10/03/2012 11:17:00 AM EST
State Net Capitol Journal: Pension Cuts Trim Only a Ninth of States' Unfunded Liabilities
Nearly every state in the nation has made cuts to its public-employee pensions in the past few years. But the measures have only chipped away a fraction of the enormous gap between what states have put into their retirement plans and what they've promised their workers.
According to researchers at Boston College, the new laws have trimmed just $100 billion from states' $900 billion in unfunded pension liabilities. The researchers say the reason is most states have opted to make pension changes that apply only to new employees, which they project will reduce pension costs by 25 percent - but over the next 35 years.
California Gov. Jerry Brown (D) called the pension reductions he signed earlier this month the "biggest rollback to public pension benefits in the history of California pensions." The changes are expected to save the state as much as $55 billion over the next few decades, but because they apply mostly to new hires, they won't do much to reduce the state's unfunded liability in the short term.
Legal considerations have discouraged states from cutting benefits for current employees and retirees. But recent court rulings in Minnesota and Colorado upholding reductions to cost-of-living increases could spur states to explore the legal boundaries of the issue.
"There is a lot of gray area," said Alicia Munnell, director of the Center for Retirement Research at Boston College.
Ohio lawmakers passed a series of changes this month that apply to current and retired workers, as well as new hires. And many of the state's public employee unions actually supported the cuts - less than a year after fighting a tough battle to retain their collective bargaining rights.
"It is a tough pill to swallow," said Kevin Griffin, president of the local teachers union and an English teacher in Dublin, Ohio. But he said it was ultimately a matter of mathematics.
"It came down to the question of whether there will be a pension there for me when I retire or not," he said (WALL STREET JOURNAL)
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