Unions Alone Aren't To Blame For The Fiscal Mess of Our Cities and States

I read an article yesterday about Central Falls, Rhode Island filing for bankruptcy.

A lot of the comments were blaming the unions, and how they have unsustainable benefits and pensions.

I made a comment that the issue can't be entirely blamed on the unions:

To be fair, unions aren't the sole cause of the fiscal problems happening in our cities and states. In many cases, the contracts signed decades ago would have been affordable if the politicians had made the required contributions when they were due, so the amounts would have compounded. (For investment success, "time in the markets" is more important than "timing the markets".)

Instead, they skipped payments and used the money for other entitlements to buy votes. Then, they turned over management of the funds to the investment managers with the best political connections, and let them take investment risks to make up for the missing or late contributions. Instead, this resulted in investment losses and under-performing the markets. Anyone remember the rare coin investing fiasco from Ohio?

Here in Illinois, the lawmakers not only didn't make required contributions, but they kept changing the pension formulas - against the advice of their own actuaries. Now we have a big unfunded pension liability.