The pensions problem: Begin here
Bankrupt Detroit's stone-cold lesson on underfunded retirement promises to public-sector employees is especially chilly for those states, including Pennsylvania, that have built no shelter for the winter of their disregard.
A CNBC.comanalysis shows that more than 120 of the country's biggest state and local pension plans contain a range of problems. “Thanks to a patchwork of accounting practices and rosy investment assumptions,” according to the report, it's unclear just how bad off they are.
But based on adjusted funding gaps, Pennsylvania and nine other states “would see their funding liabilities exceed an entire year's worth of state revenues,” according to the report.
Another report, this one from the Thomas B. Fordham Institute, reveals a jaw-dropping snapshot of the Philadelphia school district's pension bomb. Appropriately titled “The Big Squeeze: Retirement Costs and School District Budgets,” the report notes that in Philadelphia, the cost of retirement benefits leaps from $73 million in 2011 to a whopping $349 million by 2020, an increase of 378 percent (as measured in 2011 dollars).
Yet despite the urgency for corrections, one analyst likens public pension reform to “steering a blimp.” The Hindenburg comes to mind.
Avoiding disaster in Pennsylvania begins by getting the Legislature off the dime and shifting new state employees and public school teachers from a defined-benefit to a defined-contribution plan — which should have been done years ago.