The Next Financial Collapse The Taxpayers Will Be Asked To Bail Out

On January 17, 1962, President John F. Kennedy signed Executive Order 10988. This order allowed federal employees to form unions. Eventually bureaucrats at all levels of government formed unions. So what was the result of this? The eventual result is large amounts of unfunded liabilities in terms of generous retirement benefits and medical benefits for retirees. These are listed as unfunded liabilities because the actual cost of the benefits negotiated did not show up in the annual budgets of the towns and cities that were approved by the states. This is the perfect negotiating tool–unions make large donations to candidates. These unions then negotiate for retirement benefits for union members. Those doing the negotiations want to stay on the good side of the unions in order to continue to receive campaign contributions.

The Daily Signal posted an article today showing the per capita amount of these unfunded liabilities in every state.

Here is the chart and the list:

The article reports:

Contractual or constitutional obligations for government pensions could mean that paying the pensions of retired government employees may take precedent over paychecks for current employees.

Moreover, some state constitutions prevent any changes to government employees’ pension benefits. That means current government employees can’t ever be required to contribute more to their pension plan than they did on the first day they were hired. And, actually, not a single term of their initially promised pension benefits ever may be altered.

Just imagine how detrimental it would be to private employers if they never were allowed to alter the benefits they initially offered their employees.

With an average funding ratio of only 33.7 percent across state and local pensions and every single state at risk of defaulting on pension obligations (as measured by Pension Protection Act standards, assuming a risk-free rate of return), taxpayers across all states face significant tax increases to pay for their governments’ unfunded pension promises.

As the federal government attempts to cut the amount of taxes each American pays, the states may be forced to raise their taxes to cover their unfunded liabilities. States and municipalities need to fund their pension programs as the money is needed and encourage employee participation–past practices need to change.