but 64% of unfunded pension liabilities. Chapter 9 might be the answer in the near future. Beware if you are a holder of muni bonds or a retiree who relies on a state or local pension. 

This has come about through the loss of $865.1 billion in value in state pension funds. To recover that, the funds would have to make an annual return of 18% to get back to even by 2013. That does not take into consideration withdrawals to pay pensions. This loss is bigger that the TARP bailout budget.

Add to this the deficits in most states and localities due to lower taxes. So a make up of short funds from other sources is not going to happen.

The average state pension fund cost is three times the retirement costs of their private counterparts. What a surprise, government created a problem by spending too much for the pension fund and giving government workers a better plan than the average private plan. Three times better.

Bad investment choices is the big culprit. Who do you think was handling the pension fund in Illinois? Whomever made the biggest contribution to the governor. Running the plan had nothing to to with who might be the most qualified.

When this bubble bursts, who is left holding the bag. If you aren’t a local or state retiree or a muni bond holder you could still get a bill. How? Do you think the feds aren’t going to bail out this mess? No way are they are going to let this house of cards collapse completely. So, you are going to help bail them out with your tax dollars, with more Federal debt, or by printing more money. Or, our grandkids are, since they will eventually get the bill.

That junior college professor who played 200 rounds of golf a year and used the same lesson plan for the last 25 years. You get to bail him out. That snow plow driver who filled your driveway the minute you shoveled the snow out, you get to bail him out.

It’s a great country, isn’t it? Or, it was, wasn’t it?

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