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U.S. Senator Orrin Hatch plans to back legislation aimed at curtailing the costs of state and local government workers' retirement benefits, saying the looming burdens pose a risk to the federal government.
Hatch, the top-ranking Republican on the Senate Finance Committee, said Tuesday that he plans to introduce legislation this year, without specifying what it will entail. A report issued by his office today said pension-fund shortfalls — which it estimated at more than $4 trillion — may spur demands for a federal bailout or add to the burden on antipoverty programs if localities renege on promises to retirees.
"The public pension crisis plaguing our nation demands a real solution," Hatch, 77, who represents Utah, said in a statement. "Over the coming weeks, I will be putting forward ideas to reform public pension programs in a meaningful way that doesn't leave taxpayers on the hook."
The senator's proposal may revive a partisan clash in Congress over retirement benefits of state and local-government employees. Last year, Republican-backed legislation to force greater disclosure by state and local governments failed to advance in Congress as Democrats said Republicans were mounting a political attack against public-employee unions.
Pension funds have added to the fiscal strain on states, cities and counties. The credit crisis of 2008 hit the municipalities with investment losses, forcing them to set aside more money to cover the cost of benefits promised to retirees. Last week, Illinois had its credit rating knocked to the lowest among U.S. states by Moody's Investors Service, in part because it failed to shore up its pension fund.
Estimates for the magnitude of the pension-fund gaps vary, depending on the assumptions used to account for the value of money to be paid out in coming decades. The median state pension fund had 75 percent of what it will need to pay for benefits, down from 83 percent in 2007, according to data compiled by Bloomberg.
States have taken some steps to fix their plans since the financial crisis. In 2010 and 2011, 41 states passed legislation changing their pensions, including restrictions on retirees' ability to return to public payrolls, according to the National Conference of State Legislatures.