Growing Deficits Threaten Pensions

Publication: The Washington Post

Author: David Cho


05/11/2008 - The funds that pay pension and health benefits to police officers, teachers and millions of other public employees across the country are facing a shortfall that could soon run into trillions of dollars.

But the accounting techniques used by state and local governments to balance their pension books disguise the extent of the crisis facing these retirees and the taxpayers who may ultimately be called on to pay the freight, according to a growing number of leading financial analysts.

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By their own assessment, state and local governments acknowledge that their funds for retiree benefits are increasingly falling behind, with the number that are severely underfunded soaring to 40 percent in 2006, a five-fold increase from 2000, according to the U.S. Government Accountability Office.

But even these grim calculations are based on assumptions that some analysts consider too aggressive, including projections about how the investments of pension funds will fare and how long retirees will live.

"Very small shifts in actuarial assumptions can generate huge changes over time," said Susan Urahn of the Pew Center on the States, which has studied the issue. "It is not very transparent, and even where it is transparent not many people understand it."

Read the full article Growing Deficits Threaten Pensions on the Washington Post Web site.

Read the releated report by the Pew Center on the States, Promises with a Price.

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