In addition to their immediate, recessionary budget deficits, many states are facing billions of dollars in unfunded liabilities for pension and health benefits for public employees. The pension problem alone is probably a $3 trillion problem. In some states, however, the projected holes in state health plans are actually larger (much as Medicare is a bigger fiscal problem than Social Security at the federal level).
How did states get themselves into so much trouble? There are plenty of stories to tell, but you can get the gist of the problem by considering the latest news out of Washington State. A Seattle station reports that upon retirement, public employees are allowed to convert accumulated sick leave into cash:
KOMO News has found during the last biennium, all those silver parachutes cost state taxpayers a total of $21.3 million. In the first 11 months of the current biennium, the amount is already at $12,182,000. “Coming from the private sector it’s kind of a novel concept that you get to cash out your sick leave,” said Jason Mercier, director of the Washington Policy Center, a conservative think tank.
In fact, it’s a benefit most private sector workers can only dream of. The most recent numbers from the Bureau of Labor Statistics are from 1997, and the bureau found that only 17 percent of private sector workers can cash out sick leave benefits. And the numbers have gone down since then, according to World at Work, a major human resources association. According to World at Work, in 2010 only 6 percent in the private sector have any type of sick leave cash out.
With Washington now facing a $4.5 billion budget gap, Mercier believes getting rid of this program is a no-brainer.
The Washington Policy Council’s Mercier has written much more about the fiscal impact of the state’s accommodation of union demands. As for the larger issue of unfunded state and federal liabilities, you won’t find better coverage than on the Exchequer blog by NRO’s own Kevin Williamson.