US - State and local governments in Wisconsin face costs of around US$17.4bn to settle their unfunded liabilities, leading to possible tax hikes or programme cuts in the near future, a Wisconsin Policy Research Institute report has revealed.
WPRI senior fellow George Lightbourn highlighted the huge pension and benefits promises made by Wisconsin government and gave recommendations on how the issue should be tackled.
"The exact amount will not be known until 2009, but it is already clear that there are either tax hikes or programme cuts in the future for Wisconsin taxpayers," said Lightbourn, who is also a former Wisconsin administration secretary .
He said state government would need to spend $3.6bn to retire its pension and benefits liabilities while local governments, including schools would pay out around $13.8bn to settle its pension debt.
An earlier WPRI report had shown the Wisconsin budget to be $2.2bn in the red, meaning the government had promised to spend 17% more than it had money to actually pay out.
Lightbourn said the recent improvements in accounting standards made apparent the true magnitude of deferred responsibility.
“The concept of deferred responsibility is ingrained in Wisconsin government... and the emerging picture is that government had been spending beyond its means,” he claimed.
The report went on to offer a number of recommendations on the steps to be taken to prevent the liabilities from taking over government budgets, as was the case in Illinois.
“Government must stop the practice of making promises to its employees for which there is no money,” Lightbourn warned. He said therefore the pension costs must be brought in line with what the government can afford.
“Looking ahead, the concern is that the same government leaders who have sat idly by watching the IOUs mount are the same leaders expected to solve the problem,” the report highlighted.
Lightbourn said the leaders had two clear choices – either cut spending on benefits rising in the future or continue to spend and turn to the taxpayers for more money.
“Given the record of accomplishment to date, taxpayers should be prepared for the worst,” he concluded.
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