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Blue Model Blues
The Crazy Quilt of Public Pension Law

The challenges facing state-level pension reformers in the United States are both complicated and considerable. Even more bewilderingly, laws on whether state and city governments can cut pensions vary wildly between localities. Mary Williams Walsh has an excellent piece over at the New York Times detailing the variations:

“…for constitutional reasons, the federal law is not binding on states or cities, which has led to a patchwork of litigation and outcomes.

“It’s hard to keep it all straight,” said Josh B. McGee, vice president for public accountability at the Arnold Foundation, which tracks the litigation on a public website.

Pensions can be cut in any number of ways, and challenges are brought on a variety of legal theories. A winning argument in one state may fail in another. To some extent, outcomes can be handicapped along red-state and blue-state lines — but not with pinpoint accuracy.

State supreme courts in traditionally blue California, New York and Oregon, but also in red Arizona, have ruled that public workers’ pensions are set in stone from the first day on the job and cannot be reduced.

But state courts in red South Dakota, blue Minnesota and variable Colorado and New Mexico have ruled that public pensions can lawfully be cut — even for people who have already retired. In the past, existing retirees’ benefits were considered inviolate.”

 

With pension problems driving cities across California bankrupt and states like New Jersey, Illinois, and Rhode Island—not to mention Puerto Rico—into states of crisis, pension reform is bound to become a hotter issue national issue. Walsh does a good job outlining the details; read her whole piece as a primer on the subject.

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  • Pete

    Let’s just make sure there is no federal bailout

  • Andrew Allison

    “…for constitutional reasons, the federal law is not binding on states or cities, . . ” Huh? Federal law is binding upon private pensions (among a whole host of other things not enumerated in the Constitution). How are public pensions different?

  • FriendlyGoat

    Of course pensions can be cut—–if you elect politicians and/or judges who are so inclined. All we have to do is decide that financial traders are more worthy of accumulating wealth that retirees are worthy of receiving pensions. This is one of the unstated, yet prominent, features of a Republican platform anywhere. (It’s sort of “unstated” because the actual statement is so distasteful as to be counter-productive in an election. (Something more generic, like say “pro-growth”, is thought to work better so that’s what you hear, but the intent is always the same.).

    • Thom Burnett

      Goat, No one (other than the traders) – not even your despised Republican enemies – favors financial traders over retirees. The problem that some see is that after you’re snatched every penny from those financial traders and every penny from the despised 1% there still won’t be enough money to pay all the pension promises. Sooner or later, it will be our children, grand children etc who pay off those promises. Children who couldn’t vote because they weren’t yet born will be paying for our comfortable retirement.

      • FriendlyGoat

        The retirees, recipients of private-sector pensions, public-sector pensions, and the big one—Social Security—all have extended downline families which are impacted by the new trend to cut them all back. There are probably some young people who “get” the reasoning of cut back Grandma and Grandpa and Mom and Dad NOW so the youngsters won’t owe some theoretical government debt later. There are likely some other ones who “get” the reasoning that whatever is cut from Grandma and Grandpa and Mom and Dad is money that isn’t in the family coffer as of the moment of the cuts.

        When I hear that we “need” to cut capital gains taxes, corporate taxes, estate taxes AND cut pensions all at the same time, all I hear is favoring traders over retirees and families. Because that’s what it is.

        • Thom Burnett

          Who lumped tax cuts with pension reform? Certainly not me. Somewhere there are people who favor both – surely. But there are plenty of people who favor one without the other and the reverse.

          I don’t care what people ‘get’. What matters is the fact – of growing debt that will be difficult and painful to handle. Worse the ones who have to handle it will be generations after the ones who benefited by the spending.

          Is it your belief that we can accumulate debt for generations and never have a problem with it? That’s a legit belief since this nation has carried debt for generations without obvious negatives. I think Greece, Detroit, and Puerto Rico (not to mention Argentina or Venezuela) show otherwise.

          • FriendlyGoat

            REPUBLICANS lump high-end tax cuts with pension reform in most red states and with respect to Social Security (entitlement reform) at the national level. They don’t speak them in the same sentence, as I do here, but they do mention them in the same platform, nearly everywhere and all the time. Such people are not rare oddballs for seeking both changes at once. They are the mainstream GOP.

            I care what people “get”, including what I personally “get”. It’s how we know whether we are thinking or being herded. It’s why I write in comment sections regularly. On this one, I think you ultimately will run into some young people who understand that cutting revenue to Grandma and Grandpa and Mom and Dad is not going to put their family in a stronger position, no matter what Thom says about Greece.

          • Thom Burnett

            Is it your belief that we can accumulate debt for generations and never have a problem with it?

          • FriendlyGoat

            It is my belief that there is PLENTY of money in America to do all the job creating, infrastructure building, social improvements AND debt pay down that we need to do—–IF we get out political priorities straight. We have these deficits and national debt BECAUSE we already passed too many tax cuts. I’m for not passing any more AND for reversing some of those we already passed. I am not for reneging on pensions to make up for Republican fiscal error.

  • f1b0nacc1

    As more and more legislatures begin to wake up to the fact that they won’t be able to skim off benefits and pay off their friends if pensions eat up all of the revenue, you will see more and more willingness to take steps against the pension monster. Math wins in the end, and there is simply not enough money in the world to pay off on the promises that legislatures have made in the past. Public sector employees represent a relatively small proportion of the voting population (and that isn’t likely to change much over time), so their leverage will tend to decline as the situation becomes more dire.

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