One complaint we often hear when disaffected voters complain about politicians is that they “never keep their promises.” Indeed, elected officials manage frequently to evade past commitments, blaming others for their failures or riding on the fact that their promises were vague enough to escape objective measurement.

Promise and delivery of public employee pensions, on the other hand, can be tracked with mathematical precision. Either enough money is being set aside for future benefits or is not. In Maryland and in many other states, promising future benefits has been much easier than providing for them. These liabilities are a ticking time bomb threatening to implode the finances of many states.  

According to a Pew Center on the States report, the gap between the promises made for public employees' retirement benefits and the money set aside has grown to at least $1.38 trillion in the most recent year for which data are available. Despite growing publicity about the problem, the gap grew by over $100 billion in just one year.  

According to the Pew report, state pension plans face a $757 billion gap with $2.31 trillion set aside to cover $3.07 trillion in long-term liabilities. In addition to pensions, health care and other non-pension benefits account for another $627 billion shortfall. States have amassed $660 billion in non-pension liabilities but saved just $33.1 billion to pay for them. Maryland is among the worst offenders, with an $8 billion bill for retiree health care costs but only 3 percent reserved.

According to updated state treasury data, Maryland is over $20 billion short of fully funding its current pension obligations alone, at less than two-thirds of the total obligation. The consequences of this underfunding will impact not only current and retired state employees, but also Maryland taxpayers. The combined shortfalls translate into a hidden debt obligation of $14,000 for every household in the state.

Three years ago, Gov. O’Malley and the legislature told Marylanders – taxpayers and public employees - that reforms could address the shortfall. Public employee unions agreed to reforms, with employees both contributing more for their retirement and accepting benefits reductions. Employee contributions increased to up to 7% of salary. Newly hired employees could not draw retirement benefits until age 60, a change from the previous age limit of 55.

In return, the state would reinvest a portion of the savings: $300 million would be added to required government contributions.

Yet this year, the Governor’s budget proposal cut back some of the $300 million funding. The legislature cut the contribution even more. With the approved 2015 budget, just a third of the catch-up money was provided. In its place was yet another “promise” to add $50 million per year annually more through 2019, when the $300 million target can be reached.

Worsening matters are lackluster investment returns and the high fees paid to Wall Street money managers by the Maryland State Retirement and Pension Fund. A Maryland Public Policy Institute report concludes that Maryland's pension system could “save enormous amounts of money on fees without harming investment returns by simply embracing low-cost, passively-managed index fund investments."

The system’s investments returned 10.6 percent while the median return for the benchmark public fund database was 12.4 percent for the year ending June 30, 2013. The 1.8 percent difference represents a one-year opportunity cost of $720 million on the fund’s $40 billion portfolio. Had the fund achieved average performance, the $720 million would have been available to decrease unfunded liability or cut the state annual contribution to the fund, thereby freeing up tax revenues for other purposes. Over the last 10 years, the fund’s consistent underperformance has cost Maryland taxpayers roughly $3.5 billion.

Regrettably, Maryland is not the only state reneging on pension reform commitments in which public employees traded benefits for future state contributions. This year, New Jersey Governor Chris Christie used the exact same budget gimmick to close an unanticipated state budget gap by slashing its promised “catch-up” pension contribution.

Maybe Iowa and New Hampshire voters need to begin asking questions of visiting governors about their home state pension contribution promises.