American states are saddled with $2.8 trillion in unfunded public employee pension obligations. Those commitments, calculated by the nonpartisan think tank State Budget Solutions, represent the largest chunk of the states’ total $4.2 trillion in debt.
Republicans from Congress’ Joint Economic Committee (JEC), led by Sen. Jim DeMint (R-S.C.), worry that states will turn to the federal government for pension bailouts rather than fight labor unions for reforms. In a September report, the JEC’s Republican staff identified the states with the worst pension problems. Illinois, Massachusetts, and DeMint’s own state ranked high. More than two-thirds of the three states’ pension liabilities were unfunded.
In the event of a federal bailout, those with lower liability percentages, such as New York and North Carolina, would lose out to the less responsible states. “Until a federal bailout is taken off the table,” the report concludes, “states that enact prudent policies and take the often painful actions required to live within their means will risk being penalized, while states that are unrestrained and irresponsible with their spending and promises will hold out for a federal recompense.”