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State Budget Issues Put Police Officer Pensions at Risk

State legislatures in virtually every state across the country are deliberating over their budget plans for the next one or two years. One of the hot-button issues that has been the focus of state legislators writing the budgets is public employee pensions. Police officers are usually part of a general state pension fund.

Some states with constant ongoing fiscal problems are putting the pensions of police officers at risk. Illinois is considered to be the poster child for fiscal dysfunction out of all states in the country. The Prairie State has an unfunded pension liability of $134 billion. Governor J.B. Pritzker proposes that converting the state’s income tax from a flat to a graduated system would solve their pension woes. Unfortunately, Illinois isn’t the only state with budget issues. Connecticut and New Jersey are looking at transferring assets to cover their growing unfunded pension liabilities. New Jersey has $90 billion of unfunded pension liabilities while Connecticut has $100 billion of unfunded liabilities according to publicly available data reported over the past year.

Famed investor Warren Buffett has recently sounded the alarm on states that have ballooning public pension debts. During an interview on CNBC on February 25, 2019, Buffett warned that private sector businesses should avoid doing business in states that have pension debt problems:  “If I were relocating into some state that had a huge unfunded pension plan I’m walking into liabilities. [… W]ho knows whether they’re gonna get it from the corporate income tax or my employees, you know, with personal income taxes or what. […] You can’t ship it offshore or anything like that. And those are big numbers, really big numbers. And […] you can delay a long time”.

Buffett’s warning paints a bleak picture of states with unfunded liabilities. If the economy in a state like Illinois or Connecticut does not thrive, they will face a diminishing tax base. A tax base in an optimal circumstance would ensure funding of officer’s pensions upon retirement. When states mismanage officer pension funding, they are left with only two options: cut benefits or impose higher taxes on their citizens.

Pensions should not be subjected to political games and posturing. Lawmakers who fail to make the effort to enact meaningful pension reform at the state level must be held accountable at the ballot box.  Police officers have enough to worry about during their shifts. The last thing they need to worry about is whether their pension will not be full of red ink.

Daniel Stuebs is Executive Director of the American Police Officers Alliance, a political organization dedicated to standing up for America’s police officers.