Could NH’s $5 billion pension problem be much, much bigger?
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Andrew Biggs authors a new report for State Budget Solutions that finds that states are massively underestimating their unfunded pension liabilities at a measly $885 billion.
However, reports from academic economists and nonpartisan government agencies strongly suggest that the true state of public sector pension funding is far worse than suggested by official plan disclosures. The accounting rules followed by U.S. public sector pensions are more forgiving than those required for private sector pensions or public sector plans in other countries. So-‐called “fair market valuation” more fully reveals the value of public sector plan liabilities and shows that the average public employee pension plan in the United States is only around 41 percent funded while total unfunded liabilities as of 2011 are roughly $4.6 trillion.
The New Hampshire Retirement System estimates its unfunded pension liability at $4.2 billion, with additional obligations for medical subsidies that haven’t been paid for. Biggs’ report suggests the true costs to New Hampshire taxpayers could be up to five times that amount.
Posted under Blog, Featured.
Tags: Andrew Biggs, Pensions, State Budget Solutions
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2:27 pm on July 19th, 2012
Classic “yellow journalism”. Make a claim: “true costs to New Hampshire taxpayers [could} be up to five that amount.” Then provide NO evidence to substantiate the claim.That will certainly ensure a calm, rational discussion of a serious issue: NOT!!
2:51 pm on July 19th, 2012
Actually, Don, the report from State Budget Solutions outlines exactly why unfunded pension liabilities might be far higher than currently calculated. You don’t have to agree with Biggs’ report, but it makes no sense to attack our credibility by pretending it’s not included in the story.
6:57 pm on July 19th, 2012
Grant
Surprised that you would defend your sticle from don, who does not see it and felt that it was poor journalism. The truth is it is a rather short article and to be really credible should have more information. Obviously more of the report and their information would have been nice rather than a synopsis that could be right or wrong.
The article does lead a lot to be desired and facts would have been nice.
I guess you would consider me also wrong for questioning this article, but it does lead a lot to be desired.
10:09 pm on July 19th, 2012
These objections seem awfully strange. This is a blog post pointing out a new study, with a link to the primary source so that readers can read and judge it for themselves, much as we would a story in the Union Leader or Concord Monitor.
I’m not sure rehashing Biggs’ findings would add much value, given that readers are capable of deciding if they accept his arguments and methodology on their own. Nor do I think we should commit 500-1,000 words to every post on our site.
We produce information in several forms and in several lengths. I felt that a short blog post pointing people to the Biggs’ study was sufficient. You’re free to disagree, but to suggest we’re somehow failing to provide credible evidence to support the post is simply unfounded. Click on the link we provide and decide for yourself if the summary we provide is accurate.
6:53 am on July 20th, 2012
The concept is not hard to understand. If you calculate the current value of a $100 payment liability due in one year at an assumed and artificially high 8% discount rate, the liability is valued at $92.59. If you use a lower discount rate (say 4% to reflect current market rates), the liability is worth more today — $96.15. Larger present values of future liabilities means more underfunding. Sum up those differences over the ridiculously long pension periods under the state retirement plan, and you have billions of dollars of additional underfunding. This point has been discussed in the academic literature for many years. But state government pension plans like New Hampshire’s take advantage of the financial illiteracy of most politicians to continue to scam taxpayers by using artificially high discount rates to present fraudulent numbers.
New Hampshire’s retirement plan is now universally recognized as one of the worst in the nation in terms of underfunding. Promising overgenerous benefits and scamming taxpayers on the costs may have seemed politically savvy at one point, but now it looks “kinda stupid”…