Taxpayers nationwide are staring down a swelling tidal wave of government pension debt. Recent estimates put the combined unfunded liability of state pension systems at $2.5 trillion. Nearly every state has tried to reduce these unsustainable costs, but most reforms have proven to be baby steps or worse — leaving future generations up to their necks in waves of debt.
One inescapable fact remains: Without meaningful reform, paying down these liabilities would cost the average American household an additional $1,385 in taxes every year for the next three decades.
Not all state reforms have merely kicked the can down the road, however. Some states have pursued — or are pursuing — a shift to a defined contribution plan like the 401(k), which most private companies already offer. These states are leading the way in government pension reform. By simply moving to a 401(k)-style plan, states will put themselves on surer financial footing and protect taxpayers from the political games that have created this funding crisis.