ECONOMY - State Budgets vs State Benefits Revisited

"Pension Shortfalls Force States to Consider Cutting Benefits" PBS Newshour 6/19/2012

Excerpt

JEFFREY BROWN (Newshour): More and more states are struggling to keep their pension promises, as the ripple effects of recession erode their revenues. A new study painted a stark picture today of just how big the budget hole has become.

GOV. PAT QUINN, D-Ill.: This has to be the year of pension reform once and for all in our state of Illinois.

JEFFREY BROWN: For governors like Illinois's Pat Quinn, the already-huge pension gap just keeps growing. It's the difference between what they owe in public employee pensions and what's actually set aside.

A new analysis reports that nationally the shortfall in funds covering millions of workers reached $757 billion in fiscal year 2010. That marked a 9 percent increase from the year before. All told, 34 states fell short of safe levels of pension funding, roughly 80 percent of long-term obligations.

The study said hard-hit states have redirected funds away from pensions to more immediate needs. In Rhode Island, for example, state treasurer Gina Raimondo highlighted the problem for NewsHour economics correspondent Paul Solman last year.

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KIL HUH, Pew Center on the States: Well, the widening gap has been growing.

As you mentioned, it has grown percent from 2009 to 2010 and collectively it's $1.38 trillion between what states have promised their workers and what they have set aside to pay for these benefits. These promises include both pensions and retiree health care.

So now states want workers to take the hit for a mistake made by the state legislatures? How typical.

Reference from video:

"Retirees hit amid CF bankruptcy endgame" by Ted Nesi, WPRI 4/27/2012

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Central Falls is being carefully and painfully nursed back to health.

Last August the tiny city became the first Rhode Island municipality to file for bankruptcy, weighed down by $80 million in retirement benefits promised to its employees, deep cuts in state aid and a moribund economy. Its 19,376 residents - more than half of them Hispanic and 42% of them immigrants - have a median household income of $34,389, more than $20,000 below the state average.

National experts warned the bankruptcy process could drag on for years. But a concerted effort by the Chafee administration - and a lack of alternatives for its retirees - have Central Falls near the finish line after less than a year. The city could be out of bankruptcy within three months, but the situation is bittersweet, according to Rosemary Booth Gallogly, the state's director of revenue.

"We're not really proud of what came out of that," Gallogly told WPRI.com. "While we're really pleased with how our hard work has paid off, we're not really gleeful because there were a lot of people who were hurt by it. So it's kind of a balance. We really haven't tried to say, wow, we really got this done."