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Sunday, February 27, 2011

Unfunded pensions and benefits in WI? Not so much

One would never know it from Gov. Walker's extremist campaign to limit public-sector collective bargaining rights in Wisconsin, but Wisconsin is one of the best performers when it comes to unfunded pension liabilities and health care benefits. 0n a per capita basis, its liabilities are down there with those of Florida and South Dakota. So reports the New York Times Magazine today in a piece on Gov. Christie of New Jersey, which does really have a problem.

The Times chart is based on a Pew Center on the States' report, which notes:
Some states are doing a far better job than others of managing this bill coming due. States such as Florida, Idaho, New York, North Carolina and Wisconsin all entered the current recession with fully funded pensions.
The Pew report rates Wisconsin a "solid performer" (its top rating) in managing its pension and non-pension obligations.

Isn't it time, Gov. Walker, to drop the pretense and negotiate?


Nicholas Winterer said...

You seem to be mistaken as to the definition of an unfunded pension.

A funded pension is one where money for the pension is put aside on a regular basis to cover the need in the future.

An unfunded pension is one that is paid out of current income when it is needed by retirees.

Just because a state has the ability to cover its pension liabilities, this does not make it a "funded" pension.

Politicians like unfunded obligations because it allows them to appease the unions without raising taxes and ruining their political career (it's somebody else's problem by the time the union members start retiring).

ProfD said...

I'm using the Pew Center's terms. The report includes a lengthy discussion of methodology (challenging, as you might guess), and the Center has posted fact sheets for the individual states, including Wisconsin, in case you're interested.


The whole concept of pre-funding pension plans is rather silly, other than security for the employee. Pension liability is just another liability (debt equity), like bonds payable. Imagine that the pension funding rules were applied to bond liabilities. Every bond issued by a city would to have all future debt service fully funded at the time of the sale (discounted to current value) in order to sell its bonds. Debt is debt.