I keep hoping that the current presidential race might actually focus on some of the growing problems that are facing our country and that we would hear the candidates discuss how they might go about solving them. I know, I must be crazy. Who has ever heard of political candidates having a serious discussion of pressing issues?
For instance, we are hearing little from the candidates about the growing problems of our social security system. In the not too distant future, it is highly likely that it will eventually run out of funding. At some point we will be faced with tough choices such as cutting benefits for future retirees, implementing large tax increases, raising the current caps on paying the tax or some combination of those options.
But at least that issue has had a mention.
That’s better than what we are hearing about the growing public pension crisis in this country and around the globe, which is zero. And like the social security mess, this is an issue that is lurking and continuing to grow worse every day.
There was a recent front page article in my local newspaper about the credit score for the city of Dallas being lowered by Fitch because of concerns about the failing police and fire pension fund. Fitch downgraded the city’s outstanding debt to AA from AA+ and changed the outlook to negative from stable.
This move could end up costing the taxpayers in Dallas dearly. And Dallas is not alone.
There are many cities and states across our country that are also experiencing severe problems with their public pension plans. Weak investment performance and insufficient contributions will cause total unfunded liabilities for U.S. state public pensions to balloon by 40 percent to $1.75 trillion through fiscal 2017, Moody's Investors Service reported earlier this week. It has been a tough year for the funds, which earned a median 0.52 percent on investments in fiscal 2016 versus their average assumed return rate of 7.5 percent, Moody's said.
The nation's 100 largest public pensions were funded just below 70 percent as of June 30, according to a separate study this week by consulting firm Milliman. The study found investment returns to be 1.31 percent and a funding deficit of $1.38 trillion.
And this crisis is not restricted to the U.S.
In a report issued by Citi – “The Coming Pension Crisis” – they estimate that the total value of unfunded or underfunded government pension liabilities for 20 OECD countries is a staggering $78 trillion, or almost double the $44 trillion published national debt number.
The bottom line is that many public pensions will be running out of money in the not too distant future. When that happens millions of people will be screwed — either retirees who won’t be paid what they thought, or government entities will see their budgets drown in pension obligations, necessitating deep and unpopular cuts elsewhere.
One would think that is an issue worth talking about, but apparently our current political candidates do not think so.