I recently attended a lecture given by Arnold Kling, who is a former Federal Reserve economist on the Board of Governors staff, former senior economist at Freddie Mac, and all-around financial and monetary expert. The...
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Fretting Pension Costs, Maine May Move Government Workers to Social Security
Maine is one of seven states that have opted not to have their government employees participate in Social Security, preferring their own pensions instead. (The others are Alaska, Colorado, Louisiana, Massachusetts, Nevada, and Ohio. Most teachers in California, Illinois, and Texas are also outside Social Security.) But given the well-documented crisis facing public employee pensions (see Pew Center, ALEC, the Manhattan Institute, and the Institute for Truth in Accounting, in general for more on the overpromised benefits and underfunded liabilities), the New York Times reports that states may have their employees turn more to Social Security:
Maine legislators have prepared a detailed plan for shifting state employees into Social Security and are considering whether to adopt it. They acknowledge it will not solve their problem in the short term but see long-term advantages.[...]
Some of those states' pension plans now have shortfalls so large that they need outsize contributions. Virtually all state pension funds have had big losses in the last two years, but the go-it-alone states appear especially vulnerable.
Not only are these states trying to provide richer benefits with smaller contributions than the payroll tax for Social Security, but they have promised to do it for workers who can retire 10 and sometimes 20 years younger.
With pension costs ballooning and taxpayers lashing out, many workers in states with deeply underfunded plans fear their benefits will be cut. Those being asked to put more into their pension funds complain they feel caught up in Ponzi schemes. Some wish they had been part of Social Security after all.
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