The Wall Street Journal continues to highlight public sector pension funds as the supposed bane of local governments. Fire fighters, police officers and teachers unions have all taken a hit. A doomsday article in the Wall Street Journal today names unions and pension several times in an article about a Rhode Island city entering receivership without providing any context:
...it wants a receiver to do whatever it takes—such as unilaterally rewriting contracts, cutting pension benefits or restructuring debts—to cut city spending to match revenues.
The city's pension fund has $4 million in assets and about $35 million in liabilities.
The WSJ fails to bring up the fact that pensions--public and private--across the country have struggled because of the financial crisis. Public pensions are not simply in trouble because unions have been lavishing plush benefits to all of their employees. I'll let Peter Orszag explain:
Because the majority of pension assets are held in equities, drops in stock prices have had a significant adverse effect on pension plans.