Steven Malanga and Dan DiSalvo of the Manhattan Institute join John Stossel to talk about America’s underfunded government-pension systems—the costs of which are consuming larger portions of state and city tax revenues, squeezing budgets, and limiting vital public services (as they are in Fullerton). Steve Kreisberg of the American Federation of State, County, and Municipal Employees (AFSCME), the nation’s largest government-employees union, also joins the conversation.
Even after a nearly decade-long stock-market rally, pension funds for government employees across the U.S. have never fully recovered from the 2007 financial meltdown. Governments have increased annual pension contributions by 90% to help make up for it, but as Malanga notes in City Journal, a recent report estimated that “at the end of fiscal 2017, state government pensions nationwide were only 70 percent funded, down from 87 percent in 2007.”
Most media coverage of the pension crisis focuses on states in the worst condition: California, Connecticut, Illinois, and New Jersey. But the majority of pension funds are heading in the wrong direction, even in states like Colorado and in some Texas cities.
The bottom line: an alarming number of states and cities (such as Fullerton) are ill-prepared to withstand the next market downturn. Without reform, the gap between what governments owe retirees and the money that public-pension funds have on hand could grow so large that the whole system could face collapse.
[NOTE: Editor Jack Dean has spent the past 14 years monitoring this slowly-escalating crisis on a daily basis on his website PensionTsunami.com.]