Jerry Brown, pension reform hero?

Here’s the background:

Back in 2015, the Illinois State Supreme Court ruled that a 2013 public pension reform, which attempted to reduce pension benefits for existing employees by

stopp[ing] automatic, compounded yearly cost-of-living increases for retirees, extend[ing] retirement ages for current state workers and limit[ing] the amount of salary used to calculate pension benefits.

was unconstitutional because our state constitution prohibits any reduction in benefits, not just for existing benefits, but for any benefits that would ever be earned in the future, for existing employees.  Even if you were hired yesterday, the state is obliged to continue providing the same generous benefits until you reach (a very early) retirement age.

And — this was as close as I ever came to “appearing in the paper” — Bloomberg columnist extraordinaire Megan McArdle mentioned my blog post in her own piece, “Save the Pensions: No Sudden Moves, Please,” which is, annoyingly now under a nearly-impassable paywall (are you a Bloomberg Professional Service Subscriber?  I thought not), and, in the version of the article which appears in syndicated form (e.g., here) this snippet of her article was reworded, “Jane the Actuary, a frequent commenter on the religion website Patheos.com” and the link to my blog post removed (which makes sense, I guess, if published in actual newspapers).

Anyway, the original version is excerpted here, though without the link, or even the phrasing I had remembered (“a frequent commenter here and a blogger at Patheos.com”):

But Jane the Actuary, a frequent commenter here, argues that what should actually be at stake is not benefits that have already been accrued for past work, but those that will be earned in exchange for future work. Private employers are not allowed to take back benefits you already earned, and governments shouldn’t do this either. But private employers can tell you that the pension fund is closed and you won’t accrue any further benefits, or that benefits accrued in the future will be smaller. Should governments be able to do this too?

Now, McArdle goes on to say that a midcareer worker would be unfairly penalized by the elimination of future accruals, since traditional pensions are a very backloaded way of acquiring retirement benefits (that is, since the benefits disproportionately accrue as you get older due to the nature of the formulas), which makes the loss of those anticipated future accruals difficult to make up for simply by increasing savings.  And she’s not wrong, but there’s still a lot of room for reform even if future accruals for midcareer workers are preserved — there’s no reason that younger workers should keep their future-accrual guarantee, or that the generous early retirement provisions should be maintained (I’m sorry, but it doesn’t harm you if you have to work more years than you initially thought), or that benefit provisions should lead to eye-poppingly generous retirement benefits, well in excess of what private sector retirees would end up with even knowing from the start that personal savings are needed.

So, while that’s been a dead issue in Illinois (much as I would wish otherwise), I was heartened to read a report from Legal Insurrection the other day, that Governor Jerry Brown in California is actually proposing to make such a switch.  They cite the Sacramento Bee, which reports

Gov. Jerry Brown got most of what he wanted when he carried a proposal to shore up the state’s underfunded public employee pension plans by trimming benefits for new workers.

Five years later, he’s in court making an expansive case that government agencies should be able to adjust pension benefits for current workers, too.

A new brief his office filed in a union-backed challenge to Brown’s 2012 pension reform law argues that faith in government hinges in part on responsible management of retirement plans for public workers.

Now, whether Brown has a chance in hell of getting court rulings in his favor is beyond my expertise, but it’s at least promising that he’s engaging in this conversation.

In Illinois, it’s clear to me that what’s needed is a constitutional amendment, or, rather, a repeal of the provision guaranteeing future accruals for state workers.  Unfortunately, it’s also clear to me that, with Michael Madigan in power and beholden to the public unions, and with extensive barriers to voting on amendments via petition-gathering to place them on the ballot, that won’t happen anytime soon.

Image:  http://www.navair.navy.mil/index.cfm?fuseaction=home.NAVAIRNewsStory&id=4801