In recent years, state pension funds and other social insurance funds lost $477 billion dollars. One of the key reasons for the decline was the recession, a direct result of conservative policies and a huge decline in tax revenues and other fees to the states, which declined half a trillion dollars in 2009 alone.
California suffered one of the biggest losses in 2009, with $136 billion being lost from their pension fund, 21 percent of national losses that year, despite having only 12 percent of the national population. The state lost nearly $100 billion the year before that.
The conventional wisdom response to the pension losses is to claim that it shows that pensions are too expensive and we should get rid of them. The problem with that is that if state governments invested money more wisely and raised revenue in a responsible way, the pensions are easy to fund and, more importantly, they are part of the promise that has already been made to state workers. These pensions are part of the compensation that was offered to workers to get them to take on jobs that are vital and often thankless. Cutting pensions effectively means cutting compensation for state employees, who are already under assault from every direction. It also means that we, as a society, renege on our promises and it means that high quality employees are likely to find work elsewhere, something that drives down the quality of services provided by government, further eroding the economy and the quality of life of all Americans.
Beyond this, the problem is that most of the losses were avoidable. Poor investments have been a major problem. States like Ohio and New York are suing BP for misleading investors, including state pension funds, about the state of the company even prior to the Deepwater Horizon spill. And investing in BP was far from the only bad investment choice made by states.
A much bigger problem has been a lack of regulation on investments and with the companies that make them and the agencies that rate them. So much fraud, deception and other crimes have been committed by these entities that the list of lawsuits currently in the works is too long to print in full.
Alaska is suing Mercer. California is suing Countrywide. And Standard and Poor's. And the New York Stock Exchange. Chicago and Atlanta are suing Northern Trust. Detroit is suing UBS. New Jersey is suing Lehman. Ohio is suing Wachovia. Oregon is suing Countrywide. We could go on and on.
The argument that pensions are too expensive and that they are breaking state and local governments is belied by the facts. The evidence is clear that:
The simple fact is that almost everything conservatives -- and most of the mainstream media -- is saying about state pensions is inaccurate and this is another example of a manufactured crisis and draconian solutions being offered to "solve" the crisis. The reality is it is an assault on state workers, a group that doesn't vote for conservatives, so conservatives are punishing them.
This is the first in a series of posts looking at the state pension "crisis." Future posts will take a closer look at several states -- such as Florida and California -- and the problems they face and will look at Republican policies across the country that have caused this particular problem.