U.S. public pension plans face $1 trillion shortfall

(CBS News) LOS ANGELES - The slow economy in the U.S. is squeezing state budgets and many can't find the money to pay the pensions they've promised public employees. Nationwide, all together, public pension plans are $1 trillion short.

In Los Angeles, public employee unions are protesting cuts in salaries and benefits.

Paula Ready, 47, is a child support officer for San Bernardino County, Calif. Her 16-year-old son Jacob has autism and will need care the rest of his life.

She has paid into the state & county pension plan for 16 years. But now with government officials slashing jobs and benefits she fears that safety net won't be there when she and Jacob need it.

"I wonder how I'll be able to pay the cost of his medical insurance premium, or his medicine or anything like that to provide for him when he's an adult," said Ready, adding she is very scared for the future.

The state of California has a gap of more than $112 billion between what's been promised state employees and money on hand to meet retirement obligations.

California is better off than most states. It has 78 percent of the money it's promised for pensions, but according to a report this week by the Pew Research Center, Illinois has just 45 percent, and Rhode Island only 49 percent.

"In good times and bad, the states were kicking the can down the road," said Kil Huh, who wrote the report for the Pew Research Center.

Huh said states were counting on continuing stock market gains to cover pension shortfalls.

"It was not uncommon for states to shortchange or skip payments altogether when investment returns were quite good. States felt they could invest their way to full funding," Huh said.

It was a hard lesson for the University of California. When the bottom fell out of the stock market, the 10-campus system was forced to raise tuition, cut classes and staff to meet growing pension demands.

"I don't think our children should have to pay for these high pensions that give us nothing in return," said Marcia Fritz, an advocate for pension reform.

Paula Ready said she feels like public employees are not getting what they deserve.

"While I'm a proud public employee, I'm not a volunteer. We deserve some degree of security in knowing that there's going to be a system in place to provide for us when we're no longer able to work anymore," Ready said.

In downtown Los Angeles, state and federal workers gathered Wednesday to protest pension budget cuts, and they say they've already made substantial concessions, but with baby boomers now hitting retirement age, this is a problem not going away soon.

Bill Whitaker

Bill Whitaker is an award-winning journalist and 60 Minutes correspondent who has covered major news stories, domestically and across the globe, for more than four decades with CBS News.