Make a promise to a child and then break it, and what are you likely to hear? "But you promised!" We carry that same emotional response to a broken promise into adulthood.
No one wants to hear all the reasons why a promise will go unfulfilled, especially when it affects their financial future. But thousands of government retirees who are not eligible for Social Security and who count on a pension instead are hearing about proposals to renegotiate and cut their pension payouts.
In a July 19 CNNMoney article, a 65-year old retired Detroit firefighter says, "My pension is what I was promised." An August 5 CNBC piece quotes the head of Chicago's firefighters' union, "Our members were promised certain things ... We expect that the city holds up their end of the bargain when we signed on to be firefighters and paramedics for the city of Chicago.” But as the CNBC article explains, Illinois is one of the worst-off when it comes to public pension systems.
Nine states — Hawaii, Alaska, Kansas, Rhode Island, New Hampshire, Louisiana, Connecticut, Kentucky and Illinois — have now set aside less than 60 percent of what they need [to pay public retirees].Illinois has saved just 43 cents to cover every dollar of what it needs to pay 350,000 retirees and 500,000 current plan participants who are counting on a pension check.
In Detroit, city officials argue that pension payments to retirees simply have to be cut because the money just isn't there to pay them.
Other states and cities also face substantial shortfalls in their public pension systems. Many have not recovered from the 2007-2009 financial crisis, despite a rising stock market and an economic recovery.
If there's a public pension crisis now, imagine what it would be like if the economy were to tank again.