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Chamber wants states to cut back on pensions
Pensions file
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UPDATE: The transcript is posted with corrections.
TEXT OF STORY
Steve Chiotakis: The U.S. Chamber of Commerce today will hold a conference on under-funded state pension and health benefit plans. At the summit, the Chamber says states should do what a lot of private companies do: cut contributions to retirement plans during lean times. Marketplace's Nancy Marshall Genzer explains.
Nancy Marshall Genzer: Pension plans for state and local government workers are at least a trillion dollars in the red. That's according to the Pew Center on the States. Generous retirement plans were offered to employees who didn't have to pay in. Governments were responsible for pension payments, but they did put enough money in. To make matter worse -- fund investments tanked during the financial crisis. What to do now? Aliya Wong of the Chamber of Commerce says future state workers will have to share the burden.
Aliya Wong: There will be more cost sharing, which will mean if you want a richer benefit you will have to make more of a contribution from your own paycheck.
Joshua Rauh teaches finance at Northwestern University:
Joshua Rauh: We will run into a Greece-style debt crisis in states like Illinois and New Jersey, where basically the state ceases to function.
Some states have gotten the message. Pew says 15 states have raised the retirement age for new workers, or curbed their benefits.
In Washington, I'm Nancy Marshall Genzer for Marketplace.
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Isn't the present pickle due, in part, to state and local governments having NOT contributed to pensions in the past? If anything, this strategy will increase the number of time bombs to be faced in the future rather than solve the problem. Reneging on promises, cutting spending and raising taxes seem to be the only options ... it's a problem that can't be solved with growth.
