—
The $16 billion unfunded liability in state public employee pension funds seems daunting enough but apparently brings little sense of fiscal urgency to those who can fix it.
That figure is approximately what it costs to run the entire state for a year.
The shortfall is the difference between what has been promised public employees as pension benefits and what is available to pay for those benefits. Most of the experts know the causes of the unfunded liabilities and they know the solutions for bringing these funds into balance, but political leaders seem unwilling to address either. Worse, some don't see it as a major problem even though the gap has doubled since 2006.
Larry Martin, executive director of Minnesota's Legislative Commission on Pensions and Retirement, sees the problem. He told the St. Paul Pioneer Press: "Is there a need for concern? Yes. We're departing -- significantly -- from what we think we ought to be doing."
Some 11 of the 12 public pension plans that remain open to new members are not taking in enough money to pay benefits promised.
The plans vary in the level of funding from a low of 60 percent funded for the St. Paul teacher's pension to about a 90 percent funding for the corrections employees fund. Many of the pensions had been fully funded in 2000.
The problems stem from payments into the funds that aren't sufficient to pay benefits and faulty assumptions about investment returns. At varying times, fund managers estimated returns in the 8 percent range, but when the Great Recession hit, returns were far, far below that. In fiscal year 2012, the investment return was just 2.4 percent.
The public employee plans for benefits and payments can only be adjusted by the Legislature and when the funds went south four years ago the Legislature adjusted the plan in 2010. The plans have been shored up to some extent since that time, but that progress is not much to be proud of given some of the biggest general plans are still only 75 to 80 percent funded.
The changes required employees and employers to pay more into the funds. Critics like Mark Haveman, executive director of the nonpartisan Minnesota Center for Fiscal Excellence, claims even those fixes do not put the funds on a track to be fully funded in 30 years.
There should be no real debate about when to begin fixing this problem. We should start fixing it now.
It would be imprudent to wait for the stock market to provide higher returns. That's always a possibility, but in these uncertain economic times the state should not wait for Wall Street to behave more positively.
An investment return estimate in the 8 percent range per year is unrealistic. Those who would argue for waiting for the market to get better point to an average return of 9.9 percent since 1980. That's ancient history in the life of the stock market.
Other argue that requiring employees to pay in more or reduce benefits to retirees would be breaking some sort of social contract. Others argue requiring governments to pay more may cause taxes to go up and spending to be cut.
We may have to invoke all of the above solutions.
Clearly, there will be tough choices. But the choices will be tougher if we wait years to make them.
Editorials
Related Photos
-
cartoon 2-8
February 7, 2013
Our View: State pension deficiencies need attention
- Editorials
-
- Our View: Stadium gimmick backfires Officials badly misjudged or misled with electronic pulltab financing.
- Timing still legislative problem One can appreciate the deliberative, legislative process in Minnesota. We can respect the hours and hours of time legislators put in debating important issues. But time management seems to be an issue whatever party reins. This year is no different.
-
Legislature: Vows kept, mistakes made
There will be plenty for Gov. Mark Dayton and the DFL legislative majority to crow about this week after the conclusion of the session Monday night.
- Our View: Lakes reveal chemical abundance Even if your mother may not have had scientific data at her fingertips, she obviously knew what she was talking about when she said don't drink lake water. A new study makes that advice more important than ever and raises concerns about how we treat
- Press 'shield law' is a bad idea Press 'shield law' is a bad idea The Obama administration announced last week that it is throwing its support behind the press shield law that has been stalled in Congress since time immemorial. Critics insist that the administration, suddenly mired
-
Shelter for homeless right start
To Mankato civic leaders for, once again, stepping up to address a growing demand for shelter by homeless women. The needs appears to be dramatic and continuing even though the Theresa House, Welcome Inn shelters and the CADA House program for domest
- Our View: SEC should act on ratings conflicts Money talks. In the continuing dispute over the all-too-cozy relationship between the people who create and sell financial products and the people who rate their risk, the money says: Shut up and let us do what we want. Minnesota Sen. Al Franken and
- Time runs short for Legislature Focus, Minnesota legislators, as you have many details left So much for the theory that one party controlling Minnesota's House, Senate and governor's chair would mean fast work in St. Paul. Exactly one week from the end of the 2013 regular session a
- records' seizure harms free press This has not been a good week for President Obama. First it was learned that the Internal Revenue Service was targeting conservative organizations with special scrutiny, the practice of which the White House said it was unaware. Then news surfaced th
- Investigate IRS action on groups The revelation that the Internal Revenue Service was targeting conservative groups has drawn criticism from both parties. But the Wall Street Journal this week revealed that the scrutiny went beyond groups that had "tea party" or "patriot" in their n
- More Editorials Headlines
Raw: Trucker Bumps I-5 Bridge Before Collapse
Raw: Texas Deputy Shot by Colo. Suspect Honored
Major Detours Following Wash. Bridge Collapse
American Held in Grisly Czech Murders
Raw: Jersey Shore Reopens for Summer
UK-bound Pakistan Plane Diverted, 2 Men Arrested
Officials: Tsarnaev Friend Linked to Slaying
Obama:Sexual Assault Threatens Trust in Military
Bridge Collapse Survivor: 'Rough Day'
Jersey Shore Open for Business
Raw: Memorial Day Flags Placed at Arlington
New Wheelchair Lift Promises More Access
First Person: Mom Discusses Famous Tornado Photo
Raw Video: Washington State Bridge Collapse
Boy Scouts Approve Plan to Accept Gay Boys
