State and Local Public Employee Retirement Programs

State and local public employee retirement programs now have unfunded liabilities of about one trillion dollars. according to Pew Center on the States. Despite the current publicity the subject is getting, most folks have no concept of the real problem, nor the solution.

Unlike the federal government in Washington, states and local entities cannot print money. They cannot continue to keep borrowing either.

Talk of fed-enabling legislation for states to go bankrupt is not a practical solution. The public employees’ unions will not like the haircuts and shaving bond prices will starve the source of future financing, as well as decimate smaller savers in those bonds.

But there is no reason to panic if public employee pensions are negotiated to realistic levels along with state and local budgets.