Mary Williams Walsh has been covering public and private pensions for much of her professional career, at The Wall Street Journal, The Los Angeles Times and, most recently, The New York Times. Few, if any, have done it better.
Long-time readers of News Items will recall this newsletter’s long-running fascination (some would say “ morbid obsession”) with “unfunded pension liabilities,” a room-emptier at a dinner party but an issue of enormous importance in the realm of non-performative politics and public policy.
You can’t really understand the '“issue” without understanding the back story. Below, in Part One, Mary tells much of the back story, succinctly. It is well worth your time and attention. — John Ellis
Chapter 1: Two roads diverged…
Back in the 1960s and earlier, pensions were “gratuities.” Retirees had no legal recourse against employers that broke their promises. Employers used cash accounting, meaning that if a company had a pension plan, it reported the “cost” as the number of dollars it put into its pension fund every year. That was easy, but it didn’t reflect reality. Some companies set aside more than they had to, perhaps for tax reasons. Or, in a downturn, a company might go for years without putting any cash into its pension fund. That didn’t mean its pension plan had no cost. The workers were still building up their benefits every year. The employer’s obligations kept increasing every year. Eventually, the workers would retire and expect to draw monthly checks for the rest of their lives. Cash accounting ignored all that.
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