Question

1) How large of a problem is the State and local pension plan?

2) What potential solutions are there to the State and local pension issues?

Answer 1

According to FORBES data Public sector pensions and other post employment benefits such as health insurance are becoming a severe drag on an increasing number of state budgets. California's state and local pension debt is somewhere between $300 billion and $1 trillion depending on earnings assumptions, and with tax rates that are already some of the highest in the country its not clear how the debt will recovered.

In a new Mercatus Center study that ranks each of 50 states and Puerto Rico according to their fiscal condition, one common theme among the worst performing states is their drastically under funded public pension systems. The bottom five states are Connecticut, Massachusetts, New jercy, Illinois, and Kentucky are below average in trust fund solvency, which measures a states risk adjusted pension obligations.

2. It is seen that reforms also not working in this problems. Unfunded pension liabilities, or the difference between whats been promised to future retirees and whats actually on hand to provide for those benefits have grown to absolutely epic proportions. Many plans are not sustainable to retirees.

DC style plans resemble 401(K)s inn the private sector and the optional retirement programs (ORP) available for higher education employees in Texas. These DC-style plans put the power of an individual's future in their own hand instead of depending on the good fortune of govenrment directed DB -style plans.