Election cycles push politicians into short-term thinking. Being fiscally responsible for the long term, which requires saying no to popular and sometimes worthy causes, isn’t in most elected officials’ political interest.
That’s what makes the challenge of fully funding public employee pension systems so formidable. As government revenues at all levels continue to tank, the temptation to kick pension funding further down the road — or ignore the cost increases that are coming — can seem overwhelming
But this is a brewing crisis, and it’s being faced by municipal governments as well as the state. Cities throughout Washington have unfunded pension liabilities, a reality that will eventually bite.
To recap: Public employees at the state and local levels are generally covered by one of the many pension plans administered by the state. Two of the oldest and largest are dangerously underfunded, and the state actuary warns that the health of other plans is in jeopardy.
Huge investment losses the past two years are partly to blame, but were largely unavoidable given market conditions. The bigger blame lies in choices made by the Legislature to delay and suspend contributions to pension plans.
Part of the result, the state actuary warns, is that government contributions to these plans will triple over the next six years. That represents a significant hit not just to the state budget, but to county and city governments, who have also seen tax revenues fall dramatically. Most have already cut services, laid off workers or instituted furloughs to make ends meet. And with economists generally agreed that the recovery will be slow and rocky, more tough choices await.
Denying the reality of pension obligations will only make them tougher. There is no easy way out. Pension obligations are legally binding contracts, and they have to be paid one way or another. Before spending on other priorities, cities need to account for those obligations realistically to get a true picture of their fiscal condition.
Just as the federal government cannot continue to borrow against the nation’s future forever, cities that put off their pension obligations are limiting their own opportunities for the future.
For their part, state lawmakers should follow the advice of the state actuary:
Doing the right thing on pensions may not be popular in the short term, but it’s the only responsible action for the long term. It requires leadership and accountability. Let’s see how many of our elected officials are up to it.
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