W.Va. faces a canyon of pension liabilities
People talk about mountains of debt. However, debt is a sinkhole that is easy to fall in and difficult and expensive to escape - and hurts one's credit rating.
The good news is West Virginia legislators finally addressed the state's gaping holes in its pension funds for government employees in 1995.
The bad news is, the state embarked on a 40-year plan, which means taxpayers will be shoveling cash into the hole through 2035.
The state's pension debt - unfunded liabilities - amount to 86.2 percent of the state's annual income.
West Virginians are doing better than residents of 12 other states, including Illinois, whose pension debts are equal to 2.4 years of state tax revenues, Moody's Investors Service reported.
However given the high poverty in West Virginia, that pension debt means the state ranks seventh in pension debt as a percentage of personal income.
That averages to each resident owing $5,004 in public employee pension debt, which reflects past mismanagement.
"The largest accumulated liabilities most often reflect management decisions not to fund contributions at levels reflecting actuarial guidelines," Moody's said in a June report on pension liabilities of the 50 states.
"Of the 10 states with the largest pension burdens, six have been downgraded in recent years for the magnitude and management of their pension obligations, in part a reflection of persistent underfunding."
In state upon state, public employee pensions are more generous than private-sector pensions because in state upon state, including West Virginia, public employees are a major voting bloc.
In the 1980s, West Virginia short-sheeted its pension funds. Legislative eyes were bigger than taxpayers' resources, as lawmakers failed to rein in spending to meet tax revenues.
The sins of over-promising a quarter-century ago means 12 percent of the state's revenues today cannot be used to build highways, improve prisons or even give employee pay raises, thanks to a Grand Canyon of debt accumulated by offering large benefits while making tiny payments.
The state should reform pension formulas now.