by Joseph Coletti
Senior Fellow, Fiscal Studies, John Locke Foundation
Unfunded pension liabilities are driving up the cost of state government borrowing. For states, there may not be much difference between Republicans and Democrats. But for local governments, Democratic control means more unfunded promises. When people voter with their feet, the problem gets worse:
Today’s public-sector employees need to live reasonably close to their plan’s tax base in order to work there, but are free to move away upon retirement. … public employees that accrue unfunded pension benefits are systematically more likely to retire early and leave their municipality so as to be shielded from later tax increases aimed at closing pensions’ funding gap.