Public pension debt burden needs reboot

There was a time when most working Americans could count on a pension from their employer to fund the bulk of their retirement years.

But those went the way of the manual typewriter as cost-conscious companies nixed the plans, due to increasing retiree longevity, lower interest rates and the introduction of the 401(k). According to CNN, 4% of American workers have a private pension plan, down from 60% in the early 1980s.

The Golden Years have lost some luster — except if you’re an MBTA worker. If you were hired before 2009, when caps were put in place, you can retire after 23 years, with pension. It doesn’t matter if you’re well under the “retirement age,” as the Boston Herald reported, more than one in five T workers retired before hitting 50.

If you think that’s draining the system, you’re right, the T’s pension fund is running big deficits. The retirement fund last year reported $2.91 billion in liabilities versus $1.45 billion in assets. It falls on the state to fill the annual shortfall, which resulted in the MBTA budgeting $118.2 million to keep the retirement fund afloat for the current fiscal year.

So while private sector workers anxiously watch their 401(k) after each market fluctuation and worry, their taxes are helping support those with public pensions.

Something is wrong with this picture.

Pioneer Institute transportation watcher Charlie Chieppo suggested, “The fix ultimately is to move the MBTA employees onto the state pension plan.”

But the state pension situation is also feeling the strain,

Former state Inspector General Gregg Sullivan, now also with the Pioneer Institute, noted, “The state pension system, and that includes teachers, is underfunded by $43 billion. That’s mammoth.”

Massachusetts is hardly alone in bearing a huge public debt burden. According to Forbes, the national total pension debt, as calculated by Pension Tracker, stands on a market basis at $5.2 trillion, or an average of $43,179 per household.

Forbes noted that unless pension funds around the country continue to earn 7% or more each year, it’s likely that taxpayers will be on the hook for trillions of dollars of promises to government unions.

These on-the-hook taxpayers have seen their own pension plans eliminated and must calculate a postponed retirement funded by 401(k) savings, Social Security and possibly part-time jobs.

Sullivan of the Pioneer Institute offered a solution that other states are mulling.

“The state needs to consider inviting new employees to go on 401(k) programs,” he said.

For the same reasons that private companies moved from pensions to 401(k) plans, Massachusetts should make a similar move with public pensions — from the MBTA to all state government jobs. Lessening our public debt burden would be a boon for our credit rating, and spare the next generation from having to foot astronomical tax bills.

Those who have a 401(k) plan instead of a pension are, to a degree, working without a net, and have to ride out market lows and wait for the highs.

But citizens would be riding it out on a level playing field — whether in Massachusetts or any of the other debt-burdened states — without one group of workers subsidizing another.