Wednesday, December 08, 2010

The Story of Our Time.

This is from the Empire Center of New York, but it could easily be from any think tank in any number of states:

Over the next five years, tax-funded annual contributions to the New York State Teachers’ Retirement System (NYSTRS) will more than quadruple, while contributions to the New York State and Local Retirement System (NYSLRS) will more than double, according to estimates presented in this report. New York City’s budgeted pension costs, which already have increased tenfold in the past decade, will rise by at least 20 percent more in the next three years, according to the city’s financial plan projections.

NYSTRS and NYSLRS are “fully funded” by government actuarial standards, but we estimate they have combined funding shortfalls of $120 billion when their liabilities are measured using private-sector accounting rules. Based on a similar alternative standard, New York City’s pension funds had unfunded liabilities of $76 billion as of mid-2008—before their net asset values plunged in the wake of the financial crisis.

The question is: what happens when you take these liabilities and insist that they be part of any state (and/or municipal) bond financing? And what happens when House Republicans decide to not renew the Build America Bonds program? Is there an orderly bankruptcy process that forces readjustment? Or is their a Eurozone-like contagion that eventually unravels the cohesion of the United States?

No one really knows the answer.