Defined Benefit retirement systems across the country are all severely underfunded because an actuarial/political cabal has allowed Generally Asinine Approaches to Payments to pass for Generally Accepted Actuarial Principles. Now even the lowball contribution ‘requirements’ these methods are yielding have become onerous obligations for governments unprepared to actually pay for the promises they might have thought they could afford. Which leads to some desperate measures:
The politicians’ solution comes from Jim Nolan, a former Illinois legislator, agency director and aide to three governors who in a piece on mywebtimes proposes:
Why struggle to set aside a mountain of assets when in practice they would be needed only if Illinois were at risk of going out of business? State governments never go out of business.
[David] Eisenman proposes that instead of setting aside so much wealth that will never be used, Illinois fund its pensions on a mixed pay-as-you-go basis, more like Social Security than private company pensions.
As if Social Security, a transfer mechanism between low-paid workers and retirees, is a model for anything but economic stasis.
Instead of bailing out these pensions, Congress should pass a law allowing states and local governments to reduce promised benefits—something that is now illegal under some states’ statutes or constitutions.
The details, as with MPRA, would be worked out by bureaucrats and regulators and, when implemented, lead to token protests with token media coverage changing nothing as politicians claim only to be ‘following the law’.