It is pleasant to look forward to generous pension payments at the end of a long period of faithful employment. But problems arise if promised pensions outstrip the provisions made to fund them.
The city of Chattanooga is having to begin to face such a problem now, and the U.S. Social Security system has even more serious challenges to confront in the not-distant future.
Sadly, realistic taxes and unrealistic promised payments have not always been considered together in advance. The painful solution may be higher taxes or reduced promises, or some of each.
We do not like to cut pensions, and we do not like to have to pay more to meet the promises.
But we are being told by Chattanooga officials that the annual cost of paying pension benefits to employees who retire will soon be far higher than expected.
The problem is that the city was anticipating costs of about $9 million. But the true figure is coming in millions of dollars higher. The city has “scrounged around” to find the $2.5 million to $3 million more that will be needed for this budget year. But city officials — and ultimately all city taxpayers — soon must face the problem of finding that extra money for future years. The money will have to come from taxpayers.
Sometimes generous pension plans are offered because workers’ pay is not so generous as might be desired. But when the time to pay retirees comes, the money to meet the promises may by difficult to provide.
Financial facts cannot be permanently ignored. It is hard to face such realities, but it is far better to look at them honestly, well in advance, to make the necessary tax and spending adjustments easier over a longer term.
Such problems are not new, and they are not welcome, either. Nevertheless, Chattanooga officials, taxpayers and prospective retirees surely should face the problems now, to prevent the difficulties from becoming worse.