Makin' Money

What are public pension promises worth? Less than before

Chris Farrell Jan 6, 2011

The Great Recession may be over, but state and local government finances remain troubled.

The U.S. Census Bureau reports that state government revenues plunged by 31% during 2009. It isn’t a surprising number considering the depths of the Great Recession. The sobering thought is that state government finances remain parlous, according to this Washington Post article.

Governors and state legislators across the country are now confronted with a series of painful choices about future service cuts and tax increases.
Next year “will actually be the most difficult budget year for states ever,” said Nicholas Johnson, director of the state fiscal project at the Center on Budget and Policy Priorities. “If you look at the gap between the cost of providing public services and the revenue available to provide them, it remains very large,” he added.

There are a number of personal finance implications of yawning state and local government budget shortfalls, but the most important is that government workers are likely to see their pension promises cut. Like it or not–and most likely not–government workers will have to save more out of a frozen (at best) or reduced paycheck from now on to shore up their living standards in retirement.

The turn of the year is a time for resolutions. And we know that we fall off the resolution bandwagon fairly quickly. Still, it’s good to try to do better. For instance, here is a list for living green in 2011. It’s a very basic list, but sometimes a reminder of the fundamentals is worthwhile–and this is one of those times. Here is Resolution No. 10:

How about recycling some of the forgotten, unused items that have been gathering dust in the basement, garage, or attic? It takes a bit of work, but organizing a tag sale brings some major benefits. You’re sure to meet neighbors you didn’t know you had, and some of these folks will pay to prove that your trash is their treasure. What you don’t sell can go to your local Salvation Army or Goodwill store, earning you a tax deduction.

A war has erupted between a number of airlines and the big online travel sites. The airlines want you to use their websites. But the online travel companies make it easier for consumers to comparison shop (and that’s the real reason behind the fight). Kiplinger’s offers a story on what’s hppening and how to cope with the turmoil.

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