States across the country are continuing to face structural budget deficits as they try to cope with too-generous pension promises made to their employees. Mandatory payments into pension funds divert money away from essential government services and create pressure for tax increases.
While there have been numerous reform initiatives, many have proved ineffective. They have left intact the structural problems troubling state pension systems such as early retirement options, low employee contributions, assumed high rates of return and benefit “spikes” in the final years of service, without spending controls in place. Until these policies are changed, states will have to go back to the bargaining table again and again.
States across the country are continuing to face structural budget deficits as they try to cope with too-generous pension promises made to their employees. Nowhere is the problem worse than in Illinois. Matthew Glans, senior policy analyst at The Heartland Institute, notes, “The state employee pension system in Illinois is broke, both financially and structurally. Without an overhaul of the current, unsustainable system, Illinois taxpayers will continue to suffer substantially higher taxes to bail out the state for its imprudent policies.”
The public pension crisis affects municipalities across the nation as well. Since January 2010, there have been 51 municipal bankruptcy filings in the United States. Taxing districts within the Cook County area, the second most-populous county in the United States and home to the city of Chicago, have a combined “financial burden” of almost $34 billion – an average of $17,147 per Cook County household.