More on State Pensions

by Veronique de Rugy

Here is a piece I wrote for on state pensions. I look at three common misconceptions and illustrate them with examples from three states: New Jersey, Connecticut, and Ohio.

Here’s the bottom line: We can argue endlessly over when the pension plans will run out of cash, or what the true value of the unfunded liabilities is. We can even debate what the true meaning of being broke [is]. But there is one issue where there is no room for debate. Once the pension plans run out of money, the payments will have to come out of general funds, meaning out of the pockets of taxpayers. If the states want to avoid this, and the consequences that would follow, they must push through reforms as soon as possible.

A good first step would be to switch to accounting methods that show the true market value of their liabilities. Once those methods are in place, lawmakers should consider moving away from defined benefit pensions.

This is the video from my Bloomberg segment on Wednesday, which the piece is based on:

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