Public pension plans across the nation are in trouble.

For decades, state and local officials have overpromised on and underfunded government-run retirement plans, resulting in the accumulation of trillions of dollars in unfunded liabilities, or debts owed for which there is no current funding available. In fact, one recent study pegged total unfunded pension liabilities for all systems at more than $4 trillion-or $13,145 per American.

Most elected officials understand that this fiscal situation is not sustainable, but few know how to go about making the kinds of public policy changes needed to ensure the long-term viability of their systems. But now, thanks to the American Legislative Exchange Council (ALEC), those officials have an effective playbook from which to operate.

ALEC’s latest report, Keeping the Promise: State Solutions for Government Pension Reform, “includes a guide to model policies and a series of useful resources designed to help legislators navigate the intricate details of public pension policies.” The report also lays out principles for pension reform, including: 

  • Pension reform should remove the risk that states will go functionally bankrupt due to pension obligations;
  • Pension reform should make sure that commitments and obligations to current workers are fulfilled;
  • Pension plans should be predictable and defined;
  • The public (taxpayers) should not bear all the risk of pension plans;
  • No pension plan should be exempt from scrutiny; and
  • Retirement plans should not lock employees into the public sector.

The importance of meaningful public pension reform cannot be understated. State and local governments around the nation, including Texas, are nearing a tipping point on unfunded liabilities and could well end up facing a serious fiscal crisis if the right reforms are not put in place. The time to act is now.