On the recordMarch 17, 2011
I rise to speak on a matter of great importance to the economic health of State and local governments. I am talking about dangerously underfunded employee pensions. We hear about this problem every day in States such as Illinois, California, New Jersey, and many others. It is a multitrillion-dollar problem. Let me repeat that. The underfunding of these pensions runs into the trillions of dollars. Not billions, trillions. How did this happen? There are two primary causes. First, governments have promised too much money in lifetime pensions; and, second, governments have not set aside enough money to pay for those pensions. The shortfall between the money that has been promised and the money set aside is called underfunding, but that is just a sterile accounting term that means we don't have enough money to pay the bills. Where I come from, that is called being broke. It is bad enough when you go broke because you have been irresponsible with your own money. Yet it is a tragedy when governments go broke being irresponsible with taxpayer money. That is what I fear we are watching as this public pension crisis unfolds. There have been many studies in recent years of our public pension crisis. There is no question about whether this crisis exists. The only question is the magnitude of the crisis. One prominent study by scholars at the Kellogg School of Business at Northwestern University estimates that public pension plans are underfunded by over $3 trillion.…
