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In 2005, Alaska was one of the first state governments to implement significant pension reform, phasing out the traditional defined benefit plan for employees hired on or after July 1, 2006 in favor of a defined contribution plan. The reasons Alaska made this overhaul are the same set of reasons that are prompting increasing numbers of state and local governments to consider doing what Alaska did: rising pension costs and growing unfunded liabilities.
Hard-hit by Great Recession, states and local governments face ongoing fiscal pressuresDecember 3, 2013
Earlier this year, three separate reports by major national organizations suggested that states and local governments are going to face continued fiscal headwinds into the future. Two new reports by the National Association of State Budget Officers (NASBO) and the Pew Charitable Trusts, respectively, shed additional light on the fiscal shape of state and local governments in the wake of the Great Recession and similarly suggest persistent fiscal pressures.
Taken together, Massachusetts taxpayers, pensioners, and government officials have to deal with pension and health care systems that, combined, amount to $145.6 billion, with only $82.7 billion in funding. With only 43 cents for every dollar in promises made to public employees, the systems are in need of substantive reform.
In October 2013, Reason offered four educational webinars to the public which shared experiences from former and current public officials who have successfully navigated the pension reform process in various jurisdictions across the country. In the presentations, they discussed strategies for implementing pension reform in cities, counties and states across the nation.
The webinar recordings are linked below, along with a downloadable copy of the presentation material. Though the expert panel alternated in each of the presentations, each of the webinars is substantively similar.
The city of Long Beach, California has tried harder than most California municipalities to reign in rising pension costs and reducing its unfunded liabilities. Considering that this is California, though, that really isn't saying much. Long Beach is in the process of wrapping up a two-year long process of negotiating pension reforms with all bargaining units in the city. The reforms prompted Mayor Bob Foster to announce that "Long Beach has achieved full pension reform with lower and more sustainable benefits for new employees and full employee participation for all employees.” The reality is far less cheerful and the reforms too little, too late.
We know the system is going to run out of money. The question is whether or not state leaders will do anything about it.November 12, 2013
The most recent accounting of California's state debt, including unfunded pension liabilities, pegs the total at nearly $620 billion. Like our national debt, the state's bills will only keep growing as long as Sacramento clings to its "spend now, fund it later" philosophy.
The Maryland state pension system is underfunded by over $19 billion as of 2012, according to a recent Maryland Public Policy Institute study. This is up from $11 billion in 2008, and reflects a combination of lower than necessary contributions to the state pension system and low investment returns. According to the report, only 11 of the 36 pension funds, encompassing state and county plans constituting the state system, are meeting at least the recommended 80% funding threshold. Overall, the Maryland state pension system is only 63.47% funded.
Ultimately, the agreement between BART and the unions creates a budget much more bloated than before and may set a precedent for other public employee unions without a "No Strike Clause" to use the coercive tool of service disruptions to gain leverage in contract negotiations, regardless of the cost to the communities they are supposed to be serving.
Last Tuesday, Cincinnati, Ohio voters rejected Issue 4, which would have overhauled the city pension system by transitioning new city employees from the current defined benefit system to a defined contribution, 401(k)-style plan. Issue 4, titled the Cincinnati Pension Reform Charter Amendment Initiative, would have also required the city to eliminate the over $860 million unfunded liability for the Cincinnati Retirement System (CRS) in ten years. The initiative would have also tied Cost of Living Adjustments (COLAs) to the consumer price index, with a cap of 3%.
October 2013 edition: State/local budgets, social impact bonds, private lottery management, pension reform, and moreOctober 31, 2013
In this issue:
- STATE/LOCAL BUDGETS: Reports Suggest Serious Fiscal Challenges Ahead
- SOCIAL FINANCE: Social Impact Bond Initiatives Gaining Traction in U.S.
- LOTTERIES: States Turning to Private Lottery Management
- TRASH COLLECTION: Detroit Seeking to Privatize Trash Collection
- CONTRACTING: Austin Report Finds a High Cost to Insourcing City Services
- INNOVATORS IN ACTION: Pension Reform in Utah & San José
- News & Notes
View Resources by Type
- Reason Foundation's Fall Pension Reform Webinar Material
- Pension Reform Newsletter
Pension reform webinars, California ballot initiative, pensions underfunded by $4 trillion
- Alaska Governor Proposes $3 Billion Towards Paying Down Pension Debts (12/12)
- New Reports Highlight Fiscal Shape of States, Cities (12/3)
- Massachusetts State and Municipal Retiree Systems Costly, Underfunded (11/29)
- Reason Foundation's Fall Pension Reform Webinar Material (11/13)
- "Full Pension Reform" In Long Beach Leaves $700 Million Unfunded Liability (11/13)
Experts: Pension Reform
- Lance Christensen
Director, Pension Reform Project
- Nick Gillespie
Editor in Chief, Reason.com and Reason TV
- Leonard Gilroy
Director of Government Reform
- Adrian Moore
Vice President, Policy
- Julian Morris
Vice President, Research
- Anthony Randazzo
Director of Economic Research
- Adam Summers
Senior Policy Analyst
RSS Feeds: Pension Reform
Media ContactChris Mitchell
Director of Communications
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