The Onrushing State Government Pension Fiscal Crisis and Tsunami

Several days ago we posted a post that discussed the impending fiscal collapse of the state governments in New Jersey and California. These impending collapses are due to the reality that state politicians in those states continued to cater to state government union members in order to get their votes at election time. As a result, we have a system in many states that has a ton of unfunded liabilities based on the promises of robust retirement pensions and health care for retired state government employees and union members. That post can be accessed at:

https://loathemygovernment.blogspot.com/2018/01/california-and-new-jerseys-impending.html

But according to a National Review article by Lewis M. Andrews on January 26, 2018, these two states are not the only states that have been led to the brink of insolvency by state politicians and that brink is not that far away:

• In Illinois, a recent law went into effect that allows the state Comptroller to seize any Illinois town or country’s share of sales, excise, or other taxes if that town or county does not keep up its pensions payments and contributions.
• This obviously will result in other budget lines of a town or county to go down which will result in less government services to those citizens in those towns and counties.
• For example, Mattoon city officials have already said that they will get rid of ambulance services in order to make up for the lost tax revenue going into pension funding, funding that is half a million dollars more this year than last year.
• Normal, Illinois is going to raise property taxes to make up its pension contribution shortfall.
• East St. Louis, Illinois may see its ENTIRE tax money confiscated by the state to fulfill its pension requirements, leaving it nothing at all for ANY other government service, police, fire, ambulance, schools, etc.
• But the problem of unfunded pension and retirement liabilities, estimated by some to be as high as $6 TRILLION, is not restricted to Illinois, New Jersey and California.
• Florida towns and cities will have to pony up an incremental $178.5 million in the their upcoming budgets to cover their pension liabilities for government retirees.
• The San Diego school district is asking parents of its kids which services they would prefer to get cut in order to make up their contributions to California’s deeply indebted pension system.
• Fulton, Kentucky has already cut back its hospital and ambulance services and still faces an annual $114,000 annual pension shortfall.
• To cover the current deficits, Connecticut would have to raise overall taxes by 14% and New Jersey would have to raise taxes a whopping 26%.

Seriously bad financial conditions and yet rather than fix the root causes of the pension problem, as always, politicians have resorted to tricks, gimmicks, and lies to cover up the impending disasters:

• In 2016, San Francisco’s Bay Area Rapid Transit (BART) subway system sought voter approval to bond $3.5 billion in infrastructure improvements even though the needed upgrade was already covered by an ongoing capital fund, causing speculation that the $3.5 billion would be secretly diverted to cover pension expenses.
• Former New Jersey Governor Christie Christie and General Assembly Speaker Vincent Prieto agreed to a shell game that made the state lottery an asset of the pension fund which, while it would help reduce the pension fund deficit, it would rob other state government functions of the funds it currently gets from lottery proceeds.
• California Sonoma County voters recently shot down a proposal to increase the sales tax increase because it was suspected the increase would be only funneled into the local pension fund deficit.

And keep in mind these deficits and funding shortfalls have occurred during a record stretch of positive economic results, we have not had a recession in almost ten years. You can imagine what is going to happen when the economy eventually dips into a recession.

Politicians making bad promises that they cannot fulfill just to ensure their careers and cushy pay checks, pensions and benefits are protected and prolonged. It is going to be a rocky ride, probably sooner than later, when it comes to government's reckoning of its fiscal condition and insanity. And not a politician, or leader, in sight, who has the gumption and courage to do the right thing. 

Term limits anyone?

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