Following on the heels of my recent article discussing how most Ohioans favor cutting public sector employee benefits in order to balance the budget, the Journal of Economic Perspectives has a long article detailing just how badly Ohio is doing with respect to funding those same benefits. The whole thing is worth reading, but of special note is the table on the 8th page showing just how dire Ohio’s position is with respect to its underfunded public sector pensions. Quote:
Table 1 shows pension underfunding for each of the 50 states relative to the state’s total annual tax revenues and gross state product. Ohio faces the largest burden as a percent of total tax revenues. Its total tax revenues in 2007 were $24.8 billion and its total Accumulated Benefit Obligation pension underfunding using our preferred measure of the risk-free Treasury rates for discounting is $216.9 billion ($332.5 – $115.6). At its current level of tax collection, Ohio would need to devote 8.75 years of tax revenue to pension funding simply to catch up on already-made promises. Of course, Ohio would need additional revenue to fund new benefits that employees earned over that time period, and would need further tax revenue to run state programs other than its retirement systems.
It gets worse – in order to make up for its massive pension liabilities, Ohio’s Gross State product would have to shrink by a whopping 47 percent. In other words, whoever the next Governor is is going to have to push for economic growth by any means necessary, and probably go back on some of the extravagant promises made to public sector employees. Given this, it’s a wonder John Kasich hasn’t taken a firm stance on the issue.