| By Bret Thompson, ProgressOhio - Jun 24th, 2009 at 12:34 pm EDT |
Gathering at the Statehouse today were top labor leaders* from across the state. They announced their opposition to a proposal to significantly decrease the state’s contributions to the Ohio Public Employees Retirement System for two years.
One major problem with that approach is that it is hard to catch back up once you get behind with retirement contributions. One need not look too far to see this in action at the state-level. Illinois currently has $54 billion dollars in unfunded pension liabilities. This is twice what Ohio spends every year running the entire state.
Illinois recognized their problem back in 1995 and created a 50 year plan to get caught up. However, 14 years later, their pension problem is worse than ever. As AFSCME Council 8 President John Lyall said, "Cuts that were once temporary almost always become permanent." Throw that in with the miracle that is compound interest and state-level pension problems can become intractable.
Another criticism gaining traction is whether this plan is even legal:
If this precedent is not illegal, it should be. No governor or legislature should be permitted to mortgage the state's future in this manner. [...]
Borrowing from PERS to help fix a budget dilemma is the height of fiscal irresponsibility. If the state cannot afford its pension obligations, the responsible course is to statutorily change the benefit levels promised to state employees.
Like most states, Ohio faces a budget mess of historic proportions. No one envies the choices that Strickland and legislative leaders must make. With general revenue funds at 2002 levels, substantial cuts in state programs are unavoidable.
*In attendence: Ohio AFL-CIO, the Ohio Civil Service Employees Association, AFSCME Ohio Council 8, the Ohio Association of Public School Employees, AFSCME Retiree Chapter 1184, the Ohio Education Association, the Ohio Federation of Teachers, the Fraternal Order of Police, the Service Employees International Union District 1199, the Alliance for Retired Americans and the Ohio Public Employee Retirees.
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