On the excitement scale, pension reform is down there with Swedish land reform and women’s basketball. Even for accountants, it is considered dull. It is the small boring things that tend to bring down society. The best example is the Yersinia pestis, which was carried by the fleas on mice. Christendom was nearly wiped out by a tiny pest carrying an even tinier pest. Anyway, this post about pension reform is an example of the small boring stuff that will turn out to be quite important.

The regular session of the Louisiana Legislature is right around the corner and one of the most depressing aspects of it is what won’t be discussed. Pension reform isn’t going to be a prominent topic.

In fact, what could happen is lawmakers will make things worse. That’s because bills to give retired state workers a 1.5 percent cost of living raise have not only been filed but, according to the early handicapping, are likely to pass.

It’s been eight years since the last raise, which is a long time in any context other than one in which the private sector is enduring stagnant wages and chronically high unemployment for years. That is to say, like now.

Under the bookkeeping formulas kept by the state, the money is there for the COLA boost. Now. It may be better to give than to receive, but a pension increase, like a raise, is a gift that keeps on giving for the recipients. This is no bonus forun a job well done, it’s something that stays on the books and has to be met going forward even if balances cause that accounting formula to change.

When economists talk about public debt, they seldom mention the mountain of promises to government employees. If I promise you a job and regular raises for the next 30 years, that’s a debt I owe you. It is no different than borrowing the money and handing it to you. Those promises by state and local government to pay people long into the future cannot be discharged in court in most states, either due to the state constitution or the fact states cannot declare bankruptcy.

Furthermore, it’s no secret that state and municipal governments face few if any looming financial crises greater than pensions. Some governments have taken piecemeal steps to address this, largely copying moves made by the private sector.

More specifically, defined contributions plans like 401ks are now recognized as far more sensible than the rich defined benefits schemes that were once the norm.

Nevertheless, whether the fiscal bombshells created by defined benefit plans — which guarantee a certain payment for life — can be defused remains an open question. By no means is this all the workers’ fault. Lawmakers in states across this great land have frequently underfunded pensions, and states have stuck to a very respectable and probably outdated “anticipated” rate of return of 8.5 percent.

I can provide the answer here. They cannot be defused. They will explode when the cash runs out in the next decade. No one should shed any tears for the workers. They knew, or at least they should have known, that these lavish benefit packages were out of line. They live in the same world as the rest of us. They also knew the money for those lavish pay and benefit plans comes out of their neighbors paycheck. To put it bluntly, they have been screwing the rest of us for decades so too bad for them..

Translated, that means not enough money has been poured into the pension systems and investment returns will have to be forever rosy.

But the relationship between unions – whose power is increasingly concentrated in the public sector – and lawmakers means handsome deals have been struck between decidedly non-adversarial parties. Besides, it all involves other people’s money, and the unions have always provided handsome returns to friendly politicians’ campaign war chests.

Taxpayers are now looking at the monstrous bill produced by such cozy extravagance.

Louisiana, fortunately, doesn’t have as gigantic a burden as states like Connecticut face. That doesn’t mean it isn’t a huge problem in the Pelican State – to the tune of somewhere between $20 billion or nearly $75 billion, depending on which alarming report you consider more accurate.

Louisiana hasn’t adopted sensible reforms like raising the retirement age and moving to defined contribution plans. Louisiana taxpayers are still stuck with an antiquated and expensive arrangement where the defined benefit plan rules supreme.

In 2012 the Legislature did pass a law requiring future state hires to enroll in defined contribution plans, but led by the teachers’ unions and other interested parties – staffers, boards, lobbyists, investment salespeople, accountants, lawyers and the rest who ride like remoras on this bloated whale – the law was repealed.

Of course. Letting public employees unionize was never about the state employees. It was about the democrat politicians hoovering off billions in tax dollars through the unions. The hacks running the unions funnel money to the politicians, who play ball with the unions. The union leaders also keep a nice share for themselves.

It’s hard to predict how deeply we must dip the gourd into the magic fountain of other people’s money to make good on the state’s current obligations. What is clear is regardless of whether one goes with the rosy estimates floated by those in the pension business or the much scarier numbers arguably more objective analysts reach, it would take tens of thousands out of Louisiana wallets just to plug the existing gap.

In other words, what Louisiana and practically every other state across this great land faces is a system that is — all together now — unsustainable.

It is beyond belief everyone doesn’t see this, which means everyone does. The state workers drawing these handsome pensions want them. They fight like cornered tigers over having to contribute another dollar to what they regard not as some extraordinarily generous entitlement paid for by folks who have no such protected eggs themselves, but as some kind of right, confined to them, as sacred as free speech.

There is no magic solution. Detroit is the example states may follow. Over the next decades services will be reduced and budgets cut in areas like public recreation and road maintenance. As the crisis grinds on, bond holders will be hit with demand from states to forgive some debt to avoid defaults. Eventually they will come back to pension plans and force cuts on them. The unions will sue, like they are in Illinois, but you can’t get blood from a stone. When the money runs out, the party is over.