The sanctity of public pensions is looking ever more in doubt. Last year was particularly harsh: Detroit was permitted to impair pensions in its bankruptcy proceedings, while a judge in California said the city of Stockton had every right to do the same, though it didn’t. Now, as an excellent overview in the NYT‘s Dealbook suggests, 2015 looks to be much more of the same. New Jersey Governor Chris Christie is proposing a pension freeze, a move very uncommon for a state but typical for a business. It’s even possible that New Jersey’s teachers’ union, a longtime enemy of the governor, might be seeing things more his way:
For months, a pension commission formed by Governor Christie has been working quietly with the New Jersey Education Association, normally one of the state’s most litigious pension adversaries. By talking to each other instead of battling in court again, the two groups managed to find enough common ground to issue what they called a “road map” toward solving New Jersey’s daunting pension problems.Many details remain in flux, and the union took pains on Tuesday to say it was not endorsing Mr. Christie’s full proposal and might never do so. But the road map identifies certain issues that are so important to New Jersey’s teachers that the union is willing to consider a pension freeze if that is what it takes to fully protect its members from the state’s looming pension collapse.
To say that this would represent a change in public unions’ attitudes would be an understatement, though it’s not yet clear to what extent the union is on board. Still, soon public unions may find themselves facing hard bargains all around the country, with taxpayers less sympathetic and reformers more empowered. As the NYT puts it:
In some places, it is increasingly clear that reducing benefits only for future hires does not save enough money to preserve overstretched pension plans, especially in places where retirees outnumber current workers.
You can say that again. Today Illinois and New Jersey are in the midst of big pension fights, but other states, like Kansas and Kentucky, are eyeing the same risky strategy that their predecessors tried to use to escape this problem: issuing bonds as quick fixes for their ill-funded pensions. It’s a gamble, but not one a cash-strapped government can easily resist.Detroit was just the beginning.