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Public Policy

Testing Public Pension Options

Ian Scott on Friday, August 27, 2010 at 9:43:58 am

Public pension liability is a looming crisis that threatens long term fiscal stability in almost every state.  A 2008 study by the Pew Center on the States found that there is a $1 trillion gap (yes, trillion with a T) between the money set aside by states for public sector pensions and the projected cost of fulfilling pension promises. 

Potential solutions to this problem have generally included: contributing more to public pension funds, improving investment fund oversight, and raising the retirement age and reducing benefits for newly hired public employees.  None of these reform measures directly impact existing retirees, but that could change.  Stateline.org is reporting that lawmakers in several states are looking at trimming benefits to current retirees. 

State legislators are beginning to challenge one of the ironclad tenets of public pension policy:  that states cannot legally reduce pension benefits for current and future retirees.

Lawmakers in Colorado, Minnesota and South Dakota voted earlier this year to limit cost-of-living increases they previously had promised to thousands of current and future retirees, who courts historically have protected from benefit reductions. Not surprisingly, retirees in each state have filed lawsuits asking judges to restore their annual benefit increases to what they were previously.

Read more at - States test whether public pension benefits given can be taken away

We'll be watching the outcomes of those lawsuits closely.  In the mean time, you can learn more about this issue by reading The Trillion Dollar Gap.

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