The Chicago Tribune must have been pleased to run this Bloomberg story last week, which reported that New Jersey passed Illinois in the state pension fund race into the abyss.
According to Bloomberg:
The Garden State had $135.7 billion less than it needs to cover all the benefits that have been promised, a $22.6 billion increase over the prior year, according to data compiled by Bloomberg. Illinois’s unfunded pension liabilities rose to $119.1 billion from $111.5 billion.
While this makes Colorado PERA’s $27.9 billion unfunded liability look small by comparison, let’s not forget that Colorado’s entire state budget is $26.7 billion.
And this pessimistic view applies to Colorado as well as worse-off states:
“It’s a long-lived problem and a long-lived solution,” said Natalie Cohen, managing director for municipal-securities research with Wells Fargo Securities in New York. “Unfortunately, the solution is ugly, long, hard and requires everybody to sit down at the table together.”
Therein lies the rub. Even getting the conversation started in New Jersey and Illinois has been difficult, given various legal and regulatory hurdles:
In New Jersey, a proposed constitutional amendment supported by public-employee unions that would have mandated the state to make the full actuarially required contributions by 2022 failed to make it on the ballot this November.
In May 2015, the Illinois Supreme Court struck down a 2013 pension overhaul saying it violated the state constitution’s ban on reducing worker retirement benefits. The ruling highlighted the lack of legal flexibility some states have in addressing their pension funding deficits.
Can Colorado find a way to begin a rational, constructive conversation on this vital issue during the upcoming legislative session? The results of Tuesday’s state House and Senate races may go a long way toward answering that question.