Despite the anguish emanating from state legislatures about the cost of pension obligations, a recent study puts the actual cost at about 2.9% of the average state budget. The alleged gold-plated retirements that teachers and other state workers receive are not at the root of the budget problems and forcing workers to pay more into their pensions won’t fix the current shortfall issues so many states face.
Overestimating the Problem
The new information comes courtesy of an essay by Eli Lehrer, the vice-president of the Heartland Institute, a conservative think-tank. While examining the efforts of states like Illinois to reduce future benefits and shift retirement saving efforts to workers, he found that they overestimated the impact of pensions on budgets, suggesting that the current trend of blaming state workers for budget problems was misleading.
Even in California, where Lehrer took issue with the generosity of the state pension, he concluded that the state’s issues did not stem from the pension system and couldn’t be fixed by curtailing retirement benefits alone. Instead, he suggested that health care plans and salaries would bring about more immediate budget relief.
Illinois House Minority Leader, Republican Tom Cross, disagreed, citing the need to include long-term fixes into the budget process, which will reduce future liability.
What Do You Think?
What’s your state shortfall look like, and where would you focus cuts and fixes?
Photo credit: SFSU 2009 by coolmikeol