As Detroit faces bankruptcy, many public employees are nervously waiting to see what exactly will happen to their generous pensions. The Motor City simply can’t pay them and, unfortunately for those workers, they were lied to for years about what they would receive. Could this happen in Ohio?

Obviously, Ohio’s pension systems are not yet in a position where they risk careening into a chasm that ends up where Detroit now resides. However, as the Buckeye Institute has already shown on multiple occasions in studies such as our Hanging by a Thread report, it can hardly be debated that Ohio’s public pensions have their own deep-seated challenges. How else could they have accrued over $78 billion in unfunded liabilities between them?

To put that number in perspective, paying these obligations would require around an additional $14,800 from every Ohioan who pays an income tax (nearly 5.3 million). This vast gulf between the funds’ obligations and ability to meet said obligations has only been widening in recent years. While reforms passed in 2012 represent reasonable steps in the right direction, they do little to address the systemic problems that created this gulf in the first place.

The State Teacher Retirement Service (STRS) suffers from $46 billion in unfunded obligations. This is more than the unfunded liabilities of the other four pension funds combined. Not only does the STRS fund have the largest amount of unfunded liabilities, but it also has the largest percentage of unfunded liabilities: 44%, almost double that of OPERS. Since 2010 this percentage has been increasing, as the majority of new liabilities the fund incurs are liabilities it cannot pay for. More than the sheer scale of these unfunded liabilities, the fact that they pile up at an increasing rate is what poses a danger to the integrity of the pension system.

Creating unfunded liabilities at an accelerating rate is a problem for STRS, but it is a bigger problem for STRS’s counterpart. The School Employee Retirement System (SERS) covers school employees other than teachers, such as administrators and principles, and its pension fund is practically cratering. With $6 billion in unfunded liabilities, it can only fund 63% of its obligations – down from 73% just two years ago. What is especially troubling about SERS is that while it has added around $2 billion of unfunded liabilities to its balance sheet since 2010, it has only increased its total amount of liabilities by $1.5 billion. This means that it is acquiring new liabilities while losing the ability to pay for the liabilities it already has.

There is a good deal of variation among the five state pension funds, and the news isn’t uniformly bad. The fund operated by Ohio Public Employee Retirement Service (OPERS) fund is a relative bright spot on an otherwise bleak horizon. OPERS operates the second-largest pension fund of the five, and while it also has the second-largest amount of unfunded liabilities it has done comparatively well for itself. A $19 billion shortfall isn’t great, but with under 23 percent of its liabilities unfunded OPERS is in far better shape than its peers in Ohio, much less those in other states. More importantly, while OPERS’s total unfunded liabilities are increasing they are not outpacing their funding capabilities. The percentage of liabilities OPERS cannot fund actually shrunk by two percentage points from 2010 to 2012. This is the only state pension fund in which the unfunded percentage is not growing.

Recognizing the untenable nature of this situation, Ohio lawmakers passed reforms aimed at each fund’s problems through individual pieces of legislation last year. Though each bill was distinct, the main thrust of the changes involves increasing employee contributions to the funds, modifying the calculation and determination of benefits, and increasing the retirement age. These are positive changes and they will curb the rate new liabilities are created while facilitating the pay off of existing obligations. As a short-term solution they will likely make a reasonable dent in the mounting shortfalls.

However, they do nothing to address the system that allowed such extreme shortfalls to occur in the first place. The very nature of defined-benefit pensions allows liabilities to completely eclipse what the system can pay for. Conversely, defined contribution plans limit their liabilities and are categorically incapable of reaching such disastrous levels. In the interest of protecting Ohio taxpayers from runaway costs and public employees from totally insolvent pensions, a restrained and reasonable system is needed.

So while Ohio’s pension systems are not yet on the cusp of a Detroit-sized debacle, policymakers should not close their eyes to fundamental reform. We can do things now when it is easier, or we can wait until the bottom falls out.