The Economist
The immediate crisis
THE brouhaha around public workers in Wisconsin obscures a few things. First, states have big fiscal problems: pensions (in the long term) and structural deficits (oh, right about now). Health-care costs, not public workers, are the main driver of structural deficits. Second, most state pensions were faring reasonably well before the financial meltdown. As recently as 2008, pensions were 84% funded, according to the Centre for Retirement Research at Boston College. (Eighty percent is usually deemed an acceptable level.) Mismanagement has meant that some states, such as my adopted home of Illinois, are in dire trouble soon. Joshua Rauh of Northwestern expects the pension funds in Illinois will run out by 2018. However other states have more time to prepare for doom. Ohio’s pension funds are due to run dry in 2030, assuming an 8% annual return. Wisconsin’s won’t run out until 2038.
Benefits for public workers are a problem, no doubt, but I wonder whether the fight over bargaining rules is eclipsing an immediate crisis. The deadlock in Wisconsin may be replicated elsewhere. A bill in Ohio, to abolish collective bargaining for state employees, is just as aggressive as that in Wisconsin. Protesters descended on Indianapolis yesterday to oppose a few anti-union bills, including one that limits collective bargaining for teachers. Perhaps the attention on bargaining rules is a negotiating tactic—"agree to make concessions or you won’t be able to bargain at all." But the fight may become a dangerous distraction.
http://www.economist.com/blogs/democracyinamerica/2011/02/state_budget_problems
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