What to tell the beggar states of America

Image by Getty Images via @daylife

George Will:

The nation's menu of crises caused by governmental malpractice may soon include states coming to Congress as mendicants, seeking relief from the consequences of their choices. Congress should forestall this by passing a bill with a bland title but explosive potential.

Principal author of the Public Employee Pension Transparency Act is Rep. Devin Nunes, a Republican from California, where about 80 cents of every government dollar goes for government employees' pay and benefits. His bill would define the scale of the problem of underfunded state and local government pensions and would notify states not to approach Congress like Oliver Twists, holding out porridge bowls and asking for more.

Corporate pension funds are heavily regulated, including pre-funding requirements. A federal agency, the Pension Benefit Guaranty Corp., copes with insolvent ones. By requiring transparency, the government gave the private sector an incentive to move to defined contributions from defined-benefit plans, which are now primarily luxuries enjoyed by public employees.

Less candor, realism and pre-funding are required of state and municipal governments regarding their pension plans. Nunes's bill would require them to disclose the size of their pension liabilities - and the often-dreamy assumptions behind the calculations. Noncompliant governments would be ineligible for issuing bonds exempt from federal taxation. Furthermore, the bill would stipulate that state and local governments are entirely responsible for their pension obligations and the federal government will provide no bailouts.
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I support this legislation and those who oppose it must be challenged to provide a viable alternative. Raising taxes does not count.

Bankruptcy may be an alternative, but the code should be written so that state employees do not come ahead of people who have purchased bonds.  Otherwise, the states will pay a bigger cost in the future when they attempt to borrow money.

Related articles

• Judgment awaits cities, states (timesunion.com)
• Let states go bankrupt (politico.com)
• Public Pension Cost Cover-up? The Union Effort to Kill Transparency (redstate.com)