The Growing Pension
Black Hole is Pulling Us All In
By Professor Olivia S. Mitchell
Public and private pension sinkholes are showing up all over the country, and we’re tumbling in. In Pittsburgh earlier this month, benefit cuts of 30 percent were announced for 21,000 retirees from UPS and other shipping companies.
When Sears Roebuck filed for bankruptcy in October, its pension plan was revealed to be $1.5 billion short of what was needed to cover its retirees. Some of this will be covered by the government, but not all of it.
Public pensions aren’t immune from sinkholes either: Over 100 California city and municipal governments just asked voters for tax hikes seeking help to pay for long-term pension underfunding, on top of 36 similar requests already made earlier this year.
Kentucky’s public pension underfunding was the subject of a recent and damning Frontline report, and massive shortfalls in Illinois’ state pensions have dominated the election news, with no easy fix in sight.
Lest we forget, our nation’s basic retirement security pillar, Social Security, is also heading for the tank. Fifteen years from now, it will require benefit cuts of 28 percent or payroll-tax increases of at least 60 percent to stay in business.