McClatchy Newspapers has produced an excellent piece of journalism, a study of public employee pensions which shows that all of this uproar is largely a manufactured, phony issue.
The reality is that pensions comprise just a tiny portion of state budgets and pension funds’ financial picture is much more steady than what has been portrayed by snarky governors and lawmakers. McClatchy found that many states failed to infuse more money into their pension funds during good times, apparently choosing instead to fund new programs or hand out tax cuts.
Now, in bad times, the state with the shakiest pension fund is Kentucky – where public employees are not allowed to unionize. One other thing: Two-thirds of the nation’s public employees are not unionized.
“The short answer,” writes McClatchy’s Kevin Hall, “is that there’s simply no evidence that state pensions are the current burden to public finances that their critics claim.
“Pension contributions from state and local employers aren’t blowing up budgets. They amount to just 2.9 percent of state spending, on average, according to the National Association of State Retirement Administrators.
“Though there’s no direct comparison, state and local pension contributions approximate the burden shouldered by private companies. The nonpartisan Employee Benefit Research Institute estimates that retirement funding for private employers amounts to about 3.5 percent of employee compensation.
“Nor are state and local government pension funds broke. They’re underfunded, in large measure because — like the investments held in 401(k) plans by American private-sector employees — they sunk along with the entire stock market during the Great Recession of 2007-2009. And like 401(k) plans, the investments made by public-sector pension plans are increasingly on firmer footing as the rising tide on Wall Street lifts all boats.”
