Letters: Unfunded pensions were always a fraud

When I took my first job on a university faculty, I had two offers, both from public colleges. One was a defined-contribution pension plan through a nonprofit financial organization, to which I would have to make a contribution. The other was an unfunded defined-benefit state pension plan. Having trained as an economist, I realized that employer contributions to my pension were part of my pay, and that, because they would be deposited with a third-party financial organization, the contributions would be my property. The state pension would become my property only in the future. I chose the first of the two offers.

Unfunded state pension plans were, from the start, a fraud on taxpayers. By paying public employees partly in unfunded IOUs, they enabled state governments to claim that their budgets were balanced when, in fact, state liabilities were increasing faster than state assets. The unfunded IOUs were a promise by the state to pay part of the salaries in the future from future tax revenues, and thus a promise to raise taxes if necessary. They were also a fraud on the employees, since a sovereign state is incapable of making such a binding promise.

Roger A. McCain

Rosemont

mccainra@drexel.edu