by Jack Rasmus

Jack Rasmus
A new study released May 18 by a pro-business source, Meredith Whitney Advisory Group LLC, confirms what this writer and others have been pointing out about current State budget crises: namely, state employees’ pensions and retirement health benefits are not the cause of States’ current budget deficits. Moreover, the underfunding gap in state employee pensions that does exist has been due primarily to state politicians and pension fund managers having failed to make necessary contributions to state pension funds for more than a decade.
The Whitney report estimates “that about $1,000 billion of (states’) spending over the past decade came from not adequately funding pensions”, according to the business newspaper, The Financial Times. The Times further notes that “the research concludes that state debt has surged over the past decade as states have subsidized budgets by not adequately funding retirement pledges”.
In other words, the states diverted contributions to pension funds on a massive scale—$1 trillion—creating the current pension funding gap and then used the money to finance spending excesses elsewhere. They also used the diverted funds to offset billions in revenue loss due to widespread reduction in business taxes, in an escalating ‘state vs. state’ race to the bottom aimed at competitively lowering business taxes in order to lure companies to their own state. The ‘race to the bottom’ in state corporate taxes continues to this day, and is in fact accelerating
So public workers have been, in effect, subsidizing State budgets for years, not draining them. And not only have they been subsidizing state budgets, but the diversion of contributions to their pensions has enabled states to cut business taxes as well.
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Filed under: Economy | Tagged: Meredith Whitney Advisory Group, public pensions, state budgets | 3 Comments »