Unfunded pensions are usually the result of over generous benefits, especially COLAs, granted to former employees. Unfunded pension and OPEB liabilities put beneficiaries in peril if the municipality goes bankrupt which aligns the beneficiaries’ interest with current residents and taxpayers. POBs convert off balance sheet unfunded liabilities to debt on the balance sheet which reduces, and possibly eliminates, the incentive of beneficiaries to negotiate with municipal leaders and participate in hard decisions necessary to pay high portion of benefits now and in the future without bankrupting the municipality.
It's so easy to make promises, especially if you never really intend to fully pay for them.
The politicians assume they will be long gone before the costs actually bite, and for some of them, that was true. But the time is up for many of them.
Unfunded pensions are usually the result of over generous benefits, especially COLAs, granted to former employees. Unfunded pension and OPEB liabilities put beneficiaries in peril if the municipality goes bankrupt which aligns the beneficiaries’ interest with current residents and taxpayers. POBs convert off balance sheet unfunded liabilities to debt on the balance sheet which reduces, and possibly eliminates, the incentive of beneficiaries to negotiate with municipal leaders and participate in hard decisions necessary to pay high portion of benefits now and in the future without bankrupting the municipality.
Yeah, it all stems from the initial choice of the promises made, as I mentioned in one of the earlier posts:
https://marypatcampbell.substack.com/p/choices-have-consequences-retirement-afa
It's so easy to make promises, especially if you never really intend to fully pay for them.
The politicians assume they will be long gone before the costs actually bite, and for some of them, that was true. But the time is up for many of them.