Saturday, May 28, 2005

State Struggles to Meet Pension Obligations
State Struggles to Meet Pension Obligations

CHARLESTON, W.Va., May 28, 2005 — Ellen Allman, an 89-year-old retired teacher, is struggling to make ends meet.

"Sometimes I get angry, and sometimes I get resentful," she said. "And sometimes I just am worried, very worried."

Despite decades as a public school teacher, her pension does not cover her bills.

"You just have to watch every penny you have, and most of the months the money runs out before you get through a week," she said.

Allman is among more than 45,000 West Virginia educators guaranteed a retirement benefit by the state. But years of underfunding by the legislature has left the teachers retirement plan more than $5 billion in debt.

"We can't continue as we are today," West Virginia Gov. Joe Manchin III said.

Manchin, who says his state is now spending more than 12 percent of its budget on pensions, wants to sell enough bonds to cover the gap.

"We'll be one of the first states that has totally bellied up to the table and said we have taken care of our unmanaged, unfunded liabilities," Manchin said.

45 States

West Virginia is not alone. Forty-five states are struggling to close a combined $260 billion gap between their assets and the benefits they owe current and future retirees.

"There is an impending train wreck waiting to happen if action is not taken soon," said Dan Clifton of the American Shareholders Association, a Washington lobbying group for investors.

For some, the solution is to dump guaranteed benefits and let individuals, not the state, take responsibility for investing.

"The answer is not to get rid of the plan," said Keith Brainard, a public pension analyst. "If your car needs a tune-up, you tune it up. If it needs the brakes changed, you change the brakes. You don't throw out the car."

West Virginia is sticking with its current system, but even if voters approve the $5.5 billion bailout next month, the state still cannot afford cost of living adjustments for struggling retirees like Ellen Allman.

"I just feel greatly disappointed that we are not respected more than we are," Allman said.

ABC News' Geoff Morrell originally reported this story May 22, 2005, on "World News Tonight."