Another day, another public pension crisis. From Tyler Durden at zerohedge.com:
Underfunded public pensions are undoubtedly the biggest threat facing America’s long-term economic stability. As we’ve argued numerous times in the past, the size of the aggregate underfunding, $5-$8 trillion depending on your assumptions, is simply too large for even the overly generous American taxpayer to cover.
Of course, one of the biggest contributors to this inevitable crisis is the state of Kentucky which has a funding hole of $33-$84 billion, depending on your discount rate assumptions, according to an analysis recently conducted by PFM Group.
The problem is that the aggregate underfunded liability of pensions in states like Kentucky have become so incredibly large that massive increases in annual contributions, courtesy of taxpayers, can’t possibly offset liability growth and annual payouts. All the while, the funding for these ever increasing annual contributions comes out of budgets for things like public schools even though the incremental funding has no shot of fixing a system that is hopelessly “too big to bail.”
So what can Kentucky do to solve their pension crisis? Well, as it turns out they hired a pension consultant, PFM Group, in May of last year to answer that exact question. Unfortunately, we suspect that PFM’s conclusions, which include freezing current pension plans, slashing benefit payments for current retirees and converting future employees to a 401(k), are somewhat less than palatable for both pensioners and elected officials who depend upon votes from public employee unions in order to keep their jobs…it’s a nice little circular ref that ensures that taxpayers will always lose in the fight to fix America’s broken pension system.