Public Pensions, Once Off Limits, Face Budget Cuts
When an arbitrator ruled this month that Detroit could reduce the pensions being earned by its police sergeants and lieutenants, it put the struggling city at the forefront of a growing national debate over whether the pensions of current public workers can or should be reduced.
Conventional wisdom and the laws and constitutions of many states have long held that the pensions being earned by current government workers are untouchable. But as the fiscal crisis has lingered, officials in strapped states from California to Illinois have begun to take a second look, to see whether there might be loopholes allowing them to cut the pension benefits of current employees.
The mayors of some hard-hit cities have said that the high costs of pensions have forced them to lay off workers: Oakland, Calif., laid off one-tenth of its police force last year after failing to win concessions on pension costs.
Elsewhere there is pension envy: some private sector workers, who have learned the hard way that their companies can freeze or reduce their pensions, resent that the pensions of public workers enjoy stronger legal protections. But government workers, many of whom were recruited with the promise of good benefits and pensions, say that it would be unfair — and in many cases, very likely illegal — to change the rules in the middle of the game.
It has been far more common for cities and states to adopt more modest retirement plans for future workers. But the savings from new plans are initially small, growing only over time. Other states have gone further, requiring workers to work more years before retiring, or to contribute a higher portion of their salaries toward their pensions. A few states have rolled back cost-of-living increases for retirees, prompting lawsuits. Reducing the rate at which government workers earn pension benefits — even modestly, as Detroit did — has been rare.
When Gov. Scott Walker of Wisconsin, a Republican, moved to curtail the collective bargaining rights of public worker unions in the state, he exempted police and fire unions. But they often have among the most expensive pension benefits.
A related article is in today's Washington Post.