Are you ready to pay an additional $1,000 in state and local taxes alone? Prepared to see your child’s teacher laid off? Thanks to bad promises politicians made to good people, a pension crisis facing Pennsylvania threatens our American way of life, homes, cities and schools.
Already, more than 275 classroom teachers in Dauphin County public schools received pink slips over the past two school years. This unprecedented trend, following years of staff growth, will likely worsen due to skyrocketing pension costs with no financial safety net built in to protect good teachers.
What’s more, homeowners will get socked with the pension bomb, too — for benefits that were promised by politicians but never paid for. School districts’ pension payments (which cover only half the required payments) will rise substantially over the next four years.
For Harrisburg families, that cost increase comes to approximately $689 per homeowner. Homeowners in other Dauphin County school districts will see local pension costs increase from between $236 and $437 per homeowner by 2017.
As scary as that seems, it is but the tip of this woeful economic iceberg. State government’s pension costs (for state employees and half of school employees’ pensions) are expected to rise by more than $2.5 billion over the next four years — or $523 annually per household.
That is, many families will pay more than $1,000 in additional taxes for pension debt we accumulated over the past decade and get nothing more for their money.
So how did we get into this mess? Very simply, it is the culmination of a series of bad politics and policy decisions.
In 2001, following an economic boom, politicians thought pensions were well funded and stock market gains would continue indefinitely, so they decided to boost pension benefits for themselves and government workers — even doing so retroactively. When the stock market dropped, lawmakers erred again by voting to put off paying for those losses for years.
Those bills are now coming due and are exacerbated by the big investment losses in 2008. But one can understand why lawmakers made the choices they did. There’s a big political payoff for boosting benefits as government unions lobbied heavily for those changes.
And there’s little downside to delaying payments (with government unions lobbying for those changes, too). Those costs will be paid through generational theft, foisted upon our children and grandchildren, who are still too young to vote.
Ultimately, the only solution is to get politics out of pensions. This can only happen by moving from traditional pensions, where taxpayers provide a guaranteed government income for life, to a retirement plan popular in the private sector, similar to a 401(k).