Red States:
It is hard to imagine a more diverse pair of places that have been overrun by the infestation of
public-sector pension problems than
Prichard, Alabama and the withering Garden
State of New Jersey. One might expect the problems in the
Garbage
Garden State of New Jersey, which is home to such luminaries as Grover Cleveland, Thomas Edison,
Jon Bon Jovi,
Bruce Springsteen, and (the fictitious mob boss) Tony Soprano, and where a
senator-turned-governor sleeps with a union boss and still nearly wins re-election. However, unlike New Jersey, Prichard, Alabama is hardly an example union bosses run amok—in fact, as a
Right-to-Work state,
12 percent of Alabama’s workforce is unionized. Nevertheless, both are the latest examples in a string of bad news stories involving public-sector pensions.
On Thursday, Bloomberg
reported that New Jersey’s underfunded pension problem grew by more than $8 billion (or 18%) in the last year, as the state failed to pay its pension obligation.
New Jersey’s pension-funding deficit increased by $8.05 billion, or 18 percent, this year to $53.9 billion as the state failed to make contributions.
The unfunded pension liability was $45.8 billion as of June 2009. New Jersey also faces an unfunded liability of $66.8 billion for providing medical care to retired public employees, the treasury department said in a statement today. [Emphasis added.]
But that’s just the partial picture for New Jersey.
Additionally, the state has a $66.8 billion unfunded promise to future and current employees for lifetime health benefits, the report found.
[snip]
“If all the required contributions to the pension funds had been made over the last decade, New Jersey would still not have enough money to pay all the benefits state and local governments have promised to public employees,” Treasury Spokesman Andy Pratt said in an e-mail.
As New Jersey heads down a likely path of no return, it is worth noting that the town of Prichard, Alabama has already reached that point and has stopped paying its retirees and filed for bankruptcy (twice). While the town’s failure to make payments to its retirees is wreaking havoc on those retirees, as the New York Times notes, how it is handling its issues is also being watched throughout the rest of the nation.
...
These pension plans better start negotiating for a rework on their deal, because governments are not going to be able to pay them and the feds are not going to be able to bail them out. It is going to require some realistic thinking on the part of union officials. I know that is asking a lot, but it is not asking too much. The unions have already asked for too much.
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