By Jay McAninch

Today’s Financial Puzzle: If we make substantive progress on the country’s financial problems, we have a far more ominous problem looming and it's one no one is talking about.

By now, everyone that reads or listens to news of any kind is aware that many think higher taxes on the business community is a major piece to solving the country’s future financial puzzle. One reason? Many businesses like those in the archery industry have had good years despite the daunting financial concerns that burden the United States (and many countries around the world). These concerns are compounded by Social Security and Medicare and Medicaid, but also include the annual phenomenon of unbalanced budgets. To the business community, it’s the lack of solutions offered by our government that makes these problems doubly daunting.

The good news is, since Social Security, Medicare/Medicaid and balanced budgets have been at the center of the debate between conservatives and liberals at all levels of government, there are many options already on the table. The bad news is, if we make substantive progress on these problems, we still have a far more ominous problem looming and it’s one no one is talking about.

It’s an enormous, unfunded lifetime income and postretirement benefit obligation currently totaling $9.8 trillion owed to federal, state and local public retirees. It’s an obligation that sends shock tremors down my spine. Specifically, that’s $3.1 trillion for state and local workers that is broken down into $2.5 trillion for pension income and $560 billion for healthcare. Federal retirement obligations are $5.7 trillion, while the unfunded pension liabilities for teachers are $1 trillion. More troubling is the fact that the $9.8 trillion figure is a future obligation NOT included in the arguments and debates that have raged on in the Congress and in state and local legislative chambers.

Now you might ask about the private sector. Well, private employers are required by law to put revenues into pension funds to cover future promises. So the private sector has squirreled away $2.3 trillion, which currently sits in stocks, bonds, real estate and any other assets these companies feel will accrue enough earnings to help meet future obligations. As a comparison, State and local governments have $3 trillion set aside, which is actually pretty good. How much does the Federal government have in reserve? Zero, zilch, nada, nothing. Not one red cent. How ‘bout them apples?

The state teacher pension plans have some assets set aside, but all 59 teacher pension funds face shortfalls. The good news is that 5 of these pension funds are 75 percent funded or better: New York , Washington, North Carolina, Tennessee and the District of Columbia. West Virginia’s plan is only 31 percent funded and California has the largest unfunded balance totaling $100 billion.

You might wonder, why is no one talking about this colossal unfunded retirement liability? One reason is when and how the information is released. The US Treasury Department quietly released the Government Accountability Office (GAO) report of federal obligations on Friday, December 23. Releasing bad news just before a major holiday insures it won’t see the light of day. In addition, although the GAO does report the costs of future obligations, these data are in appendices making them doubly hard to find. Were it not for a column in the Washington Post by Bryan R. Lawrence, I wouldn’t have known the data were released either.

So when you hear about the list of financial challenges our leaders are working “cooperatively” to solve — such as balanced budgets and making government more accountable — up the ante. Ask to have ALL our future obligations put on the list and specifically ask that all levels of government put assets aside to cover these future obligations. Every company in our industry who offers a pension or retirement benefit has to set aside assets, so why not governments? Aren’t we all in this together?

Image the budget cuts and revenues needed to fund Social Security, Medicare and Medicaid as well as balance our budgets at all levels of government. Then add on the setting aside of assets to, not only fund the future obligations being made each year, but to fund all those past obligations that are also unfunded. From my perspective this “fix” is financial medicine that is doubly hard to swallow. Especially given that it’s already distasteful that we must find means to support concerns we already know about.

I’m sorry to start 2012 with bad news, but I think it’s time we face the facts. If you’re in business and worried about the uncertainty brought on by a lack of leadership from Federal, state and local decision-makers, then there’s no time like the present to start asking about future obligations for public retirees. With an election coming this year, let’s ask that all our obligations are on the table so negotiators can find truly comprehensive solutions. We owe our kids and grandkids that much.