Public pensions creating burden

The recently concluded, and mercifully short, special session of the legislature spent more than $70 million to more adequately fund our public schools.

Triggered by the Montana Supreme Court's interpretation of the Montana Constitution, the controversy over the amount of school funding and the level of quality it provides is certain to continue in both the courts and the legislature as long as there are plaintiffs and politicians.

But the amount just spent on schools was dwarfed by the $125 million spent to rescue state public pension systems. The pension bailout was not the result of any subjective judicial interpretation. It occurred because cold numbers show that state pension funds will eventually go broke without more money.

The public employees and teacher's retirement systems, accounting for about 85 percent of Montana's public employees, are funded by employer and employee contributions. Never has a projected unfunded liability in either of them caused the legislature to fund them directly.

The unprecedented emergency nature and magnitude of the legislature's action on pensions is a wake-up call. Most Montanans and most Americans are still sleeping.

The mathematical conclusion that Montana's public pension systems are drifting into insolvency is symptomatic of a vastly greater problem that threatens private as well as public pension plans, retirement and healthcare programs across the country.

The reason for the impending calamity is that people are living longer and having fewer children. The result is that pension plans and "entitlement" programs that Americans have grown increasingly dependent on face the same peril as our comparatively small systems in Montana.

Because of revolutionary advances in medical technology and healthcare, Americans can now expect to live to age 77. A century ago, our life expectancy was 45. People born in the middle of the last century are nearing retirement age now.

In 1960, there were slightly more than five income-earners for every Social Security recipient. Today, the ratio is about 3.3 to one, and in the next quarter of a century it is projected to fall to 2.2.

A half-century or so ago, the average number of life-time births per woman in the United states was three. Today it is two. If longevity continues to increase, and the fertility rate continues to decline to below a rate of 1.7, as is the trend in other developed countries, Social Security outlays will rise from 11 percent of worker payroll today to more than 21 percent by 2040.

More alarming still, Medicare outlays by this same calculation will soar from less than 6 percent to more than 35 percent.

Former Commerce Secretary Peter G. Peterson, in his thought-provoking book Running on Empty, calculates that just to pay for these two programs as they are currently structured will require nearly 57 percent of a worker's payroll by 2040.

We strive to live healthier and longer, and our smaller families are easier for us to support. But it is both unrealistic and unfair to expect the next generation to pay more than half its income to support us.

The reality is that retirees will soon have to receive less and wait longer to begin receiving it. And our children will have to pay more than we paid to receive less than we will receive.

A surplus made it possible for the state to supplement our Montana pension plans. No such option exists on the national level for Social Security and Medicare because of our $8 trillion national debt.

That adds up to an additional burden of more than $27,000 that the kids will have to pay for what we have already spent. And right now, the debt is growing at the rate of $2.8 billion per day.

I hope our government can never force us to die younger or have more babies, but it shouldn't impoverish our old age or burden our children with ungovernable spending.

Bob Brown is a senior fellow at the O'Connor Center for the Rocky Mountain West, in Missoula.