Jonathan Ingram
Director of Health Policy and Pension Reform

Across the country, state pension funds are dangerously underfunded. Recent calculations have put the total level of states’ unfunded pension debt at more than $2.5 trillion. That's more than one-sixth of the entire U.S. economy and more than all taxes paid to the federal government last year.
 
Now, many states are starting to chirp that there’s no way to dig out of their massive pension debts. Unfortunately, the past few years have shown us exactly what happens when large institutions face big challenges. When these institutions are deemed too big to fail, the federal government swoops in to bail them out. And there’s already movement afoot for the next big bailout – state pension systems.
 
Of course, a federal bailout of state pension debt would be disastrous. It would reward reckless states – such as California and Illinois – at the expense of states that have managed their finances responsibly.
 
That’s why we launched NoPensionBailout.com last year. We joined forces with former Sen. Jim DeMint, R-S.C., the U.S. Congress Joint Economic Committee, lawmakers from fiscally responsible states and national pension experts to stop the idea of a potential bailout before it gained much traction.
 
We worked with lawmakers here in Illinois to pass a resolution telling the federal government “no thanks” to the potential offer of a bailout. It looks like other states could be following suit.
 
Last week, California Assemblywoman Shannon Grove, R- Bakersfield, introduced her own No Pension Bailout resolution. If a federal bailout occurred, California would receive a cool $61 billion bailout financed by hardworking taxpayers in states such as Tennessee, Nebraska and North Dakota. That's nearly $5,000 per California household that would get shifted to taxpayers in more responsible states.

As long as a bailout is on the table, state and local governments will continue to delay the structural spending reforms that are so critical to their long-term fiscal health. Grove’s resolution would send a clear signal to the federal government that California is serious about getting its fiscal house in order.
 
There’s no denying the fact that state pension funds are in deep trouble. But big challenges need big solutions. Going to Washington, D.C., with a hand out doesn’t fix the crisis. It merely forces taxpayers in other states to delay the day of reckoning in states such as Illinois and California.