An op-ed by BCAD faculty Sarah Anzia was featured in The Washington Post:
In late July, the House passed a bill that would shore up endangered pensions for millions of private-sector retirees and workers in trucking, mining and other blue collar industries, offering loans for insolvent employers so they could make good on their contractual promises. But underfunded state and local government pensions loom as an even bigger problem. Over the past few decades, policymakers from California to Wyoming have made public pension benefits ever more generous — while setting aside too little money to pay for them.
Nearly all the 14 million people who work full time for state and local governments are eligible for traditional pensions, which guarantee a fixed lifetime income for those who have worked for those governments for a certain number of years. To pay for those retirement benefits, governments are supposed to contribute money to their pension funds each year — enough to cover the benefits earned by their employees during that year. But governments have underfunded those pensions by at least $1.28 trillion — and probably much, much more. Current state and local government employees and retirees will almost certainly get their pensions. Public pension benefits are backed by strong legal guarantees and have to be paid even if governments haven’t saved enough money.
The full article is available here.
