Pensions Aren't the Problem

Ezra Klein explains:

State pension systems are a problem. But they're not the problem right now. And they're certainly not what's standing between New Jersey and its tunnel. After all, Christie didn't fund the pension system this year. He simply skipped the $3.1 billion payment, saying he wouldn’t add money to a "broken" system. If I didn't buy lunch today, you can hardly blame the cost of my lunch for the fact that I don't have bus fare.

Brooks's column doesn't do much to put the pension obligations of the states in context, so we'll do it here. Just today, Alicia H. Munnell, Jean-Pierre Aubry and Laura Quinby released a paper (pdf) tallying up the pension problem. "Public plans are substantially underfunded," they conclude, but "in the aggregate, they currently account for only 3.8 percent of state and local spending." Roll that around for a minute. Pension obligations currently account for 3.8 percent of the average state's spending. That's not where the current crisis is coming from. 

[...]

"The problem in this moment," says Betsy Zeidman, director of the Center for Emerging Domestic Markets at the Milken Institute, "is revenue." The word "revenue," incidentally, doesn't appear in Brooks's column.

But that's what changed. In the months before the financial crisis, in fact, states had built up record rainy-day funds and were starting infrastructure projects. Then Wall Street collapsed, and so too did the revenue states got from taxing property, incomes and sales. At the same time, the need to spend on social services went up rather than down. The result? A terrible strain on state budgets. But not one you can blame public employees for. 

This is, of course, exactly the problem here in Jersey. We cut taxes for millionaires, give away billions in tax breaks to corporations, and then wonder why we don't have enough money to pay teachers and build bridges.

But... but... but... GOLD-PLATED BENEFITS!