Political gridlock has sown the seeds of the pension crisis. Over promising to state employees (“The state doesn’t pay as well as the private sector, but we have great pension benefits to make up for it!”) and not paying the price each year has resulted in gross under funded pension plans.
New Jersey has made less than the required annual contribution to its pension plans in each of the past 20 years!
Illinois attempted to reduce pension benefits and ran afoul of the state’s constitution. “Membership in any pension or retirement system of the state,….the benefits of which shall not be diminished or impaired.” The Illinois Supreme Court ruled against the state’s plan. The Securities Exchange Commission brought fraud charges against the state of Illinois for failing to disclose that the significantly underfunded pension plans.
