The state run pension plans of most of the big industrial states which got drilled in the great recession are still in the spotlight and it is not treating them in a kind manner.
Most of the states are caught in a vice between much lower tax income and the demand of state employee unions to continue to fund the pensions they negotiated before the current fiscal crisis.
A classic example is the state of Illinois and the black hole its pension plan has become. Illinois is now running neck and neck with California to see which one can come up with the best plan to appease the unions, while at the same time allowing the credit rating agencies to let them breathe.
Illinois is facing a $95 billion dollar deficit in its future funding of the state’s welfare program. That represents a gap of more than 45% of the future guaranteed payments. At the current rate of decline the system will be virtually bankrupt in another 20 years.
Usually, when it requires some backbone, the legislators kick the can down the road to the next group of lawmakers, but this time it appears they are finally going to have to make some hard choices.
The unions are screaming it is just another example of how hard working Americans are being thrown under the bus and they want the cost of the programs to come from new taxes on businesses the rich people own.
The problem? The “rich people” are probably small businessmen who are squeezed more than them and taxing the people who support their salaries will only drive the tax base to a new state.
If you don’t believe it, look at what is happening in California, where the pension fund guarantees an annual return of 7%!
What can these guys be thinking?
Keep those stops tight.
Todd “Bubba” Horwitz