United States state pension plans are underfunded by an estimated $2.2 trillion, though reported estimates vary.1 And soon, these unfunded liabilities will be under greater scrutiny. Beginning in 2015, 100 percent of states will be required to show unfunded pension liabilities on their balance sheets.
Given the high stakes, it may seem a high mountain for public sector leaders in the US and Europe to climb to shape an affordable, balanced plan to get pension plans on a path to fiscal recovery. By taking pragmatic steps to solve the financial sustainability challenge, leaders can slowly—but surely—climb the mountain and get to firm financial footing. Beneath their feet, they will have spending on past generations, and arrayed before them will be the right paths to support future generations. From this clear vantage point they can take the right action to solve this important public policy issue.
1 Moody’s, “Adjustments to US State and Local Government Reported Pension Data,” July 2, 2012 – page 9.