The federal government should not act to bail out state and local public-employee pension funds, Heritage Foundation expert David John says in a new report.
The pension plans were created by the states and resolving their problems is ultimately a state responsibility, he says.
Congress should have little or no role in state and local government employee pension plans. It should not step in and attempt to impose a solution, a model for reform, or a bailout of severely troubled states. Just as states and local governments created the public pension problems they now face, it should also be their responsibility to deal with these situations. Even with the best intentions, it would be fairly easy for a reform plan to end up including a full or partial bailout as an incentive for states to act.
Thirty-one state public pension plans have “funding ratios that are under 80 percent of what is needed to pay full benefits,” John writes. “A ratio that is under 80 percent indicates that the plan is in severe trouble and will have great difficulty meeting its obligations. This is not a small problem.”
A new report by Senate Finance Committee Republican staff rightly argues that “a federal bailout of the states should be avoided at all costs.” But it ominously warns that a “legislative solution for consideration by Congress will be introduced in the Senate in the near future.”
What do you think? Should federal taxpayers be on the hook for state and local financial troubles?