There is as much as a $4 trillion gap between what states have promised their public workers in retirement pensions and what they’ve actually set aside and invested in order to pay for them.
There are enough reasons this has happened to count as a survey question on the most boring episode of Family Feud ever—states and cities didn’t set aside enough money, employees didn’t contribute enough, and guaranteed investment returns are overestimated, among many other problems.
But what does the average American think about the pension crisis and what would they do? A small number of communities like Phoenix, Arizona, and San Jose, California, have put pension reform in the voters’ hands, with mixed results. In our latest Reason-Rupe poll, we decided to focus almost entirely on the pension crisis, asking Americans how seriously they view the problem and what sort of trade-offs they would accept to fix it.
Yes, Americans Are Concerned About the Pension Crisis
Pension worriers will be pleased to hear that Americans are at least paying attention. A full 72 percent of those polled are either “very” or “somewhat” concerned about state and local governments’ ability to fund the pensions they’ve promised to public employees. A similar number (74 percent) are concerned that state or local governments will raise taxes in the future in order to meet these pension obligations. When asked to prioritize dealing with the pension crisis, 35 percent said pension reform should be a top priority, while 41 percent said pension reform should be an important but lower priority.
Actually tackling the pension crisis is a much more complicated affair. The poll asked participants to consider a host of different possibilities—raising taxes, reducing services, capping maximum pension payments, requiring workers to pay more, and transferring public employees to 401(k)-style defined contribution plans, rather than guaranteed pensions.
The most consistent response is probably also the most obvious: Americans want pension reform solutions that push public employees to play a greater role in their own retirements rather than relying on taxpayers to bail them out. Those surveyed were significantly opposed to raising taxes (74 percent) or cutting government services (77 percent) in order to fix funding problems with public employee pensions. Instead, when given a list of choices, participants strongly supported (82 percent) requiring public employees to contribute more to their own retirement funds. When asked to rank potential solutions, “Require current employees to contribute more toward their own pensions and benefits” blew every other option out of the water with 63 percent of the vote as the first choice. No other option even hit double digits.
But that list of solutions assumed states and cities would keep the existing pension systems and salvage them. The Reason-Rupe poll also asked whether participants would like to switch public employees from pension funds to 401(k)-style defined contribution retirement funds. The answer was yes. The poll asked participants whether they would favor such funds for current public employees and a separate question for just future hires. In both cases, the majority said yes, but support for shifting over future employees was notably higher (67 percent) than for current employees (59 percent).