Blanket, categorical rules can be both inefficient and self-defeating, as decision-makers lack the knowledge to understand their secondary consequences.
On and off, I’ve obsessed over public pensions and retirement costs, and about the menace posed by unfunded liabilities to state and local governments. Now, I’ve come across the Arnold Foundation’s website, which publishes a periodic Pension Litigation Update (link no longer available). It’s very competently done, and supremely useful: there’s no other way to keep track of pending or even adjudicated cases (they’re often unpublished).
If you eyeball the cases, there’s stuff you won’t believe. E.g., the State of Illinois (Illinois!) bestirred itself to pass a law that limits the ability of state employees to take a leave of absence to work for a labor union but to then receive a higher pension based on the union salary rather than the public employment salary. You’d think that even unions should be a bit ashamed to defend that sort of naked self-dealing, but no: the Chicago Teachers Unions have filed suit (Carmichael v. Laborers’ & Retirement Board Employees’ Annuity & Benefit Fund of Chicago). It’s a bit like picking a naked man’s pocket: the city already contributes over 20 percent of its budget to pension funding, and that’s unsustainable. Not true, say Karen Lewis (head of the largest union, and a real piece of work): it’s all the fault of “rich white people,” who caused the school crisis in the first place and should now be made to pay.
Overall, the Foundation’s Update illustrates how modest pension reforms have been to date. Even those humble efforts are being litigated into the ground, and I suspect that the skirmishes herald much tougher confrontations in years ahead. Overwhelmingly, state reforms aim to enhance the long-term sustainability of funds without curtailing current benefits. (Reducing future cost-of-living increases is an example.) That’s commendable but for many cities and some states, it’s too late: places like Chicago need to curb pension and other retirement contributions now, and they have to deal with the accumulated legacy costs.
All glory, laud and honor to the first official who explains that to Karen Lewis, and lives to tell the tale.