30 dedicated years ...

30 dedicated years … and a great pension! After a career in public service, they’ve earned the right to the “good life.” But, who’s gonna pay for it? Unless drastic changes are made, future taxpayers from Hartford to Honolulu will be hopelessly in hock to police, firefighters, city managers, and teachers of the past.

Their problem is YOUR problem.

Ever wonder why potholes take so long to be filled in? Why the branch library didn’t reopen following the financial crisis? Or, why the cops didn’t show up for a fender bender? Within many communities, rising pension and health-care benefit costs continue to crowd out general funds needed for day-to-day services. A city’s general fund is the main source of cash used to pay employees and provide day-to-day services such as garbage pickup and parks maintenance.

Years of salary increases and generous retirement benefits have left many public-employee benefit funds scrambling to meet their obligations. Investment losses and reduced state aid during the financial meltdown further exacerbated the problem. Many public pensions now hold more risky assets on the assumption that high returns will close the gap. This shifts costs onto future generations who must make up for shortfalls if investments don’t pay off as assumed (see: In U.S. we trust).

According to Moody’s Investors Service (2014), Syracuse, N.Y. captured the gold by spending a whopping 46% of its 2012 general fund on pensions and health-care benefits. Silver medalists include Pasadena, CA (43%), San Jose, CA (31%), Hollywood, FL (25%), and Springfield, IL (25%), reports The Wall Street Journal (2014). Nationally the median is 10% and rising, as the number of retirees who decide to “hit the beach” grows.

The fuse is lit.

Research conducted for the American Enterprise Institute (2014) found the average benefits paid to a newly retired state government employee with at least 30 years of job tenure equated to an income higher than 72% of full-time workers in his or her state. Thirty states pay replacement rates above 85%, and in five states—Oregon, California, Texas, New Mexico and West Virginia—an average full-career employee retiring today receives a retirement income higher than his final salary. This excludes public-safety employees, who typically receive the most generous pensions.

But wait—the red ink doesn’t stop there! Although public-pension funds have garnered attention for being underfunded, a more precarious situation has received much less notice: health-care obligations for public retirees. Unlike pension plans, governments are not required to separately contribute to support their promises to pay for health-care coverage. In 2013, only 11 states funded more than 10% of retiree health-care obligations, and only eight out of the 30 largest U.S. cities funded more than 5%, reports the Pew Charitable Trust (2013). New York City tops the list with $22,857 of unfunded liabilities per household.

They got the gold … you’ll get the shaft.

Of course, not every public employee makes out like a bandit. Long-term employees receive generous benefits but government workers with shorter careers receive far less. Nearly half of government employees leave without any right to future pension benefits (thank you for helping reduce the deficit). Here are some other zingers:

In 2013, nearly half of state and local plan sponsors failed to make their full pension contribution. Guess what? Their obligations didn’t go down.
Underfunded obligations reduce opportunity and quality of life. When Detroit declared bankruptcy in 2013, half of the city’s $18.2 billion long-term debt was owed for employee pensions and health benefits. Like an IV in reverse, your overall standard of living is being drained away.
Some people will get screwed. But it won’t be seniors. NeXters, you are completely out-gunned; nearly a third of the voting public is 65 or older and they are overwhelmingly more inclined to vote than you are.
It’ll only get worse. As Boomers retire en masse and the dam breaks, every city, county, and state will be flooded with a rush of liabilities that could suck your future financial lifeblood out to sea. Your best defense? Pay attention to what’s coming down.
No matter what local politicians tell voters, warns one taxpayer advocate, “When you see tax increases, think pensions.” Remember that next time you’re in line at the DMV. Or at the beach.