Nation faces growing crisis of state employee, retiree benefits shortfall

by Carol Forsloff - Folks are going to get a big wake up call with the rise of new taxes to pay for state employee and retiree benefits or a lot of people are going to lose those benefits and raises if the Pew Center is right and the coffers for these benefits are nearing empty.

One of the biggest problems on the docket of growing ones, according to The Pew Center on the States  is the estimated  $1 trillion shortfall between what states have promised their employees and retirees and the money on hand to pay those obligations.

And Stateline says that number is conservative since it uses the numbers before the Wall Street dip.

Unlike companies that can't meet their obligations and go bankrupt, like the Detroit automakers did, states cannot in a legal sense do that.  So they raise taxes or cut programs.

That's what Oregon did, then found out the tax raise wasn't enough; and the bills keep coming on.

West Virginia no longer will give teachers the extra $300 stipend to use to pay health insurance, which has many teachers and others up in arms.

State legislatures have to wrestle with these facts.  

“We’ve got to do our best to balance retirees’ needs with the (possibility) of bankrupting the state of West Virginia,” says Ted Cheatham, director of the Public Employees Insurance Agency and one of Ferguson’s colleagues, as he spells out the scenario that is not only that of his state but others as well..

If West Virginia has a serious money problem in its retiree health care system, it is hardly alone. This is what Pew says, "Of the $1 trillion in unfunded pension and other post-retirement promises made to workers by states, $587 billion is for retiree health care."  That's a big chunk, and what's worse is the center found that most of the states have set aside “little or no money” for those obligations, which, the organization says, "because of medical inflation and waves of retiring baby boomers, are quickly on the rise."

All of this comes with the discussion on news broadcasts today that 50% of baby boomer retirees won't be able to extend their retirement income beyond 10 years into retirement before running out of money.

The states, if the Pew Center is correct, may run out of money before that.