Pension Battles Loom Across the U.S.

State retirement promises: The National Bureau of Economic Research says the value of pension promises already made by U.S. state governments will grow to approximately $7.9 trillion in just 15 years.

And they're forecasting that states are unlikely to be able to keep those promises: "We conservatively predict a 50% chance of aggregate under-funding greater than $750 billion and a 25 percent chance of at least $1.75 trillion in under-funding."

They say it all adds up to a huge gap: "Insuring taxpayers against funding deficits and plan participants against benefit reductions would cost almost $2 trillion today."

Paying state pensions? The looming issue of state and local pension deficits has been buried by our national financial issues, and by state politics. But there is one Web site that is tracking the pension pile-up. It started out as a watchdog for California pension issues, and now covers state budget and pension deficits across the nation.

The site has highlighted losses in California's public pension plan (CalPERS), which invested heavily in residential real estate, a mistake that wiped out nearly a third of the state employees' pension plan. Bad planning and huge promises helped force the city of Vallejo, California, into an unusual Chapter 9 bankruptcy last spring, partly to renegotiate labor contracts and pension promises.

Illinois has a nearly $50 billion gap in its public pension funds. It's trying to sell the state lottery to raise $10 billion, so far with no takers. The legislature hasn't appropriated pension funds, perhaps not recognizing that its own pension plan was only 32% funded, and that was before the stock-market crash last fall!