September 24, 2012
The Wall Street Journal had a front page article this past weekend that was very revealing about the state of this nation and its future. The article said “Almost every state in the U.S. has made cuts to its public-employee pensions, seeking to dig out from the economic downturn, but so far the measures have fallen well short of bridging a nearly $1 trillion funding gap”.
Since 2009, 45 states have rolled back pension benefits for teachers, police, firefighters and other public workers including cuts by Michigan and California. However the efforts have trimmed just $100 billion out of the $900 billion gap between what states and their workers put into their retirement plans and what the states owe in retirement benefits.
What about the situation locally? The City of Memphis has an unfunded pension liability of $609 million as of June 30, 2011. They only contributed 25% of the $80 million that the actuaries said were required to fund the promised pensions. The MLGW unfunded liability went up $60 million due to losses in investments.
The City of Memphis and Shelby County finally made some structural changes to their plans by doing away with the 25 years of service and out regardless of age provisions (a terrible burden for any pension plan) but they only did it for future employees. Now it is the turn of the MLGW to make this change for the year starting January 1, 2013 and it must be done during the MLGW budget season which is going on now. Memphis and the nation are facing a financial breakdown unless we face up to our unsustainable promises of pensions and health care for public employees.