Hatch Releases Report Detailing Threat of $4.4 Trillion Public Pension Debt
WASHINGTON – U.S. Senator Orrin Hatch (R-Utah), Ranking Member of the Senate Finance Committee, today released a comprehensive report, State and Local Government Defined Benefit Pension Plans: The Pension Debt Crisis that Threatens America, outlining the financial risks of the nation’s $4.4 trillion public pension debt and its negative impact on the American economy.
“This report highlights the fiscal threat posed by public pension programs in states across America. Today, public pension debt stands at an alarming $4.4 trillion with outstanding state and local municipal debt at nearly $3 trillion,” said Hatch. “The public pension crisis plaguing our nation demands a real solution. Over the coming weeks, I will be putting forward ideas to reform public pension programs in a meaningful way that doesn’t leave taxpayers on the hook.”
The Hatch report provides an in-depth analysis of how the unfunded pension liabilities of state and local governments jeopardize the fiscal solvency of states and municipalities as well as the nation’s long-term fiscal health, including the U.S. credit rating.
According to the report, over the past two years, there has been an unprecedented level of state legislative activity involving changes to defined pension benefits, with 40 states implementing 48 new reform laws. To date, however, state and local pension plans remain dangerously underfunded. Today, pension debt stands at $4.4 trillion with outstanding state and local municipal bond debt at another $2.9 trillion. The report further noted that 31 states have funding ratios lower than 80 percent – the indicator of a sound pension plan. To date, 11 states are projected to have exhausted all of their pension assets by 2020.
The Hatch report recommends that any pension reform action taken by Congress achieve three goals: 1) affordability and cost certainty for taxpayers; 2) retirement income security for public employees; and 3) prevent federal bailout of states.
The Senate Finance Committee has jurisdiction over public pension issues. Hatch is currently working to draft legislation to address the current pension crisis and plans to introduce a bill this year.