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LIANE HANSEN, host:

This week, NPR is going to zero in on a big financial problem that's getting larger and could threaten the solvency of some states. Over the past several decades, many states made pension promises that will be very expensive to keep. So, from Connecticut to California, pension funds for teachers, firefighters and other public employees are severely underfunded.

Some experts put the overall shortfall more than $2 trillion and taxpayers are on the hook. Robert Gentzel is policy director for Pennsylvania employees' retirement system.

Mr. ROBERT GENTZEL (Policy Director, Pennsylvania Employees' Retirement System): This is very important for people to understand. These pension fund obligations are backed by the full faith and credit of the Commonwealth of Pennsylvania, which means ultimately they're backed by the taxpayers.

HANSEN: All this week on MORNING EDITION and ALL THINGS CONSIDERED you will hear about the pension promises various states have made. NPR reporter Tamara Keith has been looking into the issue and is in the studio with a preview. And first, Tamara, why are these pension plans so underfunded?

TAMARA KEITH: Well, there are bunch of reasons: the recession and the stock market crash took a big chunk out of these funds. In 2008 alone, state pension funds lost about 25 percent of their value. And then there are a number of other factors I'd put in the category of politics.

HANSEN: Politics?

KEITH: Yes. Because these are public pensions, decisions about how they're operated and funded are made by politicians. So, in the late '90s when the markets were booming, lawmakers all over the country sweetened retirement benefits. But then the investment returns tanked and state and local governments were going to have to put more money into their retirement systems to keep them fully funded, and that's not so easy.

When budgets are tight, shorting pension funds is a politically easy way to avoid raising taxes or having to make painful cuts. One pension expert I spoke with, Rick Dreyfuss at the free market Commonwealth Foundation put it this way...

Mr. RICK DREYFUSS (Commonwealth Foundation): They don't want to increase taxes but by not paying for this, the liability doesn't go away, it just gets larger.

HANSEN: So, what exactly does this mean for retirees and the rest of us?

KEITH: Well, retired public employees don't really have anything to worry about. These pension payments are incredibly well protected under the law. So, if a pension fund runs short on cash, it's the city and the state that are on the hook, and that means that in the future a whole lot of us who ourselves don't have pensions will be working longer or paying higher taxes or maybe even suffering reduced services to keep those pension checks coming.

And it's not unusual for public employees to be able to retire at 55 and keep getting something like 80 percent of their peak salary for the rest of their lives. And so you could say, oh, it's not fair for the rest of us to pay for this. You could also say, hey, these people devoted their lives to serving the public good, don't they deserve it?

HANSEN: Tell us more about what's going to be on the series.

KEITH: We visit Kansas and Nebraska. They're two states on opposite ends of the spectrum. Reporter David Shaper tells about Illinois, which has the unwelcome distinction of being the worst funded pension in the country. Jim Zarroli looks at risk. Some of these funds are taking incredible risks to try and get higher returns.

Richard Gonzales in California takes a look at something known as pension spiking, where employees boost the heck out of their income the last years on the job so that when they retire, they actually end up getting more than their annual salary normally was. And I went to Pennsylvania to take a closer look at some of those political dynamics that push pension bills on to future generations.

HANSEN: NPR's Tamara Keith. And you can hear all those stories and more all week on MORNING EDITION and ALL THINGS CONSIDERED. Tamara, thanks a lot.

KEITH: Thank you.

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