Increasing state and local governments are transmogrifying into public employee pension plans with the power to levy taxes to the detriment of all of their other functions. At Democracy Richard Vague proposes some solutions:
- Let the Feds pick up the tab.
- Lower funding requirements.
The first sounds to me like a license to steal and the second sounds like denial.
I haven’t studied the spending of every state but I am pretty familiar with Illinois’s. Here are my counter-proposals. No solution to Illinois’s particular problems in this area can be understood except in the understanding of the reality that between 1995 and 2010 Illinois froze the contributions to public employee pension plans while increasing public employee wages sharply. And many public employees in Illinois don’t contribute at all to their retirements. Their jurisdictions pick up both the government’s and the employee’s share of pension contributions and they’re exempt from paying FICA.
- The state’s constitution must be amended to allow the state to deal with the situation.
- All public employees should immediately be transferred to a defined contribution plan. #1 is necessary for #2 to happen.
- Double-dipping should be banned.
- An absolute cap should be established for Illinois public pensions. Here there are some retired public employees collecting more than $1 million per year in pensions.
- Public employees unions should be banned from engaging in political activity. This is an obviously corrupt practice.
Even those draconian measures won’t be enough to save Illinois. The state can’t even muster the political courage to enact regular budgets let alone deal with the massive pension overhang. It can increase tax rates but it can’t force people to stay.