The Trouble with Public Unions Revisited

Here at OB&B, the situation with public pensions and their need for reform has been a topic of discussion for months and not just because of recent developments. On November 10, 2010, I posted a seemingly forgotten piece of analysis that warrants another look today: The 2010 election was a call to cut public pensions

One little-noticed result of the Nov. 2 elections – the first since the Great Recession of 2007-09 – was greater voter pressure for capping a giant gusher of government red ink: the $4 trillion in pension liabilities for state and municipal workers.

Few politicians, even Democrats backed by the public-worker unions, could afford not to propose reforms for these retirement benefits that are often abused, underfunded, and usually far more generous than those in private business.

In two key states, California and Illinois [real hotbeds of extreme right-wingers! -ed.], voters approved many local ballot initiatives calling for pension reform. And in six states, newly elected governors have proposed one of the most radical steps: 401(k)-style plans for government employees as an alternative for traditional guaranteed pensions. [The horror! -ed.]

A question remains over whether reforms will need to cut the pensions of current public workers. If unemployment persists and the stock market doesn’t do better, more governments will need big cuts. But the powerful American Federation of State, County, and Municipal Employees is ready to go to court if any government breaks an agreement on benefits. [Members are also willing to boycott working. -ed.]

The usual partisan politics, however, tend to fail in the face of the need for reform [except in Madison -ed.]. “This is not a conservative-versus-liberal issue; this is a reality issue,” says Dan Liljenquist, a state senator in Utah who champions such reform.

States collectively face a $72 billion shortfall in their budgets this coming year, according to the National Conference of State Legislatures. And they have enough money to cover only 76 percent of their pension obligations.

Notice this pressure isn’t coming from one political party, as even democrats are stepping up to confront the need for reform, nor is this pressure originating from a conspiratorial effort on the part of tycoon activists. The pressure is coming from the electorate and it is based on the reality that The People simply don’t have an extra $4 trillion lying in the couch cushions.

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