The best and worst state debt disasters

By Warner Todd Huston

Forbes created an interactive map where Americans can find out what sort of mess their state is in. All you need do is roll your mouse cursor over your state and get the good ... or horrible... news.

Forbes finds that the best state is Utah. The debt per capita in the Beehive State is just $447 with an unfunded pension cost of $7,272. Utah is rated by Moody's at Aaa and has an S&P rating of AAA.

Unsurprisingly the worst state is Illinois. Illinois is a disaster for sure. Illinois's debt per capita is $1,877 and it's unfunded pension obligations stands at $17,230. Moody's rates the state an A1 and its S&P rating is AA-.

But don't worry. It's the Obama administration to the rescue with another giant bailout — a bailout that is all too naturally a payoff to the unions that spent millions to elect him president. This bailout is the Casey bill.

The Casey bill essentially takes private pension plans of non-government employee unions and makes those obligations a public debt instead of a private one. Casey would bailout failed union pensions with public money.

Brett McMahon, spokesman for Associated Builders and Contractors, however, offered a few alternate proposals. McMahon made those recommendations in a piece by Connie Hair at HumanEvents.com.

Automatic triggers for remedies for plans reaching critical underfunding thresholds including new rules for authorization of mass withdrawal. Unions would be required to meet certain disclosure standards and subsequently the company would be required to pay the withdrawal penalty.

• Liquidation of plan assets to fund current retirees and those about to retire, with an equitable allocation to participants of the fund's remaining assets should mass withdrawal occur.
  
  
• Increased transparency from the multi-employer pension plans.
  
  
• Yearly written notices issued to all participants and beneficiaries when the ratio of the number of retirees, beneficiaries of deceased participants, and terminated vested participants in a multiemployer plan reaches 3:1 or less to the number of the active participants in the plan.
  
  
• U.S. Department of Labor requirement to publish on the Internet and index in a searchable format all Form 5500 pension filings.
  
  
• Any mention of benefits in collective bargaining negotiations include the funding status of the benefits and the degree to which they are insured by the PBGC (currently $12,870 per year maximum).
  
  

McMahon advises dealing with the massive unfunded liabilities from public employee union contracts will be a stickier proposition.

"We're going to have to pass some kind of specialized bankruptcy law for states. Unions are standing pat, giving no ground whatsoever," McMahon said.

© Warner Todd Huston