Public Employee Retirement Benefits: An Overblown Crisis?

With state and local governments facing, by some estimates, $1 trillion in unfunded liabilities for retiree health care and other post-employment benefits over the next thirty ...
by | February 5, 2007
 

With state and local governments facing, by some estimates, $1 trillion in unfunded liabilities for retiree health care and other post-employment benefits over the next thirty years, clearly we have a major crisis on our hands, right? Perhaps not.

A trillion dollars isn't quite as much as it sounds. Thanks to the Census Bureau's handy population projections, I've determined that from 2007 to 2036 the average annual U.S. population will be just over 340 million. Multiply 340 times 30 and you get around 10.2 billion. Then divide that $1 trillion by 10.2 billion and, there you have it, each American owes $97.95 per year to pay off presently unfunded state and local employee retirement benefits.

I'm sure this analysis is overly simplistic for a thousand different reasons. Plus, it's important to remember that $97.95 figure applies to every American, not just every taxpayer. Still, if you get a cup of coffee from Starbucks every morning, you're spending way more than a hundred bucks a year. If I could just break my two-pack-a-day fruit snack habit, I'd have $100 to contribute.

For that reason, I can't help but think that lines like this, from an Associated Press article last year, are hyperbolic: "California will almost certainly owe more than any other state, threatening to bankrupt local governments and all but guaranteeing cuts in services like education and public safety."

While California seems to be in a worse spot than other states, even the state and local burden the AP cites, $200 billion, comes to only $151.22 per Californian, per year. If a particular government completely ignores the looming bill, they'll find themselves in a tough spot. But most governments seem to be responding prudently, by either paying money into investment funds now or placing checks on employee benefits.

Josh Goodman
Josh Goodman  |  Former Staff Writer
mailbox@governing.com

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