Growing Deficits Threaten Pensions
Accounting Tactics Conceal a Crisis For Public Workers
David Cho - Washington Post
Sunday, May 11, 2008
The funds that pay pension and health benefits to police officers, teachers and millions of other public employees across the country are facing a shortfall that could soon run into trillions of dollars.
But the accounting techniques used by state and local governments to balance their pension books disguise the extent of the crisis facing these retirees and the taxpayers who may ultimately be called on to pay the freight, according to a growing number of leading financial analysts.
State governments alone have reported they are already confronting a deficit of at least $750 billion to cover the cost of the retirement benefits they have promised. But that figure likely underestimates the actual shortfall because of the range of methods they use to make their calculations, including practices that have been barred in the private sector for decades.
Local governments use these same techniques for their pension funds and face deficits that further contribute to what some investors and analysts say may be shaping up to be a massive breach of faith with a generation of public employees.