At Forbes Andrew Biggs and Sheila A. Weinberg have a proposal for filling in the public pensions hole that state and local governments have dug for themselves:
We propose, at least for discussion purposes, that if a state requests and receives federal aid for pension funding, then the state must agree to bring that public pension under federal regulation that was qualitatively similar to what private pensions work under.
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Put in simple terms, in exchange for near-term financial assistance, states would accept the same deal that federal law requires of private sector employers: Run your pensions right or don’t run them at all. If a state choses to continue running a defined benefit pension plan, it must do so using more prudent funding rules and more rapid repayment of unfunded liabilities. If the state can’t run a traditional pension on those terms, federal law would give the state the leeway to shift its employees to defined contribution retirement plans. That may be a better option than waiting for states to declare bankruptcy.
That’s a lot easier to say than it is to do. In Illinois such an agreement would require not merely a single but probably a slew of amendments to the state’s constitution. Even were the amendments to be enacted the inevitable lawsuits would need to be decided in ways that did not vitiate them. Keep in mind that state Supreme Court justices have their own public pensions to watch out for.
Illinois’s problem has been a corrupt arrangement by which elected officials protect public employee pensions in exchange for contributions, campaign workers, and votes. For decades those politicians kept the ball in the air by not paying into the public employee pension funds at the rate required to maintain solvency. As long as the incentives remain the same I’m not sure how the proposal would solve anything. Once they had the cash Illinois’s governor and legislature would just reneg on the deal. Then what?
Never work, the Feds are no better at running pensions than anyone else.
Agree that it would never work, but it would enable Pritzker and Madigan to kick the can down the road far enough so that they won’t be on the hook when the bill came due. Which is the whole point of it, make the guy behind the tree responsible.
But to even try that they have to get their guy into the White House first.
D’s held all three branches before, fool me once shame on you, fool me twice, shame on me.