Opinion

Bill Boyne: Pension costs pose a problem with no easy answer

10/28/2009 6:15:02 AM

Comments (65)

It was a catastrophic financial blunder that should have been anticipated.

But it wasn't.

That's why thousands of government employees in Minnesota will face a huge reduction in their pension benefits in the next few years. The problem arose because people are living longer and are entitled to many more years of pension benefits than originally expected.

The problem was made known in an article by Fred Zilmmerman in the Minneapolis Star-Tribune.

It has been known for some time that people are living longer, but Minnesota government officials failed to recognize that this would cause a substantial increase in the cost of pension payments because people will continue receiving benefits for many more years. Even after this became known, officials at all levels of government in Minnesota have failed to take action to solve the problem.

There are three possible solutions, all of which will be difficult to accept.

The first is to raise the retirement age to 70 and to reduce the pension payments and make them similar to pension benefits paid to employees of private companies.

The second is to increase the taxes they pay for pension benefits. However, that raises the question of who should pay the extra taxes. Should private companies' employees be taxed for this purpose? That doesn't seem reasonable.

Should the state tax retired employees who have already received their pensions? Or should the bill be paid by future retired employees who have not received any benefits?

None of these solutions seems to be fair or reasonable, and yet some solution to the problem must be found.

Obstacles to a solution

Pension fund administrators do not appear to be ready to take corrective action and might simply delay addressing the problem.

Unfortunately, the shortage of pension funds is much more difficult to correct because of the steady increase in the number of public employees -- state, city, county and federal -- in this country. In 1950, there were about 15 million employees in the manufacturing industry in the United States and 6 million in government.

Today, however, there are 22.5 million public employees in this country and only 13.4 million employed by privately owned manufacturing companies.

One other factor makes it even more difficult to find the necessary funds to restore an adequate level of pension payments for public employees. The recession, which is likely to last a few more years, has reduced government revenue that might otherwise be part of a solution.

There is no obvious way to reduce government pension payments fairly and effectively. We can only hope that it can be done by finding a way to share the painful burden.

Bill Boyne is a retired publisher and editor of the Post-Bulletin. His column appears weekly.

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sbintn
Murfreesboro, TN

Posted on 10/28/2009 at 11:54:05 AM

Maybe if politicians were required to live under the same rules that the private sector has been required to adopt when it comes to pension funds the problem would resolve its self.

Future promises have alway been easy for politicians to hand out. When they came due it was someone else’s problem to fulfill. Maybe, it will be necessary for the politicians to cut elsewhere to make good on the promises that have been made by their predecessors.

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Bill Boyne: Pension costs pose a problem with no easy answer

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