Mar 13, 2006
Public employee pension funds are in trouble all around the country. About 30% are considered to be seriously underfunded. Illinois’ pension funds alone have a deficit estimated at 38 billion dollars. The California teachers’ retirement system has a shortfall of more than 24 billion dollars.
Funds for local government workers are at least as bad. San Diego’s plan is underfunded by about two billion dollars.
Many public employees believe that because they work for the government, even if their pension plans are seriously underfunded, their benefits are still secure.
They are mistaken.
In recent years, local governments have defaulted. Like the corporations, some of these local governments pretended to be bankrupt as an excuse to walk away from pension and other obligations to both their active and retired workers.
But a growing number of state and local governments aren’t waiting for that. Twelve states and many local governments have already replaced traditional defined-benefit pension plans with 401(k) plans for some or all of their employees.
These 401(k) plans provide no guaranteed level of retirement benefits. Even the best of them don’t give someone enough to live on for more than a few years. They also provide little or no benefits for workers who must retire early because they are disabled.
Putting our trust in politicians to protect our future retirement is like putting our trust in a thief not to rob us.