By Jay Heflin - 08/31/10 04:00 PM EDT
"Many poorly funded pensions are similar to Ponzi schemes, with new contributions paid out in benefits rather than being saved for contributors' retirement," states the report Union Pensions at Risk. "Union pension funds can survive only through new contributions."
The report was authored by former Chief Economist at the U.S. Department of Labor Diana Furchtgott-Roth, who is now with the Hudson Institute.
She said union pensions are worse off when compared to non-union funds.
"Unions really don't want people to know this because they're trying to recruit more members by telling potential recruits that if they join the union they will have a better pension plan, a better retirement," she said. "But that is actually the opposite of the truth."
Furchtgott-Roth used data from 2007, the most recently available, and found 18 percent of union-negotiated plans were fully funded, meaning they could meet 80 percent of liabilities. Meanwhile, 39 percent of non-union plan were fully funded.
Twenty-four percent of union plans were considered "endangered," meaning they were less than 80 percent funded. Only 9 percent of non-union plans met this definition.
More union plans were also deemed in "critical" shape, meaning the funds could not meet 65 percent of their obligations. More than 12 percent of union funds were deemed critical, compared to 1.5 percent of non-union plans.
The report states it could cost as much as $165 billion to bailout out union pension plans and that legislation has been introduced to accomplish the feat.
One bill offered by Reps. Earl Pomeroy (D-N.D.) and Patrick Tiberi (R-Ohio) would require the federal government to supply the $165 billion to bailout the funds, the report states.
"This means that what should be a financial issue to be resolved between workers, unions, and employers might well be dumped on the American taxpayer," the report states, warning the bailout would increase the deficit by "hundreds of billions of dollars."