Years of Democrat power in Olympia didn’t end well for education funding in our state—the state Supreme Court’s McCleary decision is the outcome of nearly 30 years of Democrat control of the state budget. But, education funding isn’t the only financial mess Democrats have managed to create. According to the Freedom Foundation, Washington State will be making more than $1 billion a year in pension payments. And, “about 40 percent of that is to pay down unfunded liabilities.”
The expected increase “nearly doubles current pension payments” and it is the result of bad financial decisions made by the Democrat-controlled Legislature over the course of the years. The Freedom Foundation writes that legislators “have skipped required pension payments, adopted unrealistic rates of return, invested large amounts in risky private equity and enacted foolish policies like gainsharing and other costly benefit increases.”
The pension problem doesn’t end at state-level. Projections indicate that school districts and local governments will also feel the impact of rising pension costs, in some cases with “50 percent increases in employer contribution rates.”
So, what can lawmakers do about the increasingly heavy pension burden? The Freedom Foundation,
Pension reforms need to consider options that are more transparent and less susceptible to legislators’ tendencies to overpromise and underfund. Most Americans have defined-contribution retirement plans (the employee or individual owns the plan).
Properly designed, there is no reason state employees can’t, as well. The Freedom Foundation has long recommended a change in pension policy, starting with closing all defined-benefit plans to new employees.
Defined-benefit pensions are a relic left over from an era when life expectancies were low (around 60 years when the state’s first pension plans were enacted) and most people worked until they were physically unable. Governments expected to pay out benefits for a relatively small number of years.
Today, retirees may live for 25, 30 or even 40 years after they stop working. Putting taxpayers on the hook for those kinds of benefits is neither practical nor fair.
Any reforms will have to first overcome the obstacle of unions. They are infamously opposed to even modest pension reforms. But, as the Freedom Foundation points out, our pension system is hemorrhaging. Patchwork fixes may help for the short term, but they are ineffective in halting the inescapable pain to taxpayers.
John Ley says
Former Senator Rodney Tom attempted to start the “pension reform” discussion, but too few legislators were willing to join this very worthy cause & fight for legitimate pension reform in WA state. Thanks for the excellent article.
Eastside Sanity says
Another tax & spend, self consuming, Washington State policy from 40 years of socialism, provided to you by the democratic party.