Running on Empty

Maryland’s pension system will run out of money in the year 2024, according to a recent study by economist Joshua Rauh of Northwestern University and the National Bureau of Economic Research (see Table 1 pg. 26). Rauh’s analysis—as do most state pension systems including Maryland—assumes an eight percent return.

However, over the last decade Maryland’s pension system has seen only a two percent return, meaning the pension fund could run dry earlier than 2024. Even though the system saw a 14 percent return for the last six months of 2010, it lost $11 billion between 2007-2009.

The aggregate liability for state pension systems is $3 billion. Maryland’s pension system fun liability is $18 billion. Rauh argues that if sates want to remedy the problem—assuming the eight percent return—they would have add an additional $75 billion annually.

In addition to the pension fund problem, Maryland’s liability for retiree healthcare is $16 billion. All together, Maryland taxpayers are on the hook for over $6,000 each for state employee pensions and healthcare benefits.

Governor Martin O’Malley’s has put forth a modest reform proposal, yet the state public sector unions are opposing it. Patrick Moran, head of the Maryland chapter of the American Federation of State, County, and Municipal Employees said, “We’re going to fight like hell against it.”

AFSCME and other public sector unions are marching on Annapolis tonight to protest O’Malley’s plan and reductions in planned increases to education spending. Those unions are one of the most powerful political special interests in the state, contributing millions to Maryland’s one-party Democratic rulers.

Taxpayers are now acutely aware of the shakedown those unions have perpetrated, and the true costs of subsidizing their political power. They are demanding reform. The public sector unions know it, but like Welsh poet Dylan Thomas, they “will not go gentle into that good night.”

This video from the Manhattan Institute, a free market think tank, explicates the shakedown.

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