By Cory Eucalitto
Originally posted by State Budget Solutions on July 12, 2013

Washington is beginning to take note of the funding crisis facing America’s states and municipalities. It calls attention to the inadequacy of the response to the crisis that has so far come from state governments themselves. This is welcome news.

Last week, Senator Orrin Hatch (R-UT) unveiled a bill designed to give new flexibility to state and local public pension plans struggling to stay afloat. The Secure Annuities For Employee (SAFE) Retirement Act of 2013 would alter the tax code to allow plans to be transferred to life insurance companies and other annuity providers. State Budget Solutions published a summary of the bill’s key points here.

The pension funding crisis – a combined $4.6 trillion unfunded liability – is first and foremost a state and local government crisis that requires state and local solutions. Of course, those governments operate under the laws and tax code of the Federal government, so anything Washington can do to encourage solutions is a great step. Sen. Hatch’s bill may have potential as one of those steps, in a way that would signify healthy attentiveness on the part of Washington to the needs of the states.

Back down at the state level, though, the pension reform debate is often stale and recycled. True reform, which would involve a complete overhaul of the way public employees receive a secure retirement, modeled after the proven successes of defined contribution plans in the private sector, is left on the table in favor of half measures that end up stalled in a court room battle anyways.

The combination of leaders who still fail to recognize the magnitude of the crisis and entrenched interests desperate to make sure that the ignorance continues is toxic. Until more people in state capitals and city halls recognize what one Senator who has been stuck in the corridors of Washington for over 30 years has been able to, little will change. The pension crisis needs bold, innovative solutions that originate from the same source as the problem itself: the nation’s state and local governments.

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