Assertion of high performance is skewed
Is Washington’s pension system well-funded and secure, or does the accounting system it uses simply overstate strengths while minimizing weaknesses?
In his March 21 op-ed “State’s pension plan in great shape,” [Opinion, March 22], Washington state Treasurer James McIntire trots out the familiar canard that the state’s pension system is funded at 113 percent — and by the standards of government reporting, that’s arguably true.
But an analysis prepared as recently as last year by the American Enterprise Institute reveals the state is only funded at 52 percent — a level that would earn it a shaky status if Washington were a private business.
The main problem is that the state reports the value of its pension system based on the 8 percent return it hopes it can earn via riskier investments in the stock market rather than the 4 percent it is guaranteed to earn with safer instruments like Treasury bills.
Just because you say you’re going to get 8 percent doesn’t mean you will. On paper, risk solves the problem. In real life, it doesn’t always work that way.
McIntire, like other pension-system apologists, points to the difficulties other states — for example California, whose unfunded pension liability has been estimated at $500 billion — are experiencing to prop up the assertion that Washington is performing well.
But being one of the better-funded states these days is being like the prettiest hog in the slaughterhouse.
–Jeff Rhodes, managing editor, The Freedom Foundation, Olympia