Missouri Senate Joint Resolution 71 would unwisely fund public pensions through fines and fees
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Missouri Senate Joint Resolution 71 would unwisely fund public pensions through fines and fees

If governments are going to offer pensions, they need to be willing to directly appropriate the funding to cover those pension promises.

A version of this testimony was submitted to the Missouri House Pensions Committee on April 2, 2024.

The use of fines and fees in criminal and civil proceedings is a complex and controversial topic, largely because, as the Missouri Supreme Court found in 2021, they can serve as a barrier to equal access to the criminal justice system by placing financial obstacles in front of those navigating the justice system, disproportionately affecting lower-income populations.  

The proposal also violates some basics of public finance and fiscal stewardship. Public pensions are constitutionally protected benefits promised to public workers, and government employers are obligated to ensure they are paid in full, regardless of market conditions or revenue generation. Further, law enforcement and courts are core functions of government that should be funded through legislative appropriations, not fees.  

Regardless of past practice, it would be imprudent to revive a policy to fund pension contributions with dedicated fine/fee revenues because those revenues can fluctuate over time, while pension liabilities are always locked in. Fine and fee revenues may also hit a plateau while pension liabilities—and the employer contributions needed to fund them each year—keep rising.  

Long-term pension solvency demands funding discipline and proper methods. Local governments in Missouri need to wean themselves off fines and fees to cover pension costs and instead pay for their pension promises out of general appropriations. Claims that a failure to rededicate fine and fee revenue to pensions will force those pension systems to insolvency are simply false: Governments are legally obligated to fund pensions that they’ve promised to public workers, and if one revenue source is deemed unconstitutional, then local governments need to follow kitchen-table economics and reprioritize their funding, delay capital purchases, alter spending plans, and the like. 

Outside of Illinois, it is fairly rare for states to use fees and other targeted revenue streams to cover public pension contributions because of the aforementioned hazards. Several years ago, Arizona abandoned a statutory funding policy that explicitly dedicated court fees to its state pension system covering judicial officers and elected officials, opting to just pay the full bill from general appropriations and abandoning the tether to dedicated fees. 

There is a lot of flexibility in how to address these public pension systems’ ongoing funding challenges. Newly hired sheriffs and prosecutors could easily fold into one of several other existing pension systems that have better funding mechanisms in a way that would maintain the same benefit levels and also reduce unnecessary bureaucratic duplication among various local government pension systems in Missouri. Gov. Mike Parson’s administration has proposed a two-year, $5 million total appropriation to temporarily cover pension contributions, allowing more time to develop a workable funding solution. 

Funding sheriff and prosecutor pensions with fines and fees was a historical anachronism, and there is an opportunity to modernize these pensions’ funding policy and avoid tying fluctuating revenue streams to fixed, constitutionally guaranteed retirement liabilities.

If governments are going to offer pensions, they need to be willing to directly appropriate the funding to cover those promises as an administrative “cost of doing business,” and not attempt to ask the criminal justice system to bear the burden of covering governments’ financial obligations. 

Further, perpetuating the use of fines and fees for sheriff and prosecutor pension systems would reinstate a set of perverse incentives that tie pension contributions to the volume of traffic citations, arrests, prosecutions, and other aspects of the criminal justice system. 

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