Update: Even Democrat county politicians don’t want to have anything to do with O’Malley passing the pension hot potato to them, here. (Hat tip: Cecil Calvert)
Remember last week that the WSJ called O’Malley “son of Obama” in a critical editorial on the sorry state of Maryland’s financial situation. Gov. O’Malley responded here (you can go read it yourself), but more interesting is the response to his response by Frank Keegan (State Budget Solutions) who many of you met at MD CAN a couple of weeks ago. Below is what he says of O’Malley’s rosy view of our pending pension crisis (Hat tip: Cathy).
At the MDCAN/Franklin Center investigations workshop, Keegan told us that the pension shortfall is a hot potato that each Maryland governor is just trying to hand off to the next guy so as not to be left holding it when the end comes.
Here is Keegan in the WSJ (emphasis mine):
The real monster deception in Maryland is the false promises made to state workers about their retirement benefits. That $16 billion unfunded pension liability you cite actually is at least $30 billion, and probably more than $65 billion, when you include realistic investment-return assumptions and the fact that retiree health-care benefits are at best 1% funded, according to the Pew Center on the States’ April 2011 “Widening Gaps” study.
None of the tax increases Gov. O’Malley proposes this session will make a dent in that hidden debt, which is at least $32,000 on top of all other taxes and fees for each of the declining number of private-sector workers who pay for everybody else. Private employment is at 2001 levels and struggling to claw back under growing tax and regulatory load.
Without drastic benefit cuts now, pension debt must grow. According to the latest full-year data from the U.S. Census Bureau, Maryland state pensions paid out $8.3 billion more than they earned from 2007 to 2010 and lost another $8.6 billion in total fund value. Over the same time, beneficiaries taking benefits out went up more than five times the increase in active members paying in. For every dollar state employees contributed to pension funds, the state lost $4.25.
The system in Maryland, as in many other states, never will recover; the hole is too large. It is a mathematical certainty, not a political position. The pension funds are taking on more risk, chasing unrealistic returns, hoping to pay unrealistic promises. It is a structure of smoke and mirrors that must collapse eventually.